Annual Report
2021
Contents
Strategic report
Our business model 01
2021 performance summary 02
Chair’s statement 03
CEO’s statement 05
Financial performance 07
Our long-term priorities 10
Our culture 11
Key performance indicators 12
Our external environment 13
Innovation 17
Performance 29
Trust 34
Consumer Healthcare 41
Stakeholder engagement 44
Risk management 46
Group financial review 55
Corporate governance
The Board and GSK Leadership Team 83
Chair’s Governance statement 89
Board roles and responsibilities
92
New ambitions for patients, shareholders
and our people
Cautionary statement
See the inside back cover of this document for the cautionary statement regarding forward-looking statements.
Non-IFRS measures
We use a number of adjusted, non-International Financial Reporting Standards (IFRS) measures to report the performance of our business. Total reported
results represent the Group’s overall performance under IFRS. Adjusted results 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 56 and 59 and
reconciliations to the nearest IFRS measures are on pages 70 to 73.
In 2021, we made major progress on our journey towards the most significant
corporate change for GSK in more than 20 years. We are on track to separate in
2022 to create two new leading companies, both with the opportunity to impact
human health at scale and deliver compelling performance for shareholders.
GSK
GSK will unite science, talent and technology to
get Ahead of disease Together. We will prioritise
innovation in vaccines and specialty medicines,
maximising the increasing opportunities to prevent
and treat disease.
Step change in growth
–
Expected sales growth of more than 5% and adjusted
operating profit growth of more than 10% on a
compound basis 2021-26
–
R&D focused on the science of the immune system,
human genetics and advanced technologies
–
Positively impacting the health of more than 2.5 billion
people over ten years
–
Leading ESG performance to be maintained
W
e set out our new purpose, growth commitments
and R&D catalysts at an investor update in June 2021.
For more detail see gsk.com
Haleon
Haleon will be a global leader 100% focused on
consumer health. It will have a clear purpose to
deliver better everyday health with humanity, and a
focused strategy to deliver sustainable above-market
growth and attractive returns to shareholders.
Strong prospects for growth
–
Exceptional portfolio of category-leading brands with
attractive global footprint and competitive capabilities
–
Compelling strategy to outperform in a growing, £150
billion plus sector which is more relevant than ever
–
4-6% annual organic sales growth in the medium term,
sustainable moderate margin expansion and high cash
conversion
–
Attractive growth profile with capacity to invest and
deliver shareholder returns
We set out our strategy, capabilities and growth
ambitions at a Consumer Healthcare capital markets
day in February 2022. For more detail see gsk.com
Board committee information
93
Board architecture 94
Board activity
95
Board progress in 2021
96
Board’s approach to continuous
engagement
99
Board-led purpose and culture
102
Board performance
103
Board committee reports
104
Section 172 statement 116
Directors’ report 117
Remuneration report
Chair’s annual statement 120
Annual report on remuneration 125
2022 Remuneration policy summary 143
2022 Remuneration policy report 144
Financial statements
Directors’ statement of
responsibilities 154
Independent Auditor’s report 156
Financial statements 168
Notes to the financial statements 172
Financial statements of
GlaxoSmithKline plc prepared
under UK GAAP 252
Investor information
Quarterly 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 2022 291
Annual General Meeting 2022 291
Tax information for shareholders 292
Shareholder services and contacts 294
US law and regulation 296
Group companies 299
Glossary of terms 311
GSK Annual Report 2021
01
Strategic report
Governance and remuneration Financial statements Investor information
Our business model
As we prepare for a new future, we continue to help improve the health of
hundreds of millions of people around the world by discovering, developing and
manufacturing innovative medicines, vaccines and consumer healthcare products.
What we do
We develop and deliver medicines, vaccines and consumer
healthcare products that impact human health at scale. Our
operations span the value chain from identifying, researching,
developing and testing ground-breaking discoveries, to
regulatory approval, manufacturing and commercialisation.
Central to our success are our people: experts in science,
technology, manufacturing, regulation, intellectual property
and commercialisation. We also collaborate with world-leading
experts and form strategic partnerships to complement our
existing capabilities.
The value we create: now and in the future
The greatest contribution we make is to improve the health
of people around the world. In 2021 that included delivering
1.7 billion medicines, over 767 million vaccines
1
and 3.7 billion
consumer healthcare products. Looking ahead, GSK has a
clear ambition to positively impact the health of more than
2.5 billion people over the next ten years.
We create value for shareholders by investing in our business
to provide shareholder returns, and in 2021 we paid a dividend
of 80 pence per share. We have made new commitments
to growth and a step change in performance over the next
five years.
We aim to be a modern employer, developing our people
and offering a broad range of benefits, including preventative
healthcare services, that help us attract and retain the best
people.
We employ over 90,000 people across 92 countries and work
directly with 37,500 suppliers. In 2021 we paid £1.3 billion in
corporation tax, as well as a significant amount of other
business and employment-related taxes.
Delivering strategic transformation by prioritising Innovation, Performance
and Trust
In recent years, we have transformed GSK to improve
performance, strengthen capabilities and prepare for a
new future. We have done this by prioritising Innovation,
Performance and Trust – across the entire company –
driving a multi-year programme to improve R&D productivity,
commercial execution, Group structure and capital allocation.
This is underpinned by a new culture with more ambition and
accountability.
Innovation
is critical to how we improve health and create
financial value. In 2021, our total R&D expenditure was
£5.3 billion, up by 3.5% AER on 2020. We have a robust
late-stage R&D pipeline with many assets having the potential to
be first or best in class. We continue to believe the rapid
convergence of science and technology in biopharmaceuticals
provides significant opportunity and is why our R&D will
continue to focus on the science of the immune system, human
genetics and use of advanced technologies.
Performance
is delivered by investing effectively in our
business and our people and executing competitively. Our
ability to launch new products successfully and grow sales from
our existing portfolio is key to our commercial success. Over the
next five years, with 2021 as a base year, we expect GSK to
deliver highly attractive growth with sales and adjusted
operating profit of more than 5% and more than 10%
respectively on a compound basis.
Trust
underpins everything we do. We have maintained
our acknowledged leadership in environmental, social and
governance (ESG) issues, demonstrated by our sector-leading
position in the Dow Jones Sustainability Index and our long-
standing leadership in the Access to Medicine Index.
We remain deeply committed to addressing the issues that
matter for the sustainability of our company, including pricing
and access, global health, the environment, and inclusion and
diversity, working with integrity and care.
1
Including AS03 adjuvant sales
02
GSK Annual Report 2021
2021 performance summary
Strong commercial execution drives growth across Pharmaceuticals, Vaccines
and Consumer Healthcare (excluding divestments/brands under review)
–
£34.1 billion Group turnover stable at AER, +5% CER
–
Pharmaceuticals £17.7 billion +4% AER, +10% CER; new and specialty medicines
£10 billion +20% AER, +26% CER
–
Vaccines £6.8 billion -3% AER, +2% CER
–
COVID-19 solutions sales £1.4 billion
–
Consumer Healthcare £9.6 billion -4% AER, stable CER (+4% excluding brands divested/under
review)
Cost discipline supports delivery of adjusted EPS growth
–
Total EPS 87.6p -24% AER, -13% CER
–
Adjusted EPS 113.2p -2% AER, +9% CER; contribution to growth from COVID-19 solutions +8%
AER, +9% CER
–
Total operating profit £6.2 billion -20% AER, -9% CER
–
Adjusted operating profit £8.8 billion -1% AER, +9% CER
–
Dividend of 80p
On track to create two new leading companies through demerger in mid-2022
–
New GSK investor update in June 2021 set out our new purpose, growth commitments and R&D
catalysts.
For detail see gsk.com
–
Consumer Healthcare capital markets day in February 2022 highlighted our strategic priorities, key
growth drivers and detailed financial information. For detail see gsk.com
Continued momentum in R&D delivery and strengthening of pipeline
–
Three major product approvals; 8 phase III starts; 22 vaccines and medicines in pivotal trials
–
Strong pipeline of 21 vaccines and 43 medicines, many of which offer potential best or
first-in-class opportunities for patients
–
20+ deals executed securing access to novel clinical programmes including in immuno-oncology,
immuno-neurology and flu, plus technologies that expand our capabilities in human genetics and
artificial intelligence/machine learning (AI/ML)
Leading ESG performance
–
1st in the pharmaceutical industry for Dow Jones Sustainability Index
–
1st in the Access to Medicine Index
–
Gold recognition in S&P’s Sustainability Yearbook
–
A- in CDP Climate Change
GSK Annual Report 2021
03
Strategic report
Governance and remuneration Financial statements Investor information
Chair’s statement
GSK has been delivering a programme of fundamental strategic
transformation since Emma started as CEO five years ago,
designed to tackle the root causes of the company’s long-term
underperformance, including on shareholder returns.
The Board is pleased that under Emma’s leadership 2021
saw further progress against the clear priorities set to enable
this: improving the pipeline and R&D productivity, sharpening
commercial execution and cost discipline and tackling the
Group’s structure and capital allocation priorities, underpinned
by a shift in culture.
Building on the significant progress made over this period,
I believe we are now firmly on track to demerge GSK into
two world-class companies in mid-2022 – one focused
on pharmaceuticals and vaccines and one focused on
consumer healthcare.
2021 delivery
The Board remains focused on ensuring GSK’s fundamentals
continue to be enhanced to ensure both companies are fully
competitive at the point of split.
While the COVID-19 pandemic continued to mean a highly
dynamic operating environment, the Board was pleased the
company exceeded its earnings per share guidance set at
the start of the year. This was achieved through over-delivery
across the business, including excellent commercial execution
in key markets and therapy areas, showing our ability to
compete and grow market share. The Board was also pleased
to see the commercial performance and patient impact of
Xevudy
, our leading monoclonal antibody for
COVID
-19
developed through our partnership with Vir Biotechnology.
Savings programmes announced in early 2020 have delivered
and, as a result, GSK’s cost base is now competitive versus
our peers. Capital allocation priorities are clear – to invest in
the R&D pipeline, new product launches, and delivering returns
to shareholders.
We have made considerable advances on our distinctive
approach to R&D based on the science of the immune system,
human genetics and advanced technologies under our Chief
Scientific Officer (CSO) Hal Barron. Tony Wood will transition
into the role of CSO from August as part of a carefully
considered succession plan and will build on the significant
progress already made. Tony is one of the world’s leading
chemists and has an impressive track record of medicine
development over his 30-year career in the UK and US.
Progress was started to be reflected in the share price
performance during 2021. However, the Board (and
management) recognise that sustaining this over the long term
will depend on consistent performance, delivery and further
strengthened competitiveness.
Targets for sustained performance
As well as performance in-year, the Board maintains a clear
focus and oversight of the company’s strategy and plans to
separate which is proposed, subject to shareholder approval,
to happen in mid-2022.
At the investor update in June 2021, the purpose and strategy
of new GSK was set out and clear performance targets for
sales and operating profit margin growth, beginning in 2022,
were communicated. If achieved, these would represent top
quartile performance in our sector. Similar stretching ambitions
are being set for the consumer health business.
Of course, management must now deliver against the targets
set. And we are clear remuneration must be tied to enhancing
shareholder value. As such, we are linking executive
remuneration to reward for outperformance. Further details of
these proposals are laid out later in this report and there will be
a chance for shareholders to vote on them at our AGM in May.
In addition to what new GSK does, the Board is fully focused on
how the company operates, through a clear agenda for ESG
(environmental, social, governance) leadership. GSK has a
strong tradition to build on in these areas including maximising
access to medicines across the world and ensuring further
progress on these matters will be a priority.
We made significant progress towards demerging GSK into two
leading and competitive companies in mid-2022.
04
GSK Annual Report 2021
Shareholder engagement and Board transition
Through this period of considerable transition, the Board and
management have maintained very significant engagement
with shareholders. It is clear from this that, the vast majority
support the strategy and direction the company is taking, and
are clear there should be no distraction from sustained delivery.
This message has been heard by the Board whose
accountability first and foremost is to act in the interests
of all shareholders.
A key part of this strategy is the separation of Consumer
Healthcare, where there is a broad base of support among
shareholders for direct ownership of this outstanding business
through a demerger. Of course, the GSK Board has a fiduciary
duty to remain open to consider alternative proposals to
demerger that could create superior value for shareholders,
but no such proposals have been received to date.
We are now in the final stages of creating what will be an
exceptional company and I’m delighted with the designate
appointments of Sir Dave Lewis to lead the Board and Brian
McNamara as CEO. We strongly believe the new company
offers an attractive profile for prospective investors, as reflected
by the growth outlooks set out at the capital markets day in
February 2022.
As we move closer to separation, we are also continuing to
assess the skills, capabilities and experience the GSK Board
will need as a pure biopharma business. I was delighted to
welcome Anne Beal to the Board in May. Anne brings extensive
healthcare experience as a doctor and entrepreneur combined
with a passion for patient advocacy. In January, Dr Harry (Hal)
C Dietz, joined the Board. Hal is a world-leading expert in
human genetics and Professor of genetic medicine at the Johns
Hopkins University School of Medicine in the US. I am confident
that with these appointments, and the continued input of Hal
Barron from August as a Non-Executive Board Director, the
scientific credentials of GSK’s Board are now among the
strongest in the industry.
I also want to take this opportunity to thank Lynn Elsenhans,
who will be stepping down at the separation of the consumer
health business in mid-2022. Lynn has made an outstanding
contribution to the Board and the development of current
strategy over ten years, including notably as Chair of the
Corporate Responsibility Committee, which is increasingly
at the centre of the Board’s work. She will be missed by all
on the Board.
Finally, I would like to thank all employees, partners,
shareholders and customers for their support and commitment
through the last year and I look forward to what promises to be
an exciting 2022 for GSK.
Sir Jonathan Symonds
Chair
Chair’s statement
continued
GSK Annual Report 2021
05
Strategic report
Governance and remuneration Financial statements Investor information
CEO’s statement
I am very pleased to report that in 2021, GSK delivered
strong operational performance and pipeline progress. At
the same time, we completed our multi-year programme of
far reaching transformation to tackle long-standing issues
impacting the company’s success.
We are now ready to deliver the most significant corporate
change for GSK in 20 years: creating two new, exceptional
companies with ambitious targets for growth and with a clear
purpose to positively impact the health and lives of billions
of people.
2021 performance provides momentum
Group sales were £34 billion in 2021, up 5% CER. Our
products meaningfully helped patients across a range of
different disease areas, including respiratory, immuno-
inflammation, oncology and HIV; protected people from viruses
like shingles and meningitis; prevented hospitalisations and
deaths from COVID-19; and helped improve oral health,
reduce pain and treat everyday ailments.
Strong operational performance enabled us to increase
investment in R&D to £5.3 billion and to realise earnings per
share in excess of expectations for the year. In addition, we
generated over £4.4 billion of free cash flow, supporting
investments and a dividend of 80 pence per share for the year.
The improvements we have made to our commercial execution
and cost base, together with strengthening portfolio and
pipeline, mean we now have momentum to deliver a step-
change in growth starting in 2022.
Accelerating our innovation
We continue to believe the rapid convergence of science
and technology in biopharmaceuticals provides significant
opportunity for GSK. It is why our R&D will continue to focus
on the science of the immune system, human genetics and
use of advanced technologies. This approach is delivering
improvements in R&D and our pipeline.
In the last 12 months, we reported regulatory approvals
for three new medicines, including the first-ever long-acting
injectable PrEP treatment option for HIV, as well as starting
eight phase III clinical trials. We currently have 22 assets in
pivotal clinical studies at the time of reporting. We also
concluded more than 20 deals with external partners, securing
access to novel clinical programmes in oncology, neurology
and HIV; as well innovative technologies, notably through
further expansion of our capabilities in human genetics,
functional genomics and use of artificial intelligence.
These achievements spearhead a strengthening pipeline,
21 vaccines and 43 medicines now in clinical development –
many of which have the potential to be first or best-in-class.
Of course, one priority has been to contribute solutions to the
COVID-19 pandemic. We have successfully developed a new
monoclonal antibody treatment,
Xevudy
, with our partners Vir
Biotechnology. This medicine has proven effective against
multiple variants, including Omicron, and we are now securing
rapid regulatory approvals worldwide. Through our adjuvant
partnerships, we stand ready to supply new vaccines when their
data reads out. More broadly, we are also increasing investment
in our mRNA capability – this major new platform now validated
by the pandemic.
Never has the role of vaccines been more widely appreciated or
understood by the world than right now, and the opportunity for
GSK to protect people and deliver growth in a broad range of
vaccines remains very significant.
Much of the progress we have seen in R&D over the last four
years is due to the outstanding leadership of Hal Barron, our
CSO. In August, he will hand over responsibility to Tony Wood,
who has been a key partner to Hal. Tony is an outstanding
scientist, and with his deep expertise in science, data and new
technologies, is perfectly placed to take over and capture the
value and opportunities we see with GSK’s R&D approach.
We are also delighted that Hal will remain part of GSK as a
Non-Executive Board Director.
New purpose and new ambition
With the demerger of Consumer Healthcare, we will establish a
new GSK, purely focused on biopharmaceuticals. Last year, we
announced a new purpose and new growth ambitions for this
new company.
GSK’s new purpose is to unite science, talent and technology
to get Ahead of disease Together. We will do this by prioritising
innovation in vaccines and specialty medicines, maximising
opportunities to prevent and treat disease. Our aim is to
positively impact the health of more than 2.5 billion people over
the next ten years, deliver stronger and more sustainable returns
to shareholders, and be a company where outstanding
people thrive.
We have set ourselves ambitious five-year sales and operating
profit compounded growth targets, of more than 5% and more
than 10% respectively. By 2031, we aim to deliver more than
£33 billion in annual sales – this, from sales of existing late-
stage pipeline assets, with no contribution yet included from
early-stage assets or future business development. These
targets represent a new level of ambition for GSK and would
deliver top-quartile sector performance.
We are embedding these commitments deeply in the company,
including in incentive programmes, to drive focus and action.
We ended 2021 strongly, and we enter 2022 with good momentum.
This is going to be a landmark year for the company.
06
GSK Annual Report 2021
A culture for performance and support to succeed
I strongly believe GSK should be a company where people
can thrive. Creating the right culture to do this and to deliver
our new purpose and performance aspirations is a priority for
me and my team. We are focused on GSK being a place where
people are ambitious for patients, accountable for impact and
do the right thing.
We also have an enormous responsibility to inspire and support
our people to succeed. We continue to look for ways to invest
in our people’s growth and development and to help them
balance their work and personal lives. This includes a strong
focus on management skills, training and support for mental
health and wellbeing, as well as the health and safety of all
who work at GSK.
Last year, we put in place additional new programmes to
support these priorities and we are committed to developing
more. The same is true for our approach to inclusion, equity
and diversity. We have made good progress against our
2025 aspirational targets for female and ethnically diverse
representation in senior roles. We are also taking steps to
ensure our clinical trials are representative of the patients
we aim to help.
ESG leader
Operating responsibly is core to GSK. Our aim is to continue
to deliver sector-leading ESG performance – as recognised
in our latest rankings in the Dow Jones Sustainability Index,
the Access to Medicine Index and Anti-Microbial Resistance
benchmark. This reflects progress across our six core ESG
areas: Environment, Access, Global Health, Inclusion and
Diversity, Product Governance, Ethics. All of these have clear,
long-term goals and ambitions, but we are not complacent and
we want to go further.
We set carbon net-zero and nature positive goals in 2020 and,
recognising the increasing need and importance to provide
investors, and other stakeholders, with evidence of tangible
ESG performance, we are developing new measures and
reporting. Validated by third parties and our own audit teams,
we will share this with investors later this year. I hope it will
further demonstrate our commitment to best-in-class ESG
performance and transparent reporting.
Haleon – a new world-leading consumer
health company
Haleon is a compelling prospect. Completely dedicated to
consumer health, and with a world-class portfolio of category-
leading brands, it offers an attractive proposition. It brings deep
human understanding together with trusted science – to deliver
better everyday health with humanity. It will be a world leader
and, as a new standalone company, will offer prospective
investors a highly attractive financial profile of above-market
sales growth, sustainable margin expansion and high cash
generation.
It will have a fantastic leadership team, led by CEO designate
Brian McNamara, and a Board led by Sir Dave Lewis who
brings a wealth of international consumer sector experience.
The creation of Haleon reflects successful delivery of a series
of progressive strategic moves we took over the last few years.
Altogether, we estimate that through acquisitions, integrations of
new businesses and targeted divestments, close to £15 billion
of value has been created in this business.
It is now time for shareholders to access that value and invest
in what we believe will be a strong, highly successful growth-
orientated business, capable of delivering sustainable
performance and returns.
2022 is a landmark year
The pandemic has shone a spotlight like never before on the
difference our industry can make to society. To see how our
people – scientists, factory teams, supply experts, those who
work with healthcare professionals, and many thousands of
others – have risen to the challenge of ensuring patients and
people in all parts of the world continue to receive the products
they need has been deeply inspiring. It reflects the very deep
commitment that people working at GSK have for the people
we serve and for each other.
Our people are the reason why GSK and Haleon will be
successful in years to come. I want to thank them for all they
have achieved in 2021 and the momentum they are delivering.
I am excited and optimistic for the future. 2022 will be a
landmark year for GSK and we are committed to those who
rely on us and excited by what we can achieve together.
Emma Walmsley
Chief Executive Officer
CEO's statement
continued
GSK Annual Report 2021
07
Strategic report
Governance and remuneration Financial statements Investor information
Financial performance
Financial results
2021
£m
£%
Growth
CER%
Turnover
34,114
– 5
Total operating profit
6,201
(20)
(9)
Total earnings per share
87.6p
(24)
(13)
Adjusted operating profit
8,806
(1)
9
Adjusted earnings per share
113 . 2p
(2)
9
Net cash from operating activities
7,952
(6)
Free cash flow
4,437
(18)
Turnover
Strong commercial execution drives growth across
Pharmaceuticals, Vaccines and Consumer Healthcare
(excluding brands divested/under review)
Group turnover was £34,114 million in the year, stable at AER
but up 5% CER. Sales of COVID-19 solutions (sales of
Xevurdy
and pandemic adjuvant) contributed approximately 4 percentage
points to growth in the year.
Pharmaceutical turnover in the year was £17,729 million, up
4% AER and 10% CER. Sales of
Xevudy
, the monoclonal
antibody treatment for COVID-19 of £958 million contributed
approximately 6 percentage points to total Pharmaceuticals
growth.
Vaccines turnover was £6,778 million in the year, down
3% AER but up 2% CER, primarily driven by pandemic
adjuvant sales, partially offset by lower demand for routine
adult vaccination due to COVID-19 vaccination programme
deployment and disease circulation across regions. Vaccines
turnover excluding pandemic vaccines decreased 9% AER,
5% CER to £6,331 million.
Consumer Healthcare turnover was £9,607 million, down
4% AER but remained stable at CER reflecting dilution from
divestments given the completion of the portfolio rationalisation
at the end of Q1 2021. Sales excluding brands divested/under
review decreased 1% AER but increased 4% CER reflecting
the underlying strength of brands across the portfolio and
categories and continuing growth in e-commerce.
Operating performance – 2021
Turnover
2021
£m
Growth
£%
Growth
CER%
Pharmaceuticals
17,729
4
10
Vaccines
6,778
(3)
2
Consumer Healthcare
9,607
(4)
–
Group turnover
34,114
– 5
Operating profit
Total operating profit was £6,201 million compared with
£7,783 million in 2020. This primarily reflected an unfavourable
comparison to the net profit on disposal in Q2 2020 of Horlicks
and other Consumer brands and resultant sale of shares in
Hindustan Unilever. This was partly offset by lower major
restructuring costs, lower re-measurement charges on the
contingent consideration liabilities and the unwind in 2020 of
the fair market value uplift on inventory arising on completion
of the Consumer Healthcare Joint Venture with Pfizer.
Adjusted operating profit was £8,806 million, 1% lower than
2020 at AER, but 9% higher at CER on a turnover increase of
5% CER. The Adjusted operating margin of 25.8% was 0.3
percentage points lower at AER, 0.9 percentage points higher
on a CER basis than in 2020. The increase in Adjusted
operating profit primarily reflected the benefit from incremental
pandemic sales, sales growth in Pharmaceuticals and tight
control of ongoing costs, favourable legal settlements and
benefits from continued restructuring across the business.
This was offset by lower sales in Vaccines, higher supply chain
costs in Vaccines and Consumer Healthcare, divestments in
Consumer Healthcare and increased investment in R&D across
Vaccines and Pharmaceuticals.
Earnings per share
Total EPS was 87.6p, compared with 115.5p in 2020. This
primarily reflected an unfavourable comparison as 2020
benefited from the net profit on disposal of Horlicks and related
transactions, partly offset by a credit of £397 million to Taxation
in 2021 resulting from the revaluation of deferred tax assets,
lower major restructuring costs and lower re-measurement
charges on the contingent consideration liabilities. Adjusted
EPS was 113.2p compared with 115.9p in 2020, down 2%
AER but up 9% CER, on a 9% CER increase in Adjusted
operating profit primarily reflecting incremental pandemic sales,
sales increases in Pharmaceuticals, tight cost control and
favourable legal settlements and lower interest costs, partly
offset by lower sales in Vaccines, higher supply chain costs in
Vaccines, increased R&D investment and a higher effective
tax rate.
Cash flow
The net cash inflow from operating activities for the year
was £7,952 million (2020 – £8,441 million). The decrease
primarily reflected adverse exchange impacts, increased trade
receivables, adverse timing of returns and rebates (RAR) and
increased separation costs, partly offset by improved adjusted
operating profit at CER and reduced tax payments including tax
on disposals.
08
GSK Annual Report 2021
Total and Adjusted results
Intangible asset amortisation and impairment
Amortisation of intangible assets excludes computer software
and capitalised development costs. Impairment of intangible
assets (excluding computer software) and goodwill.
Major restructuring
Major restructuring costs, which include impairments of tangible
assets and computer software, (under specific Board approved
programmes that are structural, of a significant scale and where
the costs of individual or related projects exceed £25 million),
including integration costs following material acquisitions.
Transaction-related
Transaction-related accounting or other adjustments related to
significant acquisitions.
Divestments, significant legal and other items
Proceeds and costs of disposal of associates, products and
businesses; significant settlement income; significant legal
charges (net of insurance recoveries) and expenses on the
settlement of litigation and government investigations; other
operating income other than royalty income, and other items
including the impact of the revaluation of deferred tax assets
and liabilities following enactment of the increase in the headline
rate of UK corporation tax from 19% to 25% (effective 2023).
Separation costs
Additional costs to establish Consumer Healthcare as an
independent business, as well as admission listing and
demerger costs.
Total reported results represent the Group’s overall
performance.
GSK also uses a number of adjusted, non-IFRS, measures to
report the performance of its business. Adjusted results 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 are defined below
and other non-IFRS measures are defined on page 59.
GSK believes 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. 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 companies.
GSK encourages investors and analysts not to rely on any
single financial measure but to review GSK’s Annual Reports
including the financial statements and notes, in their entirety.
GSK is undertaking a number of Board-approved Major
restructuring programmes in response to significant changes in
the Group’s trading environment or overall strategy, or following
material acquisitions. Costs, both cash and non-cash, of these
programmes are provided for as individual elements are
approved and meet the accounting recognition criteria.
As a result, charges may be incurred over a number of years
following the initiation of a Major restructuring programme.
Adjusting items
Total
results
£m
Intangible
asset
amortisation
£m
Intangible
asset
impairment
£m
Major
restructuring
£m
Transaction-
related
£m
Divestments,
significant
legal and
other items
£m
Separation
costs
£m
Adjusted
results
£m
Turnover
34,114 34,114
Cost of sales
(11, 6 0 3)
701
(33)
154
28
27
(10,726)
Gross profit
22,511
701
(33)
154
28
27
23,388
Selling, general and administration
(10,975)
426
(10,225)25
17
282
Research and development
(5,278)
101
355
46
(4,776)
Royalty income
419 419
Other operating (expense)/income
(476)
1,106
(662)
32
–
Operating profit
6,201
802
322
626
1,159
(618)
314
8,806
Net finance costs
(756)
2 1
(753)
Share of after-tax profits of associates
and joint ventures
33
33
Loss on disposal of interest in associates
(36)
36
–
Profit before taxation
5,442
802
322
628
1,159
(581)
314
8,086
Taxation
(346)
(159)
(81)
(196)(114)
(470)
(49)
(1,415)
Tax rate
6.4%
17.5%
Profit after taxation
5,096
643
241
514
963
(1,051)
265
6,671
Profit attributable to non-controlling interests
711
295
1,006
Profit attributable to shareholders
4,385
643
5,665 241
514
668
(1,051)
265
Earnings per share
87.6
p 4.8p
12.9
p10.3
p13.3
p(21.0)
p5.3
p113.2p
Financial performance
continued
GSK Annual Report 2021
09
Strategic report
Governance and remuneration Financial statements Investor information
Financial performance
continued
Adjusted results
2021
2020
£m
% of
turnover
£m
% of
turnover £%
Growth
CER%
Turnover
34,114
100
34,099
100
– 5
Cost of sales
(10,726)
(31.4)
(10,191)
(29.9)
5 8
Gross profit
23,388
68.6
23,908
70.1
(2)
4
Selling, general and administration
(10,225)
(30.0)
(10,717)
(31.4)
(5)
(1)
Research and development
(4,776)
(14.0)
(4,603)
(13.5)
4 8
Royalty income
419
1.2
318
0.9
32 32
Operating profit
8,806
25.8
8,906
26.1
(1)
9
Net finance costs
(753)
(844)
Share of after-tax profits of associates and joint ventures
33
33
Profit before taxation
8,086
8,095
–
11
Taxation
(1,415)
(1,295)
Tax rate
17.5
%
16.0%
Profit after taxation
6,671
6,800
(2)
9
Profit attributable to non-controlling interests
1,006
1,031
Profit attributable to shareholders
5,665
5,769
Earnings per share
113 . 2
p
115.9p
(2)
9
How we performed
Cost of sales
Adjusted cost of sales as a percentage of turnover was 31.4%,
1.6 percentage points higher at AER and 0.8 percentage points
higher at CER compared with 2020. This primarily reflected
higher pandemic sales (
Xevudy
) as well as higher supply chain
costs in Vaccines resulting from lower demand and higher
inventory adjustments and higher commodity and freight costs
in Consumer Healthcare, partly offset by price benefits in
Pharmaceuticals, including the benefit from prior period RAR
adjustments, a further contribution from restructuring savings
across all three businesses and favourable mix in Vaccines.
Selling, general and administration
Adjusted SG&A costs as a percentage of turnover were 30.0%,
1.5 percentage points lower at AER than in 2020 and 1.8
percentage points lower on a CER basis. Adjusted SG&A costs
decreased 5% AER, 1% CER which reflected the tight control
of ongoing costs and reduced variable spending across all
three businesses as a result of the COVID-19 lockdowns, and
the continuing benefit of restructuring in Pharmaceuticals,
Consumer Healthcare and support functions. The decrease
also reflected a favourable legal settlement in 2021 compared
to increased legal costs in 2020 as well as one-off benefits in
pensions and insurance which were partly offset by the one-off
benefit from restructuring of post-retirement benefits in 2020.
This was partly offset by increased investment behind launches
in HIV and Vaccines.
Research and development
Adjusted R&D expenditure was £4,776 million (14.0% of
turnover), 4% higher at AER, 8% higher at CER than in 2020.
Operating profit
Adjusted operating profit was £8,806 million, 1% lower than
2020 at AER, but 9% higher at CER on a turnover increase of
5% CER. The Adjusted operating margin of 25.8% was 0.3
percentage points lower at AER, 0.9 percentage points higher
on a CER basis than in 2020.
The increase in Adjusted operating profit primarily reflected
the benefit from incremental pandemic sales contributing
approximately 6% AER, 7% CER to Adjusted operating profit
growth. Adjusted operating profit also benefited from sales
growth in Pharmaceuticals including the benefit from prior period
RAR adjustments and tight control of ongoing costs including
reduced promotional and variable spending across all three
businesses as a result of the COVID-19 lockdowns, favourable
legal settlements compared to increased legal costs in 2020
and benefits from continued restructuring across the business.
This was partly offset by lower sales in Vaccines, primarily
Shingrix
, higher supply chain costs in Vaccines and Consumer
Healthcare, divestments in Consumer Healthcare and increased
investment in R&D across Vaccines and Pharmaceuticals.
Tax
Tax on Adjusted profit amounted to £1,415 million representing
an effective Adjusted tax rate of 17.5% (2020 – 16.0%).
Non-controlling interests
The allocation of Adjusted earnings to non-controlling interests
amounted to £1,006 million (2020 – £1,031 million). The
reduction in allocation primarily reflected a reduced allocation
of ViiV Healthcare profits of £438 million (2020 – £474 million),
partly offset by higher net profits in some of the Group’s other
entities with non-controlling interests. The allocation of
Consumer Healthcare Joint Venture profits was £515 million
(2020 – £515 million).
Earnings per share
Adjusted EPS was 113.2p compared with 115.9p in 2020, down
2% AER but up 9% CER, on a 9% CER increase in Adjusted
operating profit primarily reflecting incremental pandemic sales,
sales increases in Pharmaceuticals, tight cost control and
favourable legal settlements and lower interest costs, partly
offset by lower sales in Vaccines, primarily
Shingrix
, higher
supply chain costs in Vaccines, increased R&D investment
and a higher effective tax rate. The contribution to growth from
COVID-19 solutions was approximately 8% AER, 9% CER.
10
GSK Annual Report 2021
Our long-term priorities
Innovation
We invest in scientific and technical
excellence to develop and launch
a pipeline of new products that
meet the needs of our patients,
payers and consumers.
Performance
We deliver growth by investing
effectively in our business,
developing our people and
executing competitively.
We put Innovation, Performance and Trust first to realise our ambitions for patients,
shareholders and our people. In 2021 we delivered a strong performance, and we are
on track for a successful demerger to create two new leading companies in 2022.
2021 objectives
–
Continue to deliver on-time, in-full supply
of our products
–
Improve manager capability to motivate,
focus, develop and care for people
–
Continue to deliver progress on Trust
commitments
Progress
–
Maintained sector-leading rankings in
ESG indices, including the Dow Jones
Sustainability Index, Access to Medicine
Index and Antimicrobial Resistance
Benchmark
–
Maintained supply and manufacturing
without significant disruption throughout
the pandemic
–
Made further progress to deliver on net zero
impact on climate, and a net positive impact
on nature by 2030
–
Rolled out a new training programme to
develop our managers to support them to
be great managers and lead with care
–
Continued to prioritise diversity, with good
progress made against our gender and
ethnicity targets to improve representation
in senior roles
–
WHO recommended wider use of our
RTS,S vaccine for children in regions with
moderate to high malaria transmission
2022 priority objectives
–
Deliver leading ESG performance and
effective risk management with disciplined
compliance
2021 objectives
–
Deliver Innovation sales with excellent
commercial, R&D and supply chain
execution in oncology, HIV and vaccines
–
Accelerate and strengthen pipeline with
robust commercial input, including
business development
Progress
–
Received three major approvals in 2021:
Apretude
, our long-acting HIV prevention
medicine,
Jemperli
for endometrial cancer
and
Xevudy
, for COVID-19
–
Strong pipeline of 21 vaccines and 43
medicines, many of which offer potential
best or first-in-class opportunities for
patients and 22 of which are in pivotal trials
–
20+ deals executed securing access to
novel clinical programmes including with
iTeos in immuno-oncology, Alector in
immuno-neurology and Vir Biotechnology
in flu, plus technologies that expand our
capabilities in human genetics and AI /ML
2022 priority objectives
–
Deliver Innovation sales with excellent
commercial, R&D and supply chain
execution
–
Further accelerate and strengthen pipeline
with dedicated in-house expertise and
robust commercial input, including
optimised capital allocation and business
development
2021 objectives
–
Continue to prioritise spending to deliver
growth and return on investment
–
Continue to deliver two-year programme
to prepare GSK for separation into two
new leading companies
–
Build a stronger, more diverse workforce
for two new leading companies
Progress
–
Strong commercial execution across
Pharmaceuticals, Vaccines and Consumer
Healthcare
–
Pharmaceuticals £17.7 billion +4% AER,
+10% CER with double-digit growth in
new and specialty medicines +20% AER,
+26% CER
–
Vaccines £6.8 billion -3% AER, +2% CER
–
Consumer Healthcare -4% AER, stable
CER; -1% AER, +4% CER excluding
divestments/brands under review
–
On track to deliver separation plans in
mid-2022
2022 priority objectives
–
Deliver more than 5% sales growth and
more than 10% adjusted operating profit on
a compound basis in the next five years
–
Continue to prioritise spending to deliver
growth and return on investment
–
Deliver a successful demerger in mid-2022
Trust
We are a responsible company.
We commit to use our science
and technology to address health
needs, make our products
affordable and available and be
a modern employer.
Culture
As we move towards the creation of two new leading companies, we have been embedding a culture where we are all ambitious for patients, accountable
for impact, and continue to do the right thing. We track our cultural change with a range of indicators, increasingly embedding assessments in HR
processes, and the Board receives regular updates. See pages 99 and 102.
Principal risks
Our risk management framework is designed to support our long-term priorities. See pages 46 and 112.
1
Innovation sales defined on page 12
GSK Annual Report 2021
11
Strategic report
Governance and remuneration Financial statements Investor information
Over the past four years, we have focused on embedding a
culture anchored in purpose and performance. We’ve made
great progress, demonstrated by strong engagement and pride
in GSK, which has contributed to improved R&D productivity
and performance of our commercial teams and in our supply
chains. At the same time, the impact of the COVID-19
pandemic has driven our teams to work more dynamically,
with a deeper connection to our purpose and each other.
GSK’s purpose – to unite science, talent and technology to get
Ahead of disease Together – puts our people at the heart of our
success. To deliver on that purpose, and help our outstanding
people thrive, the focus for our culture is for GSK to be a place
where we are all ambitious for patients, accountable for impact,
and do the right thing.
This means helping our people to constantly strive to do things
better and faster, always focused on what matters most. It
means setting clear objectives and ensuring accountability for
results, while giving everyone the support or space they need to
succeed. As ever, this means doing everything responsibly with
care and integrity, because our people, and people around the
world, count on us.
We measure this progress through a range of indicators,
looking at how our people experience GSK as a place to
work, how they embody the culture, and how this affects
our performance. Engagement remains high at 78%, settling
back to 2019 levels after a boost during the early phases of
the pandemic. As part of changes to make our approach to
measuring culture increasingly dynamic, we will augment our
annual survey with pulse surveys, so that we can more quickly
identify areas of success and areas of focus. We are a company
that has respect for people at its core. This gives us an
opportunity to build an inclusive culture internally and to be a
force for good in improving inclusion and diversity in society.
We continue to focus on building a more inclusive culture,
with inclusion training for our people and leaders alongside
our work to evolve our policies, processes and practices.
We know that leaders and managers play a crucial role in
bringing culture to life for our people, and we continue to
develop our managers through focused training, to support
them to be great managers: to motivate their teams, to help
them focus on what matters most, to support their performance
and development, and to lead with care for everyone as
individuals. We measure the effectiveness of our global
manager population through annual One80 feedback and
continue to build and refresh the expertise in our senior leaders,
with 14% of our top 115 leaders appointed in 2021. Our
broader HR processes, including reward and succession
planning, will continue to be based on assessments of both
what we deliver and how we do it (ie our cultural behaviours).
Our approach to hybrid working – Performance with Choice –
is anchored in driving individual and collective performance,
while creating more flexibility for our office-based people in
how and where they get their work done. This helps them
perform at their best, based on their role, team and personal
circumstances. As pandemic-related restrictions began to ease
in many countries in 2021, all of our office-based people have
either already changed the way they work or started discussing
it with their manager. In 2021, all of our office-based workers
(approximately a quarter of our people) worked some part
of their week from home, and we continually look at ways to
support our people in all role types to balance their work and
personal lives.
We know that the strongest cultures need to be built from
the top down, the bottom up and from the inside out to be
successful. This is why this year we have been bringing people
together from around the world, representing every role type,
business area and region, to help us accelerate the culture
across the company. We’re ready and excited to continue to
make progress on our culture in GSK, so together we can
deliver a step change in competitive growth and build a
successful company that improves the lives of people across
the world.
Consumer Healthcare culture, see page 43
Our culture powers our purpose to get Ahead of disease Together,
drives delivery of our strategy and makes GSK a place where
outstanding people thrive.
Our culture
12
GSK Annual Report 2021
To see how we are progressing against our three long-term priorities,
we use ten key performance indicators.
Key performance indicators
Innovation
2021
2020 2019
Innovation sales
R
Pharmaceuticals and Vaccines – sales of products launched in the last five years
£6.8bn
1
£4.1bn
2
£3.0bn
2
Consumer Healthcare – sales from products which are new to a market in the last
three years as a % of total sales
10%
11%
12%
Pipeline value and progress
R
–
the value of products in our pipeline and R&D
milestones achieved
n/r
n/r n/r
Performance
2021
2020 2019
Group turnover
R
–
flat at AER, 5% CER
£34.1bn
£34.1bn
£33.8bn
Profit
R
Total operating profit – down 20% AER, down 9% CER
£6.2bn
£7.8bn £7.0bn
Adjusted operating profit – down 1% AER, up 9% CER
£8.8bn
£8.9bn
£9.0bn
Total operating margin
18.2%
22.8%
20.6%
Adjusted operating margin
25.8%
26.1%
26.6%
Free cash flow
R
–
down 18%
£4.4bn
£5.4bn
£5.1bn
Market share
– our
market share in relation to our competitors
n/r
n/r n/r
Top talent and succession plans for key roles
– our most talented employees
in key roles with succession plans in place
n/r
n/r n/r
Trust
2021
2020 2019
Employee feedback
–
employee engagement scores from our global employee survey
78%
84%
78%
Supply service level
–
percentage of orders delivered on-time, in-full
n/r
n/r n/r
Corporate reputation
–
reputation index among stakeholders and informed public
measured globally and in top 13 markets
n/r
n/r n/r
R
Linked to Executive LTI awards and annual bonus, see pages 120, 129 and 131
targets. See pages 122, 124 and 136 to 137
1 2021 includes products that have benefited from significant lifecycle innovation
2 Comparative information reflects sales of those products that meet the definition for 2020
n/r Not reported externally due to commercial sensitivities
The GSK Leadership Team (GLT) and our Board review our
key performance indicators (KPIs) regularly. We also update
our people on progress every quarter. We decide our people’s
bonuses based on relevant subsets of our ten KPIs, which
we also use to reward our executives’ performance (see
pages 120, 129 and 131).
We track all our operating KPIs internally, and below we give
data for those we report externally. Commercial sensitivities
mean we can’t publish data for all operating KPIs (shown as n/r).
To report our business performance, we use adjusted, non-IFRS
measures, including Adjusted results, free cash flow and CER
growth rates (as described on pages 56 and 59).
GSK Annual Report 2021
13
Strategic report
Governance and remuneration Financial statements Investor information
A reopening of the global economy, driven
by healthcare innovation
The events of 2021 gave a clear demonstration of the
contribution our industry can make to the world. As the
pandemic continued, collaborations between companies,
governments, regulators and international organisations
brought new vaccines and medicines to the world in record
time. Regulatory processes got faster and companies invested
in R&D to deliver novel products and expanded manufacturing
capacity. The rollout of vaccine programmes enabled the global
economy to reopen. Later in the year, regulatory approval was
granted for COVID-19 treatments. GSK contributed to the
global response, through our agreements with the US, EU
and a number of other governments to supply our COVID-19
therapeutic,
Xevudy
(sotrovimab), and our ongoing vaccination
development programmes with Sanofi, Medicago, SK
Bioscience and CureVac.
At the same time, the virus continues to take lives, and the
world is still dealing with the economic and social impact of
the pandemic. The worst predictions of prolonged economic
recession have not materialised, with global economic forecasts
predicting growth of 5.9% in 2021 and 4.9% in 2022, although
there is some uncertainty about the uniformity of the recovery,
the management of debt, and inflationary trends.
1
Similarly, there
will be continued economic and social threats posed by new
variants such as Omicron. Although global healthcare spending
is expected to rise, there will be competing funding demands
between front-line staff costs, the ongoing need for pandemic
medical products and catch-up programmes to tackle growing
waiting lists. Governments and healthcare systems will have to
evaluate the cost of new pharmaceutical innovation and its role in
helping to address the burden of illness across all therapy areas.
Outlook for the global healthcare market
The pre-pandemic trends in the use of medicines and spending
remain relatively constant. In higher income countries, the
adoption of new treatments, offset by patent lifecycles and
competition from generics and biosimilars, is expected to
continue as the main driver of medicine spending and growth.
Global medicine spending totalled $1.4 trillion in 2021 and
is expected to grow at 3-6% CAGR through 2026, reaching
about $1.8 trillion in total market size, excluding spending on
COVID-19 vaccines. The US market is forecast to grow by
0-3% CAGR over the next five years. Spending in the top five
European markets is expected to increase by $51 billion.
China is expected to increase its uptake of new and original
medicines (growing by $35 billion by 2026), with spending
in emerging markets likely to increase by $128 billion.
2
Global
spending on vaccines is predicted to grow at 12-15%, reaching
$46 billion in 2025.
3
It is forecast that by 2026, specialty medicines will account
for nearly 60% of total expenditure in high-income markets,
with the remainder, predominantly older and traditional
therapies, becoming progressively lower-cost over time. The
two leading global therapy areas – oncology and immunology
– are forecast to grow 9-12% and 6-9% CAGR respectively
through to 2026, lifted by significant increases in new
treatments and medicine use. It is expected that 100 more
oncology treatments will come to market over five years.
2
Our position
Our 2021 performance suggests that we are well positioned
to capitalise on the forecast growth in specialty medicines.
Increased investment for key R&D programmes and expanded
support for new and ongoing launches has resulted in sales
growth driven by strong uptake of new medicines. In 2021,
new and specialty medicines grew by 26% CER and we
recorded double-digit sales growth in immuno-inflammation,
respiratory and oncology. We see these results as very
encouraging and a demonstration of strong progress against
our strategic priorities. These new medicines are at the forefront
of an exciting, high-value pipeline we continue to build across
the prevention and treatment of disease.
Our external environment
1 IMF, World Economic Outlook: Recovery During a Pandemic,
October 2021
2 IQVIA, The Global Use of Medicines 2022, January 2022
3 IQVIA, Global Medicine Spending and Usage Trends Outlook to 2025,
April 2021
The world is changing, shaped by major social and economic trends that
continue to be influenced by the COVID-19 pandemic. While the contribution
of vaccines, medicines and healthcare has been clearly highlighted this year,
challenges remain. We respond to this dynamic environment by working with
governments, regulators and industry partners to deliver innovation to
healthcare systems that demonstrates value to patients and payers.
14
GSK Annual Report 2021
Our external environment
continued
Healthcare environment: opportunities and challenges
Pricing and access
Equal access to healthcare
For governments, equal access to healthcare is a growing
policy priority. The challenge of bringing COVID-19 vaccines
equitably to the global population highlighted the dilemma.
Industry has manufactured and distributed over 11 billion
1
vaccine doses, but they have disproportionally gone to high-
income countries. Only 9.6% of people in low-income countries
have received at least one dose.
2
Governments attempt to
balance immediate access for their respective populations
with global health responsibilities.
Though global initiatives such as COVAX have helped with
access to vaccines, the disparity led some governments and
international organisations to question intellectual property (IP)
frameworks, most notably the World Trade Organization’s
agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS) waiver provisions. However, there is concern
that any moves to alter IP protections won’t address the
problem and could destabilise innovation within life sciences.
In turn, this could threaten future collaborations like the ones
that were so important in creating the vaccines and treatments
used to tackle this pandemic.
The need to demonstrate the value of innovation to public
and private healthcare payers is growing. Expenditure on
pharmaceuticals is heavily scrutinised, with renewed calls
for transparency in price setting. However, there has been
significant moderation of pharmaceutical expenditure over
the last decade. Across 11 major markets surveyed by IQVIA,
medicines’ expenditure represents only 15% of total healthcare
spending and has remained relatively flat even though reliance
on pharmaceuticals has increased.
3
Continued genericisation of medicines across therapeutic
classes, including cancer, and the increased use of biosimilars
is continually improving affordability and access. However, the
outlook will continue to be challenging and the demand for data
and real-world evidence to support continued reimbursement
of new products is likely to increase. We will work with payers
to design innovative solutions that manage their risk and
uncertainty.
There is also likely to be a greater emphasis on health resilience
and the role that preventative care can play in improving
health outcomes. Health protection interventions, including
immunisation, represent significant value in terms of return on
investment (this is estimated to be £34 for every pound spent
in the UK).
4
US medicines policy
There were several legislative efforts to address drug pricing
in the US throughout the year and pricing became a focal point
in attempts to pass the $1.75 trillion social safety and climate
package (Build Back Better Act) towards the end of the year.
5
The drug pricing reform proposals provided for direct
negotiations between the federal government's Medicare
Insurance Programme and industry on the price of the ten
costliest drugs for diseases, such as cancer and diabetes, that
only have one supplier, with new prices taking effect in 2025.
The measures sought to address out-of-pocket expenditures
for seniors by capping spending at $2,000 per person per year.
Companies that raised the price of medicines above inflation for
parts B and D of Medicare would be penalised. The inflation cap
would also apply to private insurance markets.
Though the out-of-pocket measures should improve affordability
for seniors, the industry is concerned that, taken together, the
package could reduce patient choice and limit access to
innovation in the future. With no agreement reached on the exact
terms of the Build Back Better Act by the year end, the extent
and effect of the drug reform package remained unclear.
European pharmaceutical reform
In Europe, there continues to be considerable scrutiny of
drug pricing and a growing trend towards the centralised
procurement of vaccines and medicines. A wide-ranging review
of EU pharmaceutical legislation began as part of the EU’s
pharmaceutical strategy. The strategy is based on four pillars,
covering access, competitiveness and innovation, crisis
preparedness and a strong EU voice in the world. The review
is also looking at improved regulatory procedures and the
vulnerability of supply of medicines.
Last year, the European Commission centralised the
procurement of COVID-19 vaccines on behalf of member
states and in 2021 it concluded a joint procurement agreement
to purchase monoclonal antibodies.
Beyond Europe, many countries are implementing various
reforms ranging from regulatory pathways to cost containment.
In China, the government has committed to accelerating patient
access to health insurance cover and innovative medicines.
China completed an update to its national reimbursement drug
list (NRDL) in 2021 and will add new high-value medicines in
the future. However, access to the NRDL can result in price
reductions – on average, 61% in 2019, 51% in 2020 and 62%
in 2021.
6
Our position
We aim to bring our new medicines, vaccines and consumer
healthcare products to patients across the world, no matter
where they live. We have an industry-leading track record on
this, as shown by our continued top ranking in the Access to
Medicine Index. We are working to ensure that as medicines
become more specialised, we maintain our commitment to
access. We will do this by making our products widely available
at responsible prices that are sustainable for our business.
1 World Economic Forum, From zero COVID-19 vaccines to 11.2 billion
in a year, 4 January 2022
2 Our World in Data, Coronavirus Vaccinations, as at 19 January 2022
3 IQVIA, Drug Expenditure Dynamics 1995-2020, October 2021
4 ABPI, Economic and Societal Impacts of Vaccination, 2020
5 H.R.5376 - Build Back Better Act, 117th Congress, 2021-2022
6 PharmaExec.com, China 2021: The NRDL Readout, January 2022
GSK Annual Report 2021
15
Strategic report
Governance and remuneration Financial statements Investor information
Getting the balance right between responsible pricing
and sustainable business is fundamental to our Innovation,
Performance and Trust priorities. When setting prices for our
medicines in mature markets, we use a value-based approach
that balances reward for innovation with access and affordability
(see page 36). We aim to provide truly differentiated, innovative
products that offer effective health outcomes for patients and
payers, so that all products deliver value.
For more on pricing see our ESG Performance Report
Regulatory environment
Growing flexibility and cooperation
Despite the obstacles posed by the pandemic, regulators
and the industry continue to prioritise the supply of essential
vaccines and medicines, while also accelerating the
development of new products. New regulatory approaches
have facilitated innovation, particularly in digital healthcare,
cell and gene therapies, complex clinical trials, big data and
real-world evidence.
Regulators have worked in close cooperation with industry,
often across regulatory jurisdictions, through supranational
bodies, such as the International Coalition of Medicines
Regulatory Authorities. There is the potential for the permanent
adoption of regulatory adaptations that support the development
and approval of a broader range of new vaccines and medicines.
There is also an opportunity to simplify regulatory processes.
Our external environment
continued
Across regions, major regulatory initiatives have been
announced, including in the UK, China, US and Europe. In the
US, negotiations between the industry and the Food and Drug
Administration (FDA) about the Prescription Drug User Fee Act
(PDUFA) VII have concluded. Potential regulatory innovations
covered in the resulting commitment letter are moving on to
the legislative process. In the EU, the industry continues to
prepare for the European Commission’s revision of general
pharmaceutical legislation. The industry is also working with the
UK’s Medicines and Healthcare Products Regulatory Agency
(MHRA), which is establishing new and enhanced partnerships
with regulators outside the EU. Following Brexit, there are still
significant regulatory challenges around implementation of the
Northern Ireland Protocol. The industry continues to engage
with both UK and EU agencies to resolve these.
Our position
GSK closely monitors and engages, where relevant and
appropriate, to improve regulation. This happens mainly in
the UK, Europe, US, China and Japan.
For example, scientific innovation is moving beyond the scope
of current regulation and standards, and we continue to learn
from our experience with COVID-19. Working with our peers,
we are engaging with governments to create a balanced
regulatory framework that supports the discovery and delivery
of vaccines and medicines developed through emerging
technologies and techniques.
Global environment: opportunities and challenges
Changing needs
Ageing populations are increasing global demand for preventive
and therapeutic health solutions, and changing the way
healthcare is delivered worldwide. The acceleration of digital
health and telemedicine have revolutionised the delivery of
healthcare over the last two years as patients increasingly
managed their own healthcare at home. The global digital health
market is expected to reach $484 billion in 2025 at a CAGR
of 25%.
1
Patients are becoming more engaged with their
healthcare, and companies are adopting more ‘patient-centric’
approaches, focused on patient outcomes, patient satisfaction
and user experience.
Predictions suggest the global population will grow to 8.5 billion
by 2030 (from 7.7 billion, 2019), despite the pandemic
decreasing life expectancy in some countries in 2020-21. The
number of over-65-year-olds is set to double between 2019
and 2050.
2
More people are living in cities, becoming affluent
and living to an advanced age. This is particularly true in China,
which is experiencing the world’s fastest-ever expansion of the
middle class, with projections that 1.2 billion people will be
middle class by 2027.
3
Advances in science and technology will help us respond to
the growing demand for healthcare created by changing
demographics, greater patient control and the demand for
digital health.
Our position
Changing demographics will contribute to rising demand for
healthcare, which we can respond to with our diverse portfolio
spanning infectious diseases, HIV, oncology, immunology and
respiratory disease. We aim to positively impact the health of
over 2.5 billion people over the next ten years with our products.
In line with our Innovation priority, we are investing in a pipeline
of vaccines and specialty medicines that will meet changing
healthcare needs. We believe that new technologies will enable
the earlier identification of diseases and we will develop
precision medicines that will target treatments to groups of
patients most likely to benefit. In vaccines, technological
innovation is allowing us to address unmet medical needs
across all age groups.
1 Digital Health Global Market Report 2021 – COVID 19 Growth and
Change, Research and Markets, March 2021
2 United Nations, World Population Prospects 2019 (Revised), 2019
3 Brookings, China’s influence on the global middle class, Homi Kharas
and Meagan Dooley, October 2020
16
GSK Annual Report 2021
Advances in science and technology
We are at an exciting time in medical discovery, fuelled by
the genetic revolution of the last decade combined with the
expansion of (patient-driven) healthcare data and advanced
technology like artificial intelligence/machine learning (AI/ML).
Advances in functional genomics, such as CRISPR gene
editing, have already started to redefine what is possible in
drug discovery, allowing researchers to unravel the mysteries
of biology and help pinpoint novel drug targets with a higher
probability of success. This is driving a phenomenon we call the
‘digitisation of biology’, which allows scientists to explore human
biology in a way never possible before. It holds much promise
for treating diseases previously out of reach, and requires AI
and machine learning.
Researchers, regulators and payers are also exploring how
these technologies can help improve clinical trials and generate
better insights on product effectiveness – and even new
combinations of products – to improve health.
Rapid advances in science and technology are fundamentally
changing life sciences R&D. The pandemic has accelerated
vaccine innovation, including mRNA technology. This enables
the body’s own cells to produce specific proteins, or antigens,
so the immune system can prevent or fight infectious disease.
Our position
We are at the forefront of advances in science and technology,
working to create innovative solutions to all kinds of healthcare
challenges.
Advanced technology platforms
– These are central to
our R&D approach. We have expertise in AI and functional
genomics. Our dedicated global in-house AI team is using
machine learning to unlock the potential of complex genetic
data with never-before-seen levels of speed, precision and
scale. (See page 18 for more details).
Vaccines
– We use diverse platform technologies from
adjuvants that improve vaccine effectiveness through to mRNA
technology. These are at the heart of our pipeline differentiation.
Collaborations
– We’re partnering with teams from the cutting
edge of fields within and outside pharmaceuticals and vaccines
to help steer new science and develop therapeutics. (See pages
17 to 27 for more details).
Responsible business
Society’s expectations of businesses remain high. Companies
across all sectors face increased scrutiny on the social and
environmental impacts of their operations. At the same time,
long-term socio-economic trends continue to drive down trust
in business. Organisations must meet expectations on how
they engage with – and benefit – society, the economy and the
environment. Companies are partnering with policymakers and
non-profit organisations on finding new collaborative solutions
to complex long-term issues, such as climate change and global
health inequalities.
Our external environment
continued
Climate change in focus
Recent political and economic challenges may have slowed
progress on the UN’s Sustainable Development Goals but the
need for action remains urgent. A top priority is addressing
environmental issues. Extreme weather events, new scientific
data on climate change and civic activism have rapidly advanced
the case for sustainable energy solutions and stronger
protections for the natural world and biodiversity. The Glasgow
COP26 summit was the 2021 focal point for international
climate change solutions. It led to the Glasgow Climate Pact,
which includes new emissions pledges that, if fulfilled, will limit
global warming to about 2.4 degrees above pre-industrial levels.
1
For the first time at COP a plan was also set out for reducing
global use of coal – responsible for 40% of annual CO
2
emissions.
2
Recognising good ESG management
Societal expectations of business continue to increase, with
businesses expected to play their part in addressing some
of the biggest challenges facing society. The international
investment community is responding to this context by placing
higher value on businesses that actively manage ESG risks
and opportunities. These businesses are seen to offer a better
foundation for long-term, sustainable growth; with good
environmental stewardship and climate risk mitigation planning
becoming a priority for investors.
Our position
Trust is essential to how we deliver on our purpose and create
long-term value for both shareholders and society. We have 13
commitments that support our Trust priority and we are deeply
committed to addressing the issues that matter, including
pricing and access, global health, the environment, and
inclusion and diversity.
During 2021, we made good progress across many of these
areas. We retain a sector-leading position in the Dow Jones
Sustainability Index. Our leading work in improving global health
and tackling antimicrobial resistance was recognised by the
Access to Medicine Foundation through top rankings in their
Access to Medicine Index and AMR benchmark. The WHO
recommended our malaria vaccine for wider use in children in
regions with moderate to high malaria transmission. We
launched new aspirational gender and ethnic diversity targets,
to increase representation at senior levels, alongside a review
of recruitment processes at all levels to make sure we are
reaching and attracting diverse candidates. And we made
strong progress on our 2030 climate and nature goals,
including large-scale renewable energy investments at two
major manufacturing sites, joining a coalition to curb
deforestation, and investing in R&D to cut greenhouse gas
emissions from our metered dose inhalers by up to 90%
(see page 39).
1 Lewis S & Maslin M, Five things you need to know about the Glasgow
Climate Pact, World Economic Forum, 15 November 2020
2 Ritchie H and Roser M, CO
2
emissions by fuel, Our World in Data, Last
accessed 19 January 2022
GSK Annual Report 2021
17
Strategic report
Governance and remuneration Financial statements Investor information
Innovation is at the heart of achieving our purpose – to unite
science, talent and technology to get Ahead of disease
Together. It’s by discovering and developing new vaccines
and medicines that we help patients and make a large-scale,
positive impact on human health through prevention and
treatment of disease.
R&D is the core of our innovation. In 2021, we invested £5.3
billion in R&D – 3.5% AER more than 2020 – to enhance our
pipeline of vaccines and medicines. Through our own work,
and partnerships with other businesses and academia, we
currently have 21 vaccines and 43 medicines in development.
Many have the potential to be first or best-in-class. In all we do,
we encourage our teams to pursue bold research, backed by
data and science and underpinned by clear accountability.
We have streamlined our R&D governance to allow us to
keep up this pace. In 2021, we switched from separate clinical
development organisations for vaccines and medicines to a
single combined organisation. This will help us make sure we
invest in the programmes with the biggest impact for patients
and unlock scientific synergies across prevention and treatment.
Our approach to R&D
To deliver transformational vaccines and medicines, our R&D
approach is to focus on the science of the immune system,
human genetics and advanced technologies, such as artificial
intelligence and machine learning.
We prioritise research into vaccines and medicines across our
four therapeutic areas of infectious diseases, HIV, oncology,
and immunology including respiratory. We also remain open to
opportunities outside these core areas where the science aligns
with our strategic approach.
Our pipeline consists of 64 potential vaccines and medicines
with more than 70% that modulate the immune system. In 2021,
we moved 19 assets into phase I or phase II trials.
Speeding up the pace of discovery and
development
The productivity of our R&D is increasing. Since 2017,
we’ve doubled the number of assets in phase III of clinical
development to 22 and cut overall cycle times across
development by 20%. In addition, in 2022 we anticipate
milestones on up to 7 of the 11 potential new vaccines and
medicines identified as key future growth drivers, including
Apretude
which was approved at the end of 2021 and
our respiratory syncytial virus (RSV) vaccine candidate for
older adults.
This growing pace helps us make a difference to more
people’s lives. For instance,
Blenrep
(belantamab mafodotin),
a treatment for multiple myeloma, gained regulatory approval
just two years after the start of its first pivotal study. And our
COVID-19 treatment, sotrovimab, achieved emergency use
authorisation from the FDA just 13 months after our partnership
with Vir Biotechnology began in April 2020, when the molecule
was still in preclinical phase.
Innovation is at the core of what we do. In 2021, we continued to
strengthen our pipeline of vaccines and medicines, apply our growing
expertise and partnerships in technology and data, and increase the
productivity of our R&D. It has been a year of new launches, regulatory
approvals and important clinical studies, turning our expertise into
transformational vaccines and medicines for patients.
Innovation
–
Strong pipeline of 21 vaccines and 43 medicines, many
with the potential to be first or best-in-class opportunities
for patients, 22 of which are in pivotal trials
–
Approval in the US for
Apretude
, our long-acting HIV
preventative therapy
–
Xevudy
(sotrovimab), our monoclonal antibody treatment
for COVID-19, approved or authorised for conditional/
temporary use in the US, UK, EU and over 12 other
countries
–
Approval for
Jemperli
, as a treatment for endometrial cancer and certain solid tumours
–
Positive phase III data for daprodustat for patients with
anaemia of chronic kidney disease
–
20+ deals executed securing access to five novel clinical
assets
–
Approximately 70% of our targets in research are
genetically validated, and published scientific research
shows that genetically validated targets are at least twice
as likely to become medicines
Pharmaceuticals and Vaccines highlights
18
GSK Annual Report 2021
Innovation
continued
Leading progress
We’ve had 13 major new vaccines and medicines approved
since 2017. This puts us in the top quartile in our industry. For
2018-20, we had a greater than 90% success rate for our
pivotal studies, compared to 77% across the industry. Our
2017-20 number of launches per billion dollars of R&D
spending was over 50% better than peer median.
Lifecycle innovation
As well as developing new treatments, we look for innovation
across the lifecycle of our existing vaccines and medicines by
finding new ways for them to help patients, either on their own
or combined with other therapies. Since 2017, we have
increased the number of lifecycle projects per asset by 50%.
Examples are:
–
Benlysta
for the treatment of both systemic lupus
erythematosus and lupus nephritis.
–
Nucala
, our anti IL-5 biologic, which is now also approved
in the US and Europe for severe eosinophilic asthma,
hypereosinophilic syndrome, eosinophilic granulomatosis
and polyangitis and chronic rhinosinusitis with nasal polyps.
–
Our shingles vaccine,
Shingrix
, which was approved for wider
use in several markets including the US and Canada.
–
Expansion of our clinical trial programme for
Zejula
into new
indications such as breast and lung cancer.
–
The contribution of
Trelegy Ellipta
to respiratory disease and
lung health continues to evolve.
Trelegy
has expanded the indicated use from chronic obstructive pulmonary disease
(COPD) to include asthma in the US.
Strategic partnerships – joining forces to make
progress
Through strategic partnerships and business development,
we join forces with commercial and academic partners to open
up new avenues of discovery or advance the development of
new potential medicines. In 2021 alone, we announced more
than 20 partnerships and collaborations that provided us
access to five novel clinical assets, including with iTeos in
immuno-oncology, Alector in immuno-neurology and Vir
Biotechnology in flu. We have also invested in technologies
that expand our capabilities in human genetics and artificial
intelligence/machine learning (AI/ML).
Genetics, genomics and technology
The success of our R&D rests not just on finding new
treatments, but on getting better at how we find them. The
key to that is combining genetics, genomics and advanced
technologies.
To fulfil our purpose to get Ahead of disease Together, we
prioritise genetically validated targets to increase our probability
of successfully delivering an approved vaccine or medicine.
Approximately 70% of our targets in research are genetically
validated and published scientific research shows that
genetically validated targets are at least twice as likely
to become medicines. We’re now able to harness advanced
technologies to convert insights from human genetics and
genomics to improve the probability of success for R&D.
Making better predictions to help patients
The last decade has seen a revolution in genetic data and
genomics. AI and machine learning help us find patterns in
data on a larger scale and far more quickly than before. This
is leading to the ‘digitisation of biology’ and is allowing us to
better understand the root cause of many diseases.
At GSK we partner with the world's best minds and leading
institutions in these areas. We are also investing in our own
capabilities including our London AI hub, which is using
biomedical information, AI/ML and computing platforms to
unlock new insights from our genetic and clinical data.
With these capabilities we have found new potential
combinations for existing therapies, such as
Blenrep
in
combination with a gamma secretase inhibitor, which could
allow for greater patient benefit.
Forming the right partnerships in genetics
and genomics
Our collaboration with consumer genetics and research
company 23andMe has yielded more than 40 novel research
programmes, one of which is now in phase I for the treatment
of cancer. We’ve also worked with the UK Biobank since its
founding and have joined the UK’s most recent bioresource,
Our Future Health. Additionally, we are supporting newer
datasets that feature diverse populations, such as the Genes
and Health Consortium in East London and the Black
Representation in Genetic Research Study with 23andMe.
In late 2021, we announced a five-year collaboration with the
University of Oxford which will focus on neurodegenerative
diseases. The new Institute will leverage advanced technologies
to build on insights from human genetics to accelerate the most
promising areas for drug discovery.
GSK Annual Report 2021
19
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Governance and remuneration Financial statements Investor information
In genomics, our partners include the world’s preeminent
experts: the Broad Institute in Boston and the Laboratory
for Genomics Research (LGR), which we established with
the University of California in 2019. They’re helping us find
genetically validated drug targets by investigating areas
including genetic variations and their consequences for the
function of cells. Working with the pioneers of CRISPR
technology at LGR, we’re uncovering new knowledge about
disease mechanisms for immunology, oncology and neurology
in 12 different programmes. Meanwhile, our work with UK
biotech Adrestia is leveraging a new area called synthetic
viability to find novel drug targets in hard to treat diseases like
frontotemporal dementia (FTD).
We are also funding PhD studentships at multiple universities
and institutes, including the Crick Institute, the University of
Adelaide in Australia and University of Oxford, Stanford
University, Cambridge’s Centre for AI and Medicine, and
Warwick University. This will help make sure we have sustained
talent pools and the right skills in the coming years.
Using AI/ML to build scale and speed
In 2021, we started a new partnership with King’s College
London using AI/ML to understand why some patients respond
to cancer treatment, while disease progresses in others. The
technology will tell us more about the role of tumour genetics,
the tumour microenvironment and response to therapies. In
addition, the technology will aid the creation of tools to help
make better clinical decisions for personalised treatment.
NVIDIA’s Cambridge-2 supercomputer is performing a similar
role for us in immuno-oncology by fusing different datasets
and building large-scale models to help us determine the best
treatment for patients. And the largest ever chip processor
for AI, built by Silicon Valley start-up Cerebras, is helping us
construct larger-scale genetic models that learn from DNA
to help deconstruct how genes operate in different disease
contexts.
Extensive vaccine platform technologies
Our work in vaccine platform technologies, with the broadest
portfolio in the industry, enables us to select the most
promising technology approach (or combinations of different
platform technologies) to develop new vaccines previously
not thought possible. Platform technologies such as adjuvants,
bioconjugation, generalised modules for membrane antigen
(GMMA) and adenovirus vectors can be used to make vaccines
against a range of different pathogens and allow for a tailored
approach to deliver success. This includes mRNA, a key focus
area for our development as we see it as a critical platform
technology and major opportunity for the future of vaccines.
We’re investing in it significantly, including through our
collaboration with CureVac and by building on our in-house
end-to-end mRNA development and manufacturing capabilities.
We are focusing our efforts on modified and non-modified
mRNA technologies optimised for high protein expression to
improve mRNA potency and tolerability.
Digitisation, machine learning and AI are helping us speed
up the vaccine research and manufacturing process. In 2021,
we announced a successful proof of concept of a digital twin
approach for vaccine manufacturing with Siemens and Atos.
The digital twin uses machine learning and modelling to provide
new insights for optimising the development and manufacturing
of vaccines.
Infectious diseases
The world faces a persistent threat from infectious
diseases that not only claim lives but also put strain on
healthcare systems. Almost half the vaccines and
medicines in our pipeline address infectious diseases.
We are targeting several new launches by 2026, including our
vaccine candidate for RSV in older adults, and gepotidacin, an
antibiotic to treat uncomplicated urinary tract infections (uUTI).
Both have the potential to be first and best-in-class. We also
aim to complete five proof of concept studies for new vaccine
candidates by 2023. Those that successfully demonstrate proof
of concept will be ready to move to registrational clinical trials.
In 2021, we moved multiple vaccine candidates into clinical
trials. They include a meningitis ABCWY second generation
vaccine and vaccine candidates for
Klebsiella pneumoniae
,
cytomegalovirus (CMV) and new strains of varicella
(chickenpox). Our latest trials also include protein-based,
adjuvanted COVID-19 vaccines, which we are developing
in collaboration with other companies.
Innovation
continued
20
GSK Annual Report 2021
Innovation
continued
Our combined expertise in vaccines and medicines means
we are uniquely positioned to focus on connections between
treatment and prevention. Examples include:
–
COVID-19, for which we are working on both treatments
and vaccines
–
RSV and respiratory conditions, through our efforts to
develop RSV vaccines for the populations most at risk,
as well as to develop future respiratory medicines
–
Hepatitis B, through our antisense oligonucleotide and
vaccine technologies in development
–
Influenza, for which we are developing vaccines and
antibodies
The close collaboration in R&D across our research areas
helps us innovate in areas where multiple tools might be
required, such as antimicrobial resistance (AMR) or pandemic
response. By drawing on the crossovers between our work in
vaccines and pharmaceuticals we enhance our ability to
develop innovative solutions to meet patient needs.
Shingles
Around one in three people will develop shingles in their lifetime.
In 2017, our
Shingrix
vaccine signalled a step change in preventing this painful and potentially serious illness. It’s the first
non-live shingles vaccine, and it combines a specific subunit
antigen with an adjuvant to sustain the immune response.
In 2021, we continued to expand access to
Shingrix
. We
launched it in nine new markets: Australia, Singapore, Hong
Kong & Macau, Italy, Spain, Denmark, Finland, Austria and the
UK. Switzerland followed in early 2022.
Regulators in the US, Canada, Australia, Hong Kong and
Singapore also extended the indication for the vaccine to adults
18 years and older at increased risk.
Shingrix
is the first shingles vaccine indicated for this expanded use.
We also achieved regulatory approvals for the vaccine in South
Korea, Brazil, Switzerland and Taiwan, including for the 18+ at
increased risk population. We gained new recommendations for
the vaccine in Italy, Spain, Australia and Switzerland.
In addition, the US’s National Comprehensive Cancer Network
(NCCN) Survivorship Guidelines were updated to preferentially
recommend
Shingrix
for cancer survivors aged 50 years and
older, and the NCCN Guidelines on the Prevention and
Treatment of Cancer-Related Infections were updated with
Shingrix
recommendations for autologous hematopoietic cell
transplantation (HCT), multiple myeloma and lymphoma
patients. The Global Initiative for Chronic Obstructive Lung
Disease (GOLD) guidelines were also updated to recommend
shingles vaccination to protect against shingles in adults with
COPD aged 50 years and older.
RSV
Respiratory Syncytial Virus (RSV) is a very common virus and
a leading cause of acute respiratory infections. In older adults,
RSV can exacerbate underlying conditions and lead to
pneumonia. It causes 360,000 hospitalisations and 24,000
deaths in over-60s each year in high-income countries, yet
remains one of the major infectious diseases without a vaccine.
RSV is the leading cause of severe respiratory infections in
infants and causes more hospitalisations than influenza in this
vulnerable group.
Our programme to help prevent RSV consists of two candidate
vaccines, the most advanced of which is being tested in adults
aged 60 years and over. It uses a recombinant pre-fusion F
antigen combined with our AS01 adjuvant. The AS01 adjuvant
is a key ingredient in
Shingrix
and boosts the immune response,
helping to overcome the challenges associated with protecting
older people. We anticipate phase III data on this candidate
vaccine in the first half of 2022. We stopped enrolment and
vaccination in trials of our RSV maternal candidate vaccine in
February 2022 following feedback from the Independent Data
Monitoring Committee (IDMC). Further analysis to better
understand safety data from these trials is ongoing.
We have stopped developing a phase II RSV paediatric
candidate vaccine based on an adenovirus vector, which was
not using the pre-fusion F antigen, because it was unlikely to
meet our efficacy target. We are currently investigating new
technologies to address this important medical need.
Meningitis
About 1.2 million people develop invasive meningococcal
disease (IMD) every year, with infants, young children and
adolescents particularly vulnerable. Even with early diagnosis
and adequate treatment, 5% to 10% of patients with bacterial
meningitis die, often within 24 to 48 hours of symptoms starting.
Left untreated, meningitis is fatal in up to 50% of cases and can
cause brain damage, hearing loss or disability in 10% to 20% of
survivors.
We are a leader in IMD protection, with over ten million patients
vaccinated in 2021 alone.
Bexsero
, our meningitis B vaccine, and
Menveo
, our meningitis ACWY vaccine, together help
protect against most IMD cases.
In 2021, GSK filed a submission to the FDA for a fully liquid
version of
Menveo
. This would simplify administration of the vaccine by healthcare providers.
We are developing two MenABCWY pentavalent (5-in-1)
vaccines, which would mean just one vaccine, rather than two,
could be used to help protect against all five major disease-
causing serogroups. The first generation MenABCWY vaccine
candidate is in phase III clinical trials and was created by
combining the technologies we have used to develop our
existing
Bexsero
and
Menveo
vaccines. In 2021, we also started a phase I/II trial of a second generation pentavalent candidate
for broader age indications and strains.
GSK Annual Report 2021
21
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Governance and remuneration Financial statements Investor information
Innovation
continued
COVID-19
Globally, more than 400 million cases of COVID-19 have been
recorded since the outbreak emerged, resulting in the deaths of
over five and a half million people. With our partners, we have
been developing treatments as well as several vaccines.
Treatment – harnessing monoclonal antibodies
Alongside vaccines, effective treatments are critical to support
patients and communities through the next phases of the
pandemic. Some COVID-19 patients are at a higher risk of
hospitalisation and death due to risk factors such as old age
or comorbidities. For these patients, it will remain important to
have access to early, effective treatment options including
monoclonal antibodies.
Through our collaboration with Vir Biotechnology, which began
in 2020, we developed
Xevudy
(sotrovimab) – a SARS-CoV-2 monoclonal antibody that works to prevent the virus from
entering and infecting healthy cells within the body. In the first
half of 2021, GSK and Vir announced results from COMET-
ICE, a phase III trial that investigated intravenous (IV) infusion
of sotrovimab in adults with mild or moderate COVID-19 at high
risk of progression to severe disease.
Sotrovimab is authorised for emergency use in the US and,
under the brand name
Xevudy
, has been granted a marketing authorisation in the EU. It has conditional or provisional marketing
authorisations in Great Britain, Switzerland, Australia and Saudi
Arabia. It has also been approved via Japan’s Special Approval
for Emergency Pathway. Temporary authorisations for sotrovimab
have also been granted in several other countries.
Sotrovimab binds specifically to a region of the spike protein
that is less likely to change, increasing the potential that it may
remain effective against variants that emerge over time. Data
from preclinical in vitro studies demonstrate that sotrovimab
retains activity against all tested variants of concern and interest
to date, including Delta and Omicron.
Along with Vir, we are continuing to progress the clinical
development programme for sotrovimab and are exploring
more convenient methods of administration. In November,
we received positive results from the COMET-TAIL trial
investigating the intramuscular (IM) route of administration
of sotrovimab as an early treatment for mild-to-moderate
COVID-19 in high-risk, non-hospitalised adults and
paediatric patients (12 and over). Knowing that the greatest
need for effective prophylactic treatments is likely to come
from immuno-compromised people, GSK and Vir are also
supporting clinical studies specific to this population.
COVID-19 vaccines – using technology to boost
immune response
We are working with several companies on COVID-19 vaccines
using our proprietary adjuvant technology. Adjuvants can make
vaccines more effective by boosting and extending the body’s
immune response. They also make it possible to produce more
doses with less antigen, enabling the production of more
vaccine doses to address global needs.
Following positive phase II data, our vaccine collaboration
with Sanofi began phase III trials in May 2021, in parallel with
a programme of booster studies. In December 2021 we
announced positive preliminary results showing that a single
booster dose of the adjuvanted recombinant protein-based
COVID-19 vaccine candidate delivered consistently strong
immune responses across all primary vaccines received.
And, in February 2022, we announced our intention to submit
applications for regulatory approval of the vaccine in the US
and Europe following the positive read outs of both the booster
and primary phase III trials with this vaccine candidate.
In December 2021 we reported positive phase III data for
the adjuvanted plant-based vaccine we are developing with
Medicago, building on positive phase II results announced
earlier in the year. Based on these data, the vaccine, Covifenz,
was approved in Canada in February 2022.
A third vaccine using our adjuvant technology is in development
with SK Bioscience. If successful, we intend to distribute this
vaccine globally through the COVAX facility. The GPB510
vaccine, a self-assembled nanoparticle vaccine targeting the
receptor-binding domain of the SARS-CoV-2 spike protein,
started phase III trials in August 2021.
We are also developing second generation mRNA COVID-19
vaccine candidates using modified and non-modified RNA
vaccine technologies as part of our collaboration with CureVac.
In August and November 2021 we announced encouraging
results from a range of pre-clinical studies.
Other infectious diseases
Diphtheria, tetanus and pertussis
In Europe, healthcare providers can now give
Boostrix
,
our combination tetanus, diphtheria and pertussis vaccine,
together with one additional vaccine such as
Shingrix
, or
an unadjuvanted or inactivated seasonal influenza vaccine.
This will save patients multiple vaccination visits and make
healthcare more efficient.
Chronic hepatitis B
Over 300 million people suffer from chronic hepatitis B, and
each year around 887,000 die from the decompensated
cirrhosis or liver cancer it can cause.
Our candidate vaccine, currently in phase I/II, is a targeted
immunotherapy combining different technologies, including our
adjuvant AS01 also used in
Shingrix
and in our RSV candidate vaccine for older adults. It aims to activate functional virus-
specific T-cell and B-cell responses and restore immune
competence against hepatitis B virus (HBV). This immune
restoration could lead to a functional cure of chronic hepatitis B,
which is defined as controlling the virus without eradicating it
from the body. A functional cure could reduce the risk of
long-term complications of chronic hepatitis B infection, liver
inflammation and cancer. We expect proof of concept data in
2023.
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GSK Annual Report 2021
Innovation
continued
We are also developing bepirovirsen, an HBV antisense
oligonucleotide, which has the potential to be a first-in-class
functional cure for chronic HBV and is designed to restore
the immune system’s natural ability to eliminate infected liver
cells and provide long-term control of HBV. Our phase IIa
programme demonstrated that bepirovirsen can reduce
hepatitis B surface antigen after four weeks of treatment.
We anticipate data from our ongoing phase IIb programme
in 2022.
Cytomegalovirus
CMV is a serious health risk for babies. Most infants with
congenital CMV are asymptomatic at birth but still at risk of
long-term health problems, including hearing and sight loss,
delayed development and seizures. In the US, CMV is the
leading infectious cause of birth defects. About one in 200
babies is born with congenital CMV infection, and about one
in five of those will have long-term health problems.
There’s currently no approved vaccine, but we are working to
change that with an adjuvanted subunit vaccine that entered
phase I/II trials in 2021.
Antibiotics and antimicrobial resistance
Antimicrobial resistance (AMR) is an urgent threat to public
health. By undermining the effectiveness of antibiotics, it
currently contributes to 700,000 deaths every year globally,
a figure that is expected to increase significantly unless action
is taken. We’re focusing on organisms with the highest risk of
developing AMR as characterised by the Centers for Disease
Control and Prevention (CDC) and World Health Organization
(WHO).
Medicines – developing new mechanisms
We are developing gepotidacin, a novel mechanism
topoisomerase inhibitor, for uncomplicated urinary tract
infections (uUTI) and gonorrhea, in partnership with the
Biomedical Advanced Research and Development Authority
(BARDA) in the US. This is the first time a new oral antibiotic
has addressed these infections in over 20 years. Gepotidacin
is currently in phase III.
Vaccines – targeting resistant pathogens
We are using new scientific insights and technologies, including
adjuvants, mRNA, bioconjugation and generalised modules for
membrane antigens (GMMA) to target pathogens that create a
significant health burden and are likely to develop antibiotic
resistance.
We have four vaccines in clinical trials, against Staphylococcus
aureus, Clostridium difficile, Shigella and Klebsiella. We also
have other programmes that could have a major impact by
reducing cases of diseases directly or indirectly contributing
to AMR, including RSV and tuberculosis.
Staphylococcus aureus is often resistant to antibiotics, with
multiple drug-resistant strains already in circulation. In the US,
methicillin-resistant strains cause more than 300,000 cases in
hospital patients, and an estimated 10,600 deaths. In 2021,
our candidate vaccine to prevent primary and recurring soft
skin tissue infections from this pathogen entered phase II.
In the US, Clostridium difficile causes more than 200,000
cases in hospital patients and leads to around 12,800 deaths
every year. In 2021, we progressed the phase I first-time-in-
human study of our candidate vaccine against this pathogen.
Klebsiella pneumoniae can cause severe infections in the lungs,
bladder, brain, liver, eyes and blood, as well as types of
meningitis. There is no approved vaccine, and resistance to
many treatments is growing.
Our candidate vaccine, developed with LimmaTech, started
clinical development in July 2021. If it succeeds, it could help
prevent most Klebsiella-associated infections in people who
are at highest risk, including older people with underlying
conditions like diabetes, kidney disease or chronic liver disease.
The vaccine is a tetravalent bioconjugate including O-antigen
to target the serogroup causing most infections. We combine
the antigens with our proprietary adjuvant system, which
has shown, with vaccines like
Shingrix
, that it can help provide strong immune responses in people of all ages
including older adults.
Shigella causes over 200,000 deaths every year and is the
second leading cause of diarrheal death globally after rotavirus.
There is currently no widely available licensed vaccines to
protect against Shigella; and the related threat of growing
anti-microbial resistance is a significant issue.
We started a phase I trial of a quadrivalent Shigella vaccine
candidate based on our innovative GMMA technology. This is a
unique approach to creating bacterial vaccines by replicating
the surface characteristics of the bacteria through membrane
vesicles.
Early science and additional collaborations
Our partnerships in infectious diseases include our work with
CureVac on mRNA vaccines, not only against COVID-19, but
also five additional targets including seasonal and universal flu.
Building our understanding of the microbiome in chronic
diseases
We have developed collaborations with two companies to
generate scientific insights and turn them into innovation in
microbiome engineering and optimisation for new therapies.
In October 2021, we expanded a collaboration with Viome
Life Sciences that started in 2019, investigating the role of the
microbiome in chronic diseases. It combines our expertise in
immunology with Viome’s mRNA analysis and AI platforms to
give us new insights into chronic diseases, cancers and ageing.
We aim to generate data on how pathogens cause or
exacerbate chronic diseases, including autoimmune
inflammatory conditions and immuno-oncology. This will help
us build a predictive model to tell us more about targets for
therapies that build on vaccine technology to prevent and even
reverse chronic diseases.
With Eligo Biosciences, we are focusing on developing
ways to treat acne. This means using Eligo’s CRISPR and
bacteriophage technology to remove unwanted bacteria while
leaving beneficial bacteria intact.
GSK Annual Report 2021
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Governance and remuneration Financial statements Investor information
Innovation
continued
HIV
HIV is an urgent global health threat with 1.5 million new
cases each year, including 38,000 new cases in the US
and 22,000 new cases in the EU. However, of the 38 million
people living with HIV, 55% of the world’s cases, over 20
million people, come from sub-Saharan Africa.
1
Our work in HIV is through ViiV Healthcare, the world’s only
specialist HIV pharmaceutical company, which we majority
own, with Pfizer and Shionogi as shareholders. Our goal is to
limit the impact of HIV on people’s lives by treating, preventing
and ultimately curing it.
We are developing long-acting medicines that have the
potential to dramatically change people’s experience by giving
them an alternative to daily medicine. We are also working on
long-acting therapies to prevent HIV.
Replacing daily medicines with long-acting
regimens
Our aim is to offer innovative choices that help address the
evolving needs of people living with HIV. Despite incredible
progress made with current oral HIV medicines, some people
living with HIV face challenges taking pills every day. We are
transforming the lives of people living with HIV by reducing the
number of days they take treatment from 365 to 12 or 6 per
year. This spares them the daily reminder of living with HIV,
as well as relieving the pressure of having to take medicine
every day.
In January 2021, we received FDA approval for
Cabenuva
,
the first-ever complete, long-acting, injectable regimen for HIV,
offering people living with HIV in the US a new approach to
care. Studies show
Cabenuva
dosed once-monthly is as
effective as three-drug oral regimens that patients currently
take every day.
We received approval for dosing once every two months in
the US in early 2022.
In Europe, the regimen is approved as the combination of
Vocabria
(cabotegravir) and Rekambys (rilpivirine), with dosing
every two months.
Launching this innovative treatment regimen has established
ViiV Healthcare as the industry leader in developing long-acting
HIV medicines.
Giving patients a two-drug regimen option
Integrase inhibitors are the gold standard in HIV treatment and
our medicine dolutegravir is the most widely prescribed in the
world. More than 21.3 million people living with HIV – almost
3 in 4 of those currently on HIV medicine – are now taking a
dolutegravir-based regimen. Our two-drug regimen oral
therapies
Dovato
and
Juluca
, based on dolutegravir, have
been shown to be as well tolerated and effective as three-drug
regimens. This allows people living with HIV to maintain viral
suppression while taking fewer HIV drugs over their lifetime.
We have a robust and industry-leading clinical trial programme
that is driving confidence in two-drug regimens. Our goal is to
make
Dovato
the most successful dolutegravir-based regimen
because it has fewer reactions to drugs and reduces exposure
to antiretrovirals. We now have more than three years of efficacy
and safety data for
Dovato
which sets the bar very high for two-drug oral treatment regimens. Both the US and European
Treatment Guidelines include
Dovato
as recommended for
most adult patients who are new to therapy as well as for stably
suppressed patients who need a switch in their HIV therapy.
Supporting people living with HIV with a range of
options
No single medicine works for all people living with HIV, so we
offer innovative choices that help address their evolving needs.
Our portfolio of approved antiretroviral medicines offers a range
of therapeutic options and includes
Tivicay
and Triumeq
, which
contain dolutegravir.
In 2021, we received European marketing authorisation for the
first ever dispersible tablet formulation of dolutegravir in the form
of
Tivicay
, a treatment for children from four weeks old and over
three kilogrammes living with HIV in Europe. We also made a
regulatory submissions to both the FDA and EMA for approval
of a new dispersible tablet formulation of the fixed dose
combination of abacavir, dolutegravir and lamivudine (
Triumeq
)
and to lower the minimum weight at which a child can be
prescribed this medicine.
In Europe, we received approval in February 2021 for
Rukobia
(fostemsavir), a first-in-class HIV attachment inhibitor. This
addresses an unmet need for heavily treatment-experienced
adults with HIV-1 who aren’t responding to current antiretroviral
treatment and have exhausted all other options. The European
approval followed US approval in 2020, when it was fast-
tracked as an FDA breakthrough therapy.
Preventing HIV with long-acting cabotegravir PrEP
Preventing HIV is essential. This has been reinforced by the
US Government’s goal to reduce acquisition of HIV by 75%
by 2025.
In December 2021, the FDA approved ViiV Healthcare’s
Apretude
, the first and only long-acting injectable pre-exposure
prophylaxis (PrEP) option to reduce the risk of sexually acquired
HIV-1.
Studies, reported in 2020, showed the once-every-two-month
regimen was superior to daily pills, with effectiveness three to
nine times higher (in men and women, respectively) than the oral
medicine in preventing HIV acquisition.
1
hiv.gov/hiv-basics/overview/data-and-trends/global-statistics
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GSK Annual Report 2021
Increasing our ambition for patients
Our pipeline includes a number of medicines with new
mechanisms of action that could be combined with our
integrase inhibitor, cabotegravir, to create medicines to further
extend the interval between doses. We have two objectives.
One is to produce the world’s first self-administered long-acting
medicine for people who want to take medicine at home. The
other is to develop an ultra-long-acting regimen, with dosing
intervals of three months or longer.
We have a 20-year history of success in developing integrase
inhibitors for HIV, including dolutegravir and cabotegravir,
through the collaboration with our shareholder Shionogi.
This year we signed an exclusive collaboration and licence
agreement with Shionogi for a third-generation integrase
inhibitor, a pre-clinical candidate called VH148. We believe it
will give us the potential to offer medicines with longer dosing
intervals than cabotegravir. This could anchor our future pipeline
of innovative, long-acting therapies for HIV beyond 2030.
Also in 2021 we announced a licensing agreement with life
sciences company Halozyme for its recombinant human
hyaluronidase called PH20. When PH20 is injected
subcutaneously, it creates a temporary expansion under the
skin, allowing increased volumes of medicine to be delivered,
without added discomfort to the patient. With the ability to give
a larger dose, we hope to expand the interval between doses.
This opens up opportunities to combine cabotegravir with other
products in our pipeline to create ultra-long-acting regimens for
treatment and prevention of HIV. In particular, there’s potential
for us to use this technology to increase the dosing interval of
cabotegravir for prevention from every two months to as long
as every six months.
Our ultimate goal remains to find a cure for HIV. We are
continuing to progress our unique industry/academic partnership
with the University of North Carolina at Chapel Hill through our
jointly-owned QURA Therapeutics and we expect to start a
phase I trial for a cure medicine in 2022.
Oncology
Cancer is second only to heart disease as the world’s
biggest killer. We develop transformational cancer
medicines with life-changing potential for patients.
We have accelerated research into areas including synthetic
lethality and next generation immuno-oncology agents, drawing
on our own expertise in functional genomics and the science of
the immune system, and that of our partners.
In 2021, we had our oncology medicine
Jemperli
(dostarlimab)
approved for patients. This means we have three marketed
therapies, a further nine assets in development, and numerous
pre-clinical targets. This represents rapid progress since 2018,
when we had no approved medicines and just eight assets in
development, the most advanced of them in phase I.
Blood cancers
Multiple myeloma is the third most common blood cancer
worldwide – more than 175,000 people develop it every year.
Blenrep
(belantamab mafodotin) is our treatment for patients
who have relapsed or refractory multiple myeloma, and who
have received at least four other therapies. It’s the first therapy
of its kind, as a humanised antibody drug conjugate targeting
the protein B-cell maturation antigen (BCMA).
In 2020,
Blenrep
received regulatory approval in the US and Europe following the pivotal DREAMM-2 trial, which
demonstrated deep and durable responses in patients with
advanced multiple myeloma. After launching in the US and
Germany, we expanded to another six EU countries in 2021
as well as the United Kingdom and Hong Kong.
We are continuing our DREAMM trials to understand the
potential for
Blenrep
to be used in earlier lines of treatment,
as a monotherapy and in combination with standard and
novel therapies, as well as exploring dosing and scheduling
modifications. For example, in the DREAMM-5 platform study,
we are investigating a novel combination of treatments with
nirogacestat, a gamma secretase inhibitor (GSI), and
isatuximab, a CD38 targeting monoclonal antibody.
Gynaecologic cancers
Gynaecologic cancers are some of the most common cancers
affecting women. In 2020, nearly 1.4 million women around the
world were diagnosed with a gynaecologic cancer.
Approval for
Jemperli
to treat endometrial cancer
In 2020, there were over 400,000 new cases globally of
endometrial cancer (a cancer that begins in the lining of the
uterus). Patients have limited treatment options if their cancer
progresses after first-line therapy.
In April 2021,
Jemperli
(dostarlimab), received accelerated
approval in the US for certain patients with dMMR endometrial
cancer and conditional approval in Europe for certain patients
with dMMR or MSI-H endometrial cancer. It treats advanced or
recurring endometrial cancer that has worsened despite
previous treatment with platinum-based chemotherapy.
Jemperli
activates the immune system to better attack cancer cells.
In August 2021,
Jemperli
received accelerated approval in the US for patients with dMMR solid tumours that have progressed
despite earlier treatment. This means
Jemperli
is now available
to patients with confirmed dMMR solid tumours and those who
have no satisfactory alternative treatment options.
Innovation
continued
GSK Annual Report 2021
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Innovation
continued
We are also investigating
Jemperli
as a first-line treatment in combination with chemotherapy for patients with advanced
or recurring endometrial cancer. The RUBY phase III trial is
evaluating the combination of
Zejula
and
Jemperli
as a
maintenance treatment (see below).
Treating ovarian cancer with
Zejula
More than 300,000 women were diagnosed with ovarian
cancer in 2020.
Our treatment
Zejula
(niraparib) is an oral, once-daily poly
(ADP-ribose) polymerase (PARP) inhibitor monotherapy
maintenance treatment for women with advanced ovarian
cancer, regardless of its biomarker status, who have responded
to platinum-based chemotherapy. In 2020, it received approval
as a first-line maintenance treatment in the US and the EU.
We are evaluating
Zejula
in other pivotal trials, assessing activity across multiple tumour types and exploring combinations of
Zejula
with other therapeutics. Our pivotal FIRST phase III trial
is studying
Zejula
in combination with
Jemperli
as a treatment
for first-line ovarian cancer.
Other solid tumours
Exploring
Zejula
for the treatment of lung and breast
cancer
We are currently conducting phase III trials with
Zejula
for lung
and breast cancer.
Our phase III lung cancer trial, ZEAL, is investigating
Zejula
as a first-line maintenance therapy for patients with advanced
non-small cell lung cancer (squamous and non-squamous
histologies), after they have received platinum-based
chemotherapy. The trial is studying the efficacy and safety of
Zejula
in combination with the standard of care treatment.
Our phase III breast cancer trial, ZEST, is exploring the efficacy
and safety of
Zejula
as an early-stage treatment. The trial uses
circulating tumour DNA technology for the first time in a pivotal
breast cancer study. This offers the potential to detect tumour
cells earlier at the molecular level and identify women at higher
risk of recurrence. This means therapy with
Zejula
could start
when the burden of disease is still low and may create an
opportunity to more effectively slow or stop the cancer’s
progress.
Harnessing cell therapy
Cell therapy is an important avenue for treating cancer. We’re
addressing this with our own cell therapy programme for solid
tumours, which combines strategies across research, clinical
development and supply chain to address patients’ unmet
needs.
Our lead cell therapy asset in development is letetresgene
autoleucel (lete-cel; GSK3377794), a T-cell receptor T-cell
therapy (TCR-T) which harnesses the immune system to
develop a personalised treatment. It does this by extracting a
patient’s T-cells, which are then genetically modified to express
a T-cell receptor (TCR) that targets the NY-ESO-1 antigen
found in various solid tumours.
The IGNYTE-ESO phase II trial is evaluating lete-cel in patients
with synovial sarcoma and myxoid/round cell liposarcoma. This
is on an accelerated development path after receiving European
PRIME and FDA breakthrough status.
We are also focused on developing the next generation of cell
therapies, which include approaches and technologies that
could further enhance anti-cancer activity.
Through a collaboration with Lyell Immunopharma, we are
exploring more ways to enhance T-cells’ ability to attack and kill
tumour cells by further engineering cells that could be longer-
lasting and more potent. We are also collaborating with
Immatics Biotechnologies to build our capabilities in cell therapy
for solid tumours so more patients can benefit from this kind of
treatment.
Early science and other collaborations
Across our R&D in oncology, we invest in new technologies and
partnerships to push the boundaries of combatting cancer. One
of the most important areas is immuno-oncology. Additionally,
functional genomics helps us identify new treatment targets in
synthetic lethality, an approach to cancer treatment that targets
only genetic mutations in cancer cells, not healthy cells.
Continuing advances in immuno-oncology
Immuno-oncology is a fast-developing area, but the search for
new targets is important, as so far less than 30% of patients
respond to certain immuno-oncology treatments.
Through our work, we are aiming to help the immune system
recognise and kill cancer cells more effectively. We’re studying
how combinations with our treatment
Jemperli
can enhance
anti-tumour activity utilising the CD226 axis, that is expressed
on the surface of T-cells and natural killer cells, including the
checkpoints CD96, TIGIT and PVRIG.
We are the only company with access to antibodies targeting
all three CD226 axis checkpoints. GSK6097608 (anti-CD96)
is in phase I development as a monotherapy and combined with
Jemperli
. In June 2021, we partnered with iTeos Therapeutics to
further develop a TIGIT antibody, GSK4428859A, currently in a
phase Ib safety trial also in combination with
Jemperli
.
Exploring the potential of functional genomics in
synthetic lethality
Our internal work on functional genomics has identified more
than ten target candidates in research for evaluation in the field
of synthetic lethality. Partnering with IDEAYA Biosciences,
an oncology-focused precision medicine company, we are
exploring MAT2A inhibition in tumours with MTAP deletion, a
common feature of solid tumours. Our study moved to phase I in
2021. Together, we are also developing two new assets that we
expect to move into the clinic over the next few years.
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GSK Annual Report 2021
Innovation
continued
Immunology including respiratory
Our focus on the science of the immune system helps us
develop medicines for immune-mediated conditions like
lupus, rheumatoid arthritis and a range of inflammatory
diseases. For more than 50 years, we have also produced
innovative medicines helping millions of people with
respiratory conditions to breathe more easily.
Helping more lupus patients with
Benlysta
Benlysta
(belimumab) is the first and only biologic approved
for both the chronic autoimmune disease systemic lupus
erythematosus (SLE) and lupus nephritis (LN), the kidney
inflammation caused by lupus. It is a monoclonal antibody that
targets BLyS, an underlying cause of SLE and LN, and reduces
autoantibody levels to help control the disease.
In 2021, we received approval for
Benlysta
in adult patients
with active lupus nephritis in several markets including Brazil,
EU member states and Japan. In 2022, we also received
approval in China for this indication. This followed US approval
for this use in 2020.
Moving towards a new way to treat rheumatoid
arthritis
As many as 1% of people worldwide suffer from rheumatoid
arthritis (RA), a chronic inflammatory disease that can cause
pain, joint swelling and inflammation that can lead to acute and
chronic disability. The needs are great, with only about 30%
of RA patients achieving remission despite use of targeted
therapies currently available, and around 40% of patients
reporting daily pain, which can be debilitating.
In early-stage trials, otilimab, our novel monoclonal antibody
targeting GM-CSF, demonstrated rapid and substantial
improvement in pain, and has now moved to phase III studies.
We expect results of three pivotal studies by the end of 2022.
With positive pivotal trial results, otilimab could become the
first new medicine for RA in a decade.
Finding new disease targets in immuno-neurology
Focusing on human genetics and the science of the immune
system has given us unique insights to pinpoint potential targets
for patients with neurodegenerative diseases.
In July 2021, we announced a partnership with Alector to
develop two monoclonal antibodies (AL001 and AL101) for
neurodegenerative diseases including frontotemporal dementia
(FTD), amyotrophic lateral sclerosis (ALS), Parkinson’s disease
and Alzheimer’s disease. Both antibodies are designed to raise
levels of progranulin, which regulates immune activity in the
brain. AL001 is in a pivotal phase III trial for people with, or at
high risk of developing, FTD due to a mutation in the progranulin
gene. It is also in a phase II trial in patients with ALS. AL101, in
development for Parkinson’s disease and Alzheimer’s disease,
is in a phase Ia trial with healthy volunteers.
In November 2021, Alector announced encouraging new data
from the open label INFRONT-2 phase II trial. These data
showed a consistent slowing of clinical progression in patients
with FTD who were treated with AL001 compared to historical,
matched FTD subjects, with both groups having the progranulin
gene mutation. There was a trend towards normalisation or
stabilisation of disease-associated biomarkers. The INFRONT-3
phase III trial is currently enrolling FTD patients with a mutation
in the progranulin gene to confirm the phase II data.
The partnership brings together Alector’s immuno-neurology
expertise and our R&D focus on the science of the immune
system and human genetics, as well as our drug development
capabilities.
Growing our respiratory portfolio and tackling
eosinophil-driven diseases
We have one of the broadest portfolios of respiratory medicines
in our industry, and it continues to grow. Since 2012, we have
launched five new inhaled therapies as well as a biologic,
Nucala
(mepolizumab), the first-in-class monoclonal antibody
that targets interleukin-5 (IL-5). We have been leading research
into eosinophil-driven diseases like asthma for more than 25
years. These are inflammatory conditions associated with
elevated levels of eosinophils, a type of white blood cell,
and can occur in a range of tissues and organs.
Our trials have studied how
Nucala
could change the lives of people affected by conditions such as severe eosinophilic
asthma (SEA), hypereosinophilic syndrome (HES), eosinophilic
granulomatosis with polyangitis (EGPA) and chronic
rhinosinusitis with nasal polyps (CRwNP). By targeting IL-5,
Nucala
reduces the number of eosinophils, which, in excessive
numbers, can cause inflammation. These trials have led to
important new approvals for
Nucala
, addressing unmet needs
for a broad group of patients.
In 2021, the FDA approved
Nucala
for adults with CRSwNP, a common, chronic condition which can cause difficulty breathing
and sleeping, and interfere with taste and smell. With this
approval,
Nucala
is now indicated in the US for four eosinophil-
driven diseases. In November 2021, we received approvals for
Nucala
in Europe for CRSwNP, HES and EGPA.
In January 2022, we received FDA approval to extend the
marketing authorisation for
Nucala
to include a specific
paediatric presentation in a pre-filled safety syringe, enabling
healthcare professionals or caregivers to administer
Nucala
at
home to appropriate patients. We are also awaiting European
approval for this indication.
GSK Annual Report 2021
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Innovation
continued
Nucala
is also in a phase III trial to determine whether it can help
patients with COPD with high eosinophil counts, about 40% of
COPD patients, who are at increased risk of exacerbations.
Additionally, we are focused on developing depemokimab, a
long-acting anti-interleukin-5 (IL-5) monoclonal antibody. A
current phase III programme is assessing its safety and efficacy
in severe asthma with an eosinophillic phenotype. So far, results
show it can reduce and suppress eosinophil levels for longer
periods than other anti-IL-5 monoclonal antibodies. This would
mean treatment could be extended to one injection every six
months.
Early-phase portfolio
In 2021, we started a phase Ib trial for an existing IL-18
monoclonal antibody for atopic dermatitis and a phase I trial
for a novel monoclonal antibody targeting IL-7 for multiple
sclerosis. Both of these were informed by our access to genetic
databases that identified the indications with the highest
probability of success.
We also completed a worldwide licence agreement with
Arrowhead Pharmaceuticals for GSK4532990 (ARO-HSD),
a genetically validated, investigational RNA interference (RNAi)
therapeutic currently in phase I/II development for patients with
non-alcoholic steatohepatitis (NASH). The agreement covers
the medicine’s development and commercialisation outside of
greater China.
Our phase I pipeline also consists of other molecules targeting
the immune system for celiac disease, osteoarthritis pain and
neuro-degenerative disease.
Opportunity driven
Alongside our balanced portfolio across key therapy
areas, we are also led by the science to pursue other
opportunities.
Transforming the treatment of anaemia
Over 700 million people suffer from chronic kidney disease
worldwide, and an estimated one in seven of them suffers from
anaemia. Many have limited treatment options today.
Daprodustat has potential as a novel oral treatment in dialysis
and non-dialysis settings. If approved daprodustat could bring
ease of use as an oral treatment with potential to improve on the
current injection-based standard of care and work to effectively
manage haemoglobin levels.
Daprodustat is based on compelling human genetics and Nobel
Prize-winning science that demonstrated how cells sense and
adapt to oxygen availability. It is already approved in Japan under
the name
Duvroq
. In 2021, data read out positively from five phase III studies. Each independently met their primary efficacy
and safety endpoints, demonstrating that daprodustat improved
or maintained patients within their target haemoglobin ranges
and also showed, in the primary safety analysis of the intention-
to-treat population, similar rates of major cardiovascular events
when compared to the injection-based standard of care, ESA
therapy, within each trial. Data from the ASCEND programme
will be used to support regulatory filings with health authorities
worldwide.
Innovating for patients with primary biliary
cholangitis
We are also developing linerixibat, an ileal bile acid transporter
(IBAT) inhibitor, for the treatment of cholestatic pruritus in
patients with primary biliary cholangitis (PBC), a condition
in which there is a significant unmet need with no new
pharmacologic therapy since the 1960s. Following data from
the GLIMMER phase IIb trial, in 2021 we initiated the GLISTEN
phase III trial. The GLIMMER study was the first time 23andMe
helped us to identify, recruit and enrol patients who had opted
to participate in research. The GLISTEN phase III study will also
use the 23andMe database to help match patients. It is also our
first US pivotal trial that allows assessment of participants at
home by using technology with a home-based app to track
progress.
Following the FDA Orphan Drug Designation, in 2021 linerixibat
also received a positive decision on Orphan Drug Designation
from the European Commission.
28
GSK Annual Report 2021
Pipeline overview
We have 64 assets in development, of which 22 are late-stage.
Innovation
continued
Phase III/Registration
Bexsero
infants (US) vaccine
Xevudy
1
(sotrovimab/VIR-7831) COVID-19
COVID-19 (Medicago)
1
vaccine
3
Blenrep
(anti-BCMA ADC) multiple myeloma
COVID-19 (Sanofi)
1
vaccine
3
Jemperli
1
(PD-1 antagonist) 1L endometrial cancer
2
COVID-19 (SK Bioscience)
1
vaccine
3
letetresgene-autoleucel
1
(NY-ESO-1 TCR) SS/MRCLS
2,6
MenABCWY (1st gen) vaccine
Zejula
1
(PARP inhibitor) ovarian, lung and breast cancer
Menveo
liquid vaccine
4527223
1
(AL001, anti-sortilin) frontotemporal dementia
2,7
MMR (US) vaccine
depemokimab
1
(LA anti-IL5 antagonist) asthma
Rotarix
liquid (US) vaccine
Nucala
COPD
RSV maternal
1,
†
vaccine
otilimab
1
(aGM-CSF inhibitor) rheumatoid arthritis
RSV older adults
1
vaccine
daprodustat (HIF-PHI) anaemia of chronic kidney disease
gepotidacin
1
(BTI inhibitor) uUTI and GC
linerixibat (IBATi) cholestatic pruritus in primary biliary cholangitis
Phase II
Malaria (fractional dose)
1
vaccine
bepirovirsen
1
(HBV ASO) HBV
S. aureus
1
vaccine
4
3036656
1
(leucyl t-RNA inhibitor) tuberculosis
Shigella
1
vaccine
3640254 (maturation inhibitor) HIV
Therapeutic HBV
1
vaccine
4
3810109
1
(broadly neutralising antibody) HIV
MenABCWY (2nd gen) vaccine
4
cobolimab
1
(TIM-3 antagonist) NSCLC
Varicella new strain vaccine
Phase I
C. difficile
1
vaccine
3745417 (STING agonist) cancer
Klebsiella pneumoniae
1
vaccine
3845097
1
(NY-ESO-1/TGFbR2 TCR T) cancer
SAM (COVID-19 model) vaccine
3901961
1
(NY-ESO-1/CD8a TCR T) cancer
SAM (rabies model) vaccine
4074386
1
(LAG3 antagonist) cancer
CMV vaccine
4362676
1
(Mat2A inhibitor) cancer
BVL-GSK098
1
(ethionamide booster) tuberculosis
4428859
1
(EOS-448, TIGIT antagonist) cancer
VIR-2482
1
(neutralising monoclonal antibody) influenza
8
6097608 (CD96 antagonist) cancer
2556286
1
(Mtb inhibitor) tuberculosis
4527226
1
(AL101, anti-sortilin) neurodegenerative diseases
3186899
1
(CRK-12 inhibitor) visceral leishmaniasis
5
3858279
1
(anti-CCL17) osteoarthritis pain
3494245
(proteasome inh) visceral leishmaniasis
3915393
1
(TG2 inhibitor) celiac disease
3882347
1
(FimH antagonist) uUTI
1070806 (anti-IL18) atopic dermatitis
3923868 (PI4kβ inhibitor) viral COPD exacerbations
3888130
1
(anti-IL7 ) multiple sclerosis
4182137
1
(VIR-7832) COVID-19
4
4532990
1
(ARO-HSD siRNA) non-alcoholic steatohepatitis
3739937 (maturation inhibitor) HIV
2798745
1
(TRPV4 blocker) diabetic macular edema
cabotegravir (400 mg/ml formulation) HIV
3884464
1
heart failure
4004280 (capsid protein inhibitor) HIV
Only the most advanced indications are shown for each asset.
1
In-licence or other alliance relationship
with third party.
2
Additional indications also under investigation
3
GSK contributing pandemic adjuvant
4
In phase I/II trial
5
Transition activities underway to enable
further progression by partner
6
In potentially registrational phase II trial
7
Phase III trial in patients with progranulin
gene mutation
8
GSK has exclusive option to co-develop
post phase II
†
Enrolment and vaccination stopped in
February 2022. Further analysis to better
understand safety data from these trials
is ongoing
NSCLC: non-small cell lung cancer; uUTI:
uncomplicated urinary tract infection;
GC: gonorrhea; SS: synovial sarcoma;
MRCLS: myxoid/round cell liposarcoma
GSK Annual Report 2021
29
Strategic report
Governance and remuneration Financial statements Investor information
Pharmaceuticals
Our performance
Pharmaceuticals turnover in the year was £17,729 million,
up 4% AER, 10% CER.
Sales of
Xevudy
(sotrovimab), the monoclonal antibody
treatment for COVID-19 of £958 million contributed
approximately 6 percentage points to Pharmaceuticals growth.
By December 2021, less than a year since the first pivotal
phase III data, sotrovimab was being used to treat COVID-19
patients. We had sold or reserved over 1.7 million doses
through agreements with the EU and over a dozen other
countries including the US, UK, Japan, Australia, Canada,
Singapore and UAE.
HIV sales were down 2% AER but up 3% CER, to £4,777
million, with growth in
Dovato
and Juluca
partly offset by Tivicay
and
Triumeq
. Our broad portfolio includes new products
Cabenuva
, our long-acting injectable treatment,
Apretude
,
our long-acting injectable for HIV prevention, and
Rukobia
,
for highly treatment experienced patients.
We maintained our lead position in respiratory, amid higher
demand during the pandemic and strong commercial execution.
Respiratory sales were up 21% AER, 28% CER, to £2,863
million, with sales of
Trelegy
and Nucala
each exceeding
£1 billion per year for the first time. Approvals and launches
for more eosinophil-driven disease indications for
Nucala
, and increased uptake of the therapy’s home administration options,
also boosted performance.
Trelegy Ellipta
, now in 48 markets,
further increased its market share in chronic obstructive
pulmonary disease, and made gains in asthma, aided by
approval in Japan in late 2020.
See Group financial review on page 62 for more detail
Oncology continued to show strong double-digit sales growth.
Sales of
Zejula
were £395 million, up 17% AER, 22% CER, impacted by ongoing lower diagnosis rates due to the
COVID-19 pandemic, particularly in the US.
Blenrep
was
approved and launched in the US and Europe in Q3 2020,
with ongoing launches throughout Europe in 2021.
Blenrep
sales globally totalled £89 million.
Immuno-inflammation sales of £885 million grew 22% AER,
29% CER with
Benlysta
sales up 22% AER, 29% CER to £874 million, benefiting from lupus nephritis launches in US and
Japan in H2 2020.
Sales of Established Pharmaceuticals decreased 11% AER,
6% CER to £7,757 million.
Adapting to the COVID-19 pandemic
The COVID-19 pandemic continued to affect healthcare
systems globally. It has seen the interruption of usual care
in many healthcare facilities, and a delay in diagnosis and
subsequent treatments. Patients with pre-existing medical
conditions remain particularly vulnerable.
Amidst the ongoing restrictions on access to customers we
continued to perform strongly across markets in areas like
oncology. We used online and digital tools to maintain strong
engagement with healthcare professionals and continued to
meet the needs of our patients through patient support
programmes.
Performance
Strong financial performance in 2021 was driven by first class
commercial execution and strong uptake of new products.
Pharmaceuticals highlights
–
Total 2021 turnover £17.7 billion, +4% AER, +10% CER
–
Sales of new and specialty pharmaceuticals £10 billion
+20% AER, +26% CER
–
Sales of
Xevudy
£958 million reflecting the ongoing
fulfilment of contracts across the world and most
significantly in the US
–
Strong commercial execution of key growth products,
including
Trelegy
and
Nucala
, which exceeded £1 billion
in sales for the first time
–
Better digital capabilities to support more effective
engagement with healthcare professionals, higher
productivity and a more efficient supply chain
Read more below
Vaccines highlights
–
Total 2021 turnover £6.8 billion, -3% AER, +2% CER
–
COVID-19 pandemic sales for Vaccines £447 million
including pandemic adjuvant sales of £444 million
–
Shingles:
Shingrix
sold in 17 countries, including nine
markets launched during 2021
–
Meningitis: increased market share in the US for
Bexsero
and
Menveo
–
Maintained market share for key products despite
significant disruption from COVID-19
–
Excellent supply performance; our
Shingrix
supply is fully unconstrained
–
Accelerated our digital transformation, helping to drive
data-driven decisions in manufacturing and supply
Read more on page 31
30
GSK Annual Report 2021
Driving growth over the next decade
Our portfolio of pharmaceuticals is made up of innovative and
established medicines and we have leading global positions in
respiratory disease and HIV. We are developing our presence
in other specialty therapy areas, including oncology and
immuno-inflammation. Our broad portfolio supplies innovative
and high-quality medicines, making a positive impact on the
lives of millions of patients. Over the next five years we expect
specialty medicines to be a key driver of GSK’s growth.
This will be complemented by our newly defined General
Medicines business which contains all of our primary care
brands, including
Trelegy
,
Anoro
and our classic and
established products which will support our broader investment
in innovation and R&D.
Our HIV business is also positioned for growth as we remain
innovation leaders. We anticipate continued growth in our
long-acting injectable therapies, with
Cabenuva
for the
treatment of HIV and
Apretude
for HIV prevention. Looking beyond 2026, we have multiple opportunities to sustain growth
with our late-stage assets and we’re excited about our early-
stage pipeline of further innovative long-acting medicines.
Strengthening our capabilities and organisation
We want the best and brightest people in our specialty
medicines marketing and medical teams. In 2021, a continued
focus on appointing the right leaders led to us naming new
general managers in 12 more countries (64 in all since 2017).
We’re attracting top external people with the right expertise to
compete. In oncology alone, we hired more than 300 people
(109 in commercial, 208 in R&D) in 2021, 117 of them into
leadership positions. Leadership changes are improving the
interface between commercial and R&D functions, where early
commercial input to select and develop pipeline assets can
create lasting value.
Optimised policies and collaboration between marketing,
medical and sales teams have made our sales force more
effective and competitive across key markets. Changes to
our sales incentives policy made a positive impact in our sales
teams, with higher engagement and personal accountability.
Internal audits show we achieved this without compromising
our ethical standards in engagements with healthcare
professionals (HCPs). In January 2021, we introduced individual
targets for more of our sales representatives to drive
competitiveness.
We have used data and predictive analytics to deliver engaging
customer interactions, and monitor and improve sales
performance and market share.
Transforming interactions with healthcare
professionals and patients
It’s essential for us to maintain a strong connection with HCPs,
so we can meet their needs, and those of their patients. As with
many businesses, the pandemic has accelerated how we use
technology to make ourselves more effective commercially.
We’ve increased our use of virtual calls to keep HCPs informed
about clinical data, launches and products in our pipeline. This
helps them understand the science behind our products, and
how best to use them.
In 2020, we ran successful pilots on how best to engage
with HCPs in a coordinated way across online and traditional
channels. In 2021, we scaled this up, with up to 15 brands in
23 markets now using a data-led, automatically orchestrated
mix of traditional and digital promotion. In 2022, we’ll deploy
and refine this further. Using novel data sets in our commercial
analytics and orchestration engine will let us tailor what we
deliver, plus how and when, to each HCP. Our global, data-
driven customer experience programme has been recognised
externally, winning three silver awards in the International
Customer Experience Awards 2021, and helps us improve
competitiveness. In the EU, digital investment has led to an
immediate 118% increase in HCPs attending webinars. And in
China, we’re reaching ten times more HCPs through WeChat
than through our website alone.
As well as virtual meetings and educational activities, we’ve
brought clinical experience to customers through our global
speakers’ programme. This follows feedback from HCPs, who
told us they like to receive information in a peer-to-peer setting
from expert practitioners.
We continue to engage with patients through patient support
programmes.
Benlysta
Cares is our US programme with
information and guidance, including text reminders, help with
benefits and savings, nurse support and exclusive content to
help patients taking
Benlysta
get the most from their treatment.
By September 2021, we’d enrolled over 150% more patients
than we had by the same time in 2020.
Benlysta
Cares has been shown to help more patients stick with the treatment. In
2021, the US Patient Engagement Liaison (PEL) team ran 262
patient education programmes with over 300,000 patients
across all diseases. The PEL partnered with our national and
local patient advocacy groups (PAGs) to give patients more
disease awareness and resources so they can have productive
conversations with care providers.
China Yinchuan COPD patient support programme is China’s
first digital COPD patient management programme enabled by
big data, 5G and the internet of things (IoT). We’ve worked with
the National Healthcare Commission (NHC) to embed smart
digital technology in inhalers that helps doctors make sure
patients follow their prescriptions.
Performance
continued
GSK Annual Report 2021
31
Strategic report
Governance and remuneration Financial statements Investor information
Investing in our supply chain
Our supply chain transformation continues in line with our
portfolio’s shift to innovative specialty care products. New ways
of working in response to the pandemic, and agile resource
allocation to prioritise return on investment, helped us make
more savings. This sets GSK up to be leaner, more productive
and more financially efficient.
Investing in facilities, people and manufacturing partnerships
will continue to help us launch specialty medicines rapidly and
accelerate delivery across our portfolio. The new facility at our
Barnard Castle (UK) site will start manufacturing medicines in
the first quarter of 2022. Over the coming years, it will support
manufacturing of the majority of the key existing and new
biopharmaceutical assets in our pipeline. Since 2019, we have
invested £88.4 million in the expansion of our next generation
biopharma manufacturing facility in Upper Merion, Pennsylvania,
which is set to open in 2022. Our expanded facility in Rockville,
Maryland, will begin commercial supply in 2023.
A streamlined supply chain helps us control costs and allocate
capital more effectively, with a bigger share now directed to
specialty medicines. We have simplified our network and central
functions, completing the divestment of the site in Poznań,
Poland and the closure of Xochimilco, Mexico. Our commercial
and supply chain teams are collaborating on initiatives to lower
cost of goods sold (COGS), protect margin and increase profit.
This work includes reducing active pharmaceutical ingredient
costs, optimising capacity, improving processes and working
with suppliers. By simplifying our portfolio, we’ve also reduced
the brands we sell from over 450 to 247 in four years, and SKUs
by 15%.
Investing in automation and AI/ML is improving efficiency by
reducing variability in our supply chain, as demonstrated by us
being on track to reach top-quartile days in inventory outstanding
(DIO), which frees up working capital. We expect more digital
investments in the next three years to help us improve planning
productivity and accuracy, and reduce our inventory.
Keeping supply consistent and dependable
Our success rests on maintaining a high-quality and reliable
supply of products for patients and consumers. We reduced
total costs in the supply chain as we continue to increase
productivity and simplify our supply network. Cost reductions
together with sales growth have improved the gross profit
margin by 1.2%.
We strengthened our internal and external quality oversight
model and modernised our quality management system, which
will simplify ways of working. We have improved deviation rates,
and our pharmaceutical supply chain has continued to be in
our industry’s top quartile for FDA recalls per £1 billion of sales.
All 70 regulatory inspections of Pharmaceuticals sites were
satisfactory.
Because our safety performance is critical to our success we’ve
taken extra measures to make serious incidents less likely and
strengthen our safety culture. These include deploying Life
Saving Rules to help all employees understand and apply
basic safety rules to their work, launching an operational safety
leadership programme and strengthening our safety monitoring
systems.
Reliability of our supply has improved from a median
performance of 95% on-time, in-full in 2018 to 97% in 2021.
This was despite COVID-19 disruption. As well as applying
supply chain segmentation, we’ve also improved performance
by investing in technology like Resilinc, a tool using AI to
highlight emerging supply chain risks, and piloting digital twins
to optimise planning and increase operational efficiency.
We’ve accelerated our data, digital and analytics (DDA)
adoption and use of enterprise systems for managing data and
documents and planning operations. They include value chain
mapping for supply chain planning, and cognitive supply chain
models to lower logistics costs.
Vaccines
Our performance
Vaccines 2021 turnover was £6,778 million in the year, down
3% AER, but up 2% CER. As anticipated, our Vaccines
business faced significant disruption during 2021, given
governments’ prioritisation of COVID-19 vaccination
programmes and measures to contain the pandemic. This
resulted in lower demand for routine adult vaccination, including
Shingrix
and hepatitis vaccines. Vaccines turnover excluding
pandemic adjuvant sales decreased 9% AER, 5% CER to
£6,331 million.
Shingrix
decreased 13% AER, 9% CER to £1,721 million.
Sales fell in the US and International. Sales grew in Europe,
driven by Germany and launches in the UK, Spain and Italy.
Shingrix
was sold in 17 countries, including nine markets
launched during 2021.
Hepatitis vaccines sales were down 20% AER, 16% CER to
£460 million, adversely impacted by the de-prioritisation of
routine US adult vaccination, increased hepatitis B vaccine
competition and unfavourable CDC stockpile movements in the
US, and by COVID-19-related travel restrictions in Europe and
International.
Meningitis sales decreased 7% AER, 2% CER to £961 million
driven primarily by unrepeated International tender volumes for
other meningitis vaccines.
Bexsero
sales were stable at AER,
but grew 5% CER to £650 million, reflecting increased market
share in the US.
Menveo
sales were up 3% AER, 9% CER to £272 million, primarily driven by 2020 cohort catch-up
vaccinations and 2021 higher demand, as well as increased
market share in the US.
See Group financial review on page 64 for more detail
Performance
continued
32
GSK Annual Report 2021
Adapting to the C
OVID
-19 pandemic
The pandemic continued to dominate 2021 as highly
transmissible variants emerged and countries around the world
cycled in and out of stay-at-home orders. Countries with access
to COVID-19 vaccines made them available to their adult
populations and then children. Healthcare systems had to adapt
significantly to enable this huge vaccination endeavour, which had
repercussions across many aspects of health provision, including
a lower priority on vaccines for diseases other than COVID-19.
The pandemic also meant we did not always have as much
access to customers as usual. Despite this, we maintained our
market share for key vaccines in strategic countries. We held
virtual meetings with HCPs and attended other events virtually to
provide educational support and material about vaccination. We
continued to inform people about the importance of immunisation
through disease awareness and branded campaigns for
meningitis, shingles, and diphtheria, tetanus and pertussis (DTP).
Driving growth over the next decade
Our portfolio of marketed vaccines is the broadest in the
industry. It includes more than 20 vaccines, helping to protect
people worldwide from a range of diseases throughout their
lives, including meningitis, shingles, flu, polio, measles and many
more – and 90% of our vaccines by sales have an efficacy level
of above 90%.
In commercial terms, vaccines tend to have a longer lifecycle
than medicines and can generate significant revenues over
decades. For example
Engerix
, our vaccine to help prevent
hepatitis B virus infection, has been available for more than
30 years and will remain an important part of our portfolio.
In November 2021 the CDC’s Advisory Committee on
Immunization Practices voted unanimously to recommend
hepatitis B vaccination for all adults aged 19 to 59 years.
Vaccines is expected to be one of the largest drivers of growth
for GSK, with high single-digit percentage sales growth
(CAGR) anticipated over the 2021-2026 period. We aim to
double revenues of
Shingrix
, our shingles vaccine, in that
five-year period, and to double both meningitis and flu vaccine
sales in the next decade, helping to protect millions of people
from these diseases.
By 2026, we plan to launch several new vaccines, including
our programme to help prevent RSV through the vaccination of
older adults, a significant medical and commercial opportunity.
We will support these goals by drawing on our strong
manufacturing capability and scale, as well as our global
reach and commercial execution.
Another area of focus has been attracting and retaining the
right people in strategic areas and further strengthening our
capabilities, including mRNA which is now the focus of
approximately 250 of our people.
Digital capabilities
We continue to build our capabilities through Vaccine Virtual
Days, bringing HCPs together, bringing us closer to our
customers and sharing scientific discourse from the world’s
leading experts in vaccines. Through our new eCongress
platform, we extended the second edition of this event to HCPs
from more than 150 countries, including China, and offered
translations in eight different languages. This attracted over
11,000 registrants, and we received a Net Promoter Score
(HCP feedback score) that was above the industry standard.
The event played a role in helping to improve and protect public
health everywhere.
We also continue to work with Philips on its Pregnancy+ and
Baby+ apps. Our partnership with Philips is live in 12 countries,
reaching approximately 30 million parents and continues to be
an effective tool for educating parents about the vaccines in
our paediatric portfolio. Following this success, we launched
a digital partnership in the fourth quarter of 2021 focused on
adults. This time the partnership is with San Francisco-based
Nextdoor, a neighbourhood network used by almost one in
three households in the US.
Global momentum behind vaccination
COVID-19 vaccination programmes required countries and
populations to adapt and learn – and we believe this will have
a positive long-term impact on vaccinations more widely,
particularly for adults. Attitudes to vaccination have shifted as
well – our research among people aged 50 years and older
in eight of our largest vaccine markets in 2021 showed an
increase in positive attitudes to vaccination as a result of
the pandemic.
Performance
continued
GSK Annual Report 2021
33
Strategic report
Governance and remuneration Financial statements Investor information
Performance
continued
There is a real opportunity for healthcare systems to harness
this momentum because the need for vaccination remains
strong. In the US, we commissioned and published a report
with Avalere Health which showed that adolescents and adults
may have missed more than 37 million doses of recommended
vaccines between January 2020 and July 2021, compared to
2019. These findings demonstrate how routine immunisation in
2021 continued to lag below pre-pandemic levels. The original
Avalere report was followed by the CDC’s own analysis of
missed vaccine doses, and calls from government, public policy
groups and the media to prioritise the recovery of vaccination
rates for diseases other than COVID-19.
Supply performance
We continue to strengthen our manufacturing capability to
make sure we support the growth of our vaccines portfolio.
Despite the supply chain disruptions caused by the pandemic,
in 2021 we had another very strong year for supply
performance.
We are proud of the fact that all our strategic vaccines sites
are approved by multiple regulatory agencies including the
FDA. In 2021, our network of 12 manufacturing sites, in nine
countries, produced and delivered 767 million doses.
Throughout the year we continued to invest in this network,
modernising and automating our filling and packaging activities,
building our mRNA production capabilities and adding launch
capacity for pipeline products such as RSV. We are also
investing in the infrastructure needed for the future with a
planned lyophilisation (freeze drying) unit at our site in Wavre,
Belgium, which will support our manufacturing capacity for
priority products and our innovation pipeline.
We have worked across our supply chain to reduce our
end-to-end lead times, improve our agility in the marketplace
and more effectively manage demand uncertainty. This close
cooperation, from the shop floor to delivery to the end-
customer, allows us to make better-informed decisions by
sharing data, to free up cash through increased efficiency and
to be more competitive in tenders with our customers.
By redesigning our supply chains, we are reducing lead times
and making sure we have the right inventory at the right place to
win in the marketplace. This is part of a multi-year effort to use
our working capital more effectively.
We continue to apply a co-development model where colleagues
in R&D and manufacturing work hand-in-hand to scale up
production as effectively and efficiently as possible. An ongoing
example is how we are preparing for an accelerated launch of our
RSV candidate with investment in Wavre in both clinical and
commercial activities.
We have made great strides in unlocking capacity and getting
the most from our existing assets. A good example of this is our
shingles vaccine,
Shingrix
, where we have improved yield and
throughput across the supply chain. Reductions in lead times
also mean we are now fully unconstrained on
Shingrix
supply,
which will support our growth aspirations.
We have also met our COVID-19 commitments, scaling our
pandemic adjuvant production to respond to fluctuating
demand. This agility meant we delivered on our adjuvant
agreements, and pandemic adjuvant sales made an important
contribution to our revenue. (For more about our COVID-19
solutions, see page 21.)
At the same time, we’ve continued to accelerate our digital
transformation, including investment in a manufacturing
execution system. More than 50 production lines at ten sites are
switching from paper batch recording to electronic. The system
will be deployed over the next three years, with benefits
including operational efficiency, lead-time reduction, and
improvements in compliance, yield and stability.
This investment, along with many others, will accelerate
data-driven decisions in manufacturing and supply. Examples
of data analytics and technology improvements include robotic
automation of our material handling activity, ‘bots’ to replace
repetitive manual tasks, and automating the visual inspection
of syringes and vials using AI/ML.
We are also embedding Lean Six Sigma tools and techniques
into our processes, systems and capabilities to improve our
ways of working.
The investments we’re making in our manufacturing facilities and
people will help us in many ways, for example ensuring that we
have the right mRNA capabilities and talent in place. Together,
these investments will help make our manufacturing ready to
support a bright future in Vaccines.
34
GSK Annual Report 2021
Trust is one of our three long-term priorities. The more trust we
build, the better we perform and the more value we create for
shareholders, our people and society.
Trust
Our Trust priority covers our work across ESG factors, and it’s
integral to our overall strategy. Our approach to ESG helps us
deliver sustainable performance and long-term growth, as well
as building trust with our stakeholders (see Stakeholder
engagement on page 44). It also reduces risk to our operations
(see Risk management on page 46) and helps us make a
positive social impact.
We have 13 commitments in the ESG areas where we can
make the biggest difference. The commitments help us respond
to challenges and opportunities in our industry and broader
society (see External environment on pages 13 to 16). They also
contribute to many of the UN Sustainable Development Goals,
especially Goal 3: to ensure healthy lives and promote wellbeing
for all, at all ages.
gsk.com:
Our contribution to the SDGs
External benchmarking
We have maintained our acknowledged leadership in ESG, and this continues to be a key driver in our goal to deliver health
impact and shareholder returns. Detailed below is how we perform in key ESG ratings that we are frequently asked about
by investors.
–
Dow Jones Sustainability Index (DJSI):
1st in
pharmaceutical industry group for 2021
–
S&P Global Sustainability Award:
Gold Class 2022
–
Access to Medicine Index (ATMI):
Ranked 1st in ATMI in
2021, and an industry leader in the 2021 Antimicrobial
Resistance Benchmark
–
FTSE4Good:
Member of FTSE4Good Index since 2004
–
CDP:
A- in Climate Change, B in Water, B in Forests
(palm oil and timber) and Supplier Engagement Leader
–
Sustainalytics:
Low risk rating
–
MSCI:
AA rating
–
Vigeo Eiris:
Ranked 2nd in the pharmaceuticals sector
ESG governance
Our Board-level Corporate Responsibility Committee (CRC)
oversees our progress against our commitments and how we’re
addressing the views and expectations of our stakeholders.
The GLT and senior management are responsible for delivery
of our Trust commitments and report regularly to the CRC on
progress (see page 104).
Our approach to reporting
In this section, we report highlights of our 2021 progress
against each of our 13 Trust commitments. We provide more
detailed reporting and data on each commitment in our ESG
Performance Report. This report also includes our UN Global
Compact Communication on Progress, Global Reporting
Initiative index, Sustainability Accounting Standards Board index
and assurance statements for our social and environmental
data.
gsk.com:
ESG Performance Report
GSK Annual Report 2021
35
Strategic report
Governance and remuneration Financial statements Investor information
Using our science and technology to address health needs
Commitment
Progress in 2021
New medical innovations
Develop differentiated,
high-quality and needed
medicines, vaccines and
consumer healthcare products
to improve health
–
2021 saw three major approvals for medicines, eight phase III starts and have 64 vaccines
and medicines in our pipeline. For more details, see the Innovation section on pages 17 to 28.
Global health
Improve global health impact
through R&D for infectious
diseases that affect children
and young people in low-
income countries, focusing on
HIV, malaria and TB
–
Our commitment to improve global health impact through R&D for infectious diseases and
access to medicines and vaccines has been recognised in the Access to Medicines Index
(ATMI) where we have ranked number one for the last seven years, every year since its
inception.
–
Our RTS,S/AS01e malaria vaccine is the first and only vaccine shown in long-term clinical
trials to reduce malaria in children. In 2021, the WHO recommended broader deployment of
the vaccine, to reduce illness and deaths in children in sub-Saharan Africa and other regions
with moderate to high malaria transmission. This followed new data which showed that the
vaccine, in combination with seasonal antimalarials, lowers clinical episodes of malaria,
hospital admissions with severe malaria and deaths by around 70% compared to antimalarials
alone. In December 2021, Gavi announced its decision to provide funding for the
procurement and introduction of the vaccine into routine child immunisation programmes
in Gavi eligible countries.
–
We made good progress in improving availability of age-appropriate HIV treatment options for
children around the world. A generic dolutegravir dispersible tablet was made available in key
sub-Saharan African countries, less than a year after US FDA approval of this treatment. This
work was facilitated by our public-private partnership with the Clinton Health Access Initiative,
Unitaid and two generic manufacturers: Mylan (now part of Viatris group) and Macleods.
–
Shigella is the second biggest cause of morbidity and mortality from diarrhoea worldwide
after rotavirus, and no approved vaccine is widely available. In late 2021, the first subjects
were vaccinated with our quadrivalent shigella vaccine candidate, in a first-time-in-human,
clinical phase I/II study. Our goal is to develop an affordable vaccine giving broad protection
against the most prevalent shigella serotypes.
–
We have the richest pipeline focused on global health priority diseases in the industry,
including ten medicines and vaccines currently in clinical development.
–
We launched a collaboration with Novartis in 2021, Project Africa Gradient, to support
scientific research on the link between genetic diversity and patients’ response to malaria and
tuberculosis drugs in three African regions.
Health security
Help the world to better
prepare for future disease
outbreaks with pandemic
potential, and tackle
antimicrobial resistance
–
We have taken a broad approach to developing COVID-19 solutions. To see how we have
applied our science to finding COVID-19 innovations, see page 21.
–
We were one of five companies to sit on the Pandemic Preparedness Partnership Steering
Group, convened by the UK Government in 2021, bringing together industry, international
organisations and experts to advise G7 governments on how to speed up the response to a
future pandemic. The Trinity Challenge, of which we were a founding member, also
announced the winners of its inaugural competition to find innovative ways to better predict
and prevent outbreaks of disease, using data and analytics. Winners included the
VaccineLedger, which tracks vaccines from manufacture to patient, using blockchain
technology.
–
Our commitment to preventing antimicrobial resistance (AMR) was recognised by the Access
to Medicine Foundation’s AMR Benchmark, with GSK an industry leader for the third
consecutive time in 2021. The benchmark highlighted in particular the diversity and depth of
our R&D pipeline, particularly our AMR-relevant vaccines.
Trust
continued
For full details of our progress against these commitments, please see our ESG Performance Report
36
GSK Annual Report 2021
Making our products affordable and available
Commitment
Progress in 2021
Pricing
Improve the health of millions of
people each year by making
our products available at
responsible prices that are
sustainable for our business
–
In developed markets, pricing of all our new products reflects the value they deliver to patients,
healthcare systems and wider society compared to available alternatives, and supports our
work to meet future healthcare needs. We offer patient support and, in the US during 2021,
provided prescribed vaccines and medicines to more than 87,000 low-income uninsured,
underinsured, and Medicare Part D patients through GSK and ViiV Healthcare’s Patient
Assistance Programs Foundation.
–
For pricing in low income countries (LICs) and lower middle income countries (LMICs) we
use innovative pricing structures to extend product reach. Our vaccines business has a tiered
pricing model based on World Bank gross national income country classifications, and we do
not file patents for our medicines or enforce historic patents in low-income countries LICs.
Product reach
Use access strategies to reach
800 million underserved
people in lower income
countries with our products
by 2025
–
Our access strategies continued to reach many more underserved people in lower income
countries. We made good progress against our target in 2021, and have now reached over
323 million people with our products using access strategies. These strategies include our
advanced market commitments to provide our vaccines to lower income countries through
Gavi. Our partnership with Gavi includes supplying
Cervarix
, a critical tool in lower income
countries for addressing cervical cancer,
Synflorix
, our pneumococcal vaccine, and
Rotarix
our vaccine against rotavirus, the most common cause of severe diarrhoeal disease in children
under five.
–
In 2021, we also made a commitment to supply
Rotarix
through the Humanitarian mechanism
for civil society organisations serving the vaccination needs of refugee and other emergency
situations. This builds on our existing commitment to the Humanitarian Mechanism for
Synflorix
.
–
ViiV Healthcare has voluntary licensing agreements with generic manufacturers. These have
allowed at least 21.3 million people living with HIV across 119 LICs and LMICs access to a
generic product containing dolutegravir by the end of 2021.
–
We have donated over ten billion albendazole tablets, including 526.4 million in 2021, to
support efforts to end lymphatic filariasis and control intestinal worms in school-age children.
Healthcare access
Partner to improve disease
prevention, awareness and
access to healthcare services
for 12 million people by 2025
–
We have a number of partnerships with NGOs and multilateral organisations to improve
disease prevention, awareness and access to healthcare services. By 2021, these
programmes reached 13.9 million people. Over the next year we’re developing an ambitious
global health strategy for GSK which will include setting a new target.
–
Our partnership with Save the Children increased its emergency preparedness and response
capability, investing in data analytics and early-action protocols to provide efficient and timely
healthcare in crises. Our partnerships with Save the Children, Amref Health Africa and CARE
International have trained more than 108,000 front-line health workers since 2011. They
reached over 17.3 million people with prevention and treatment for infectious diseases, plus
providing maternal/child healthcare, vaccination, hygiene sanitation and nutrition.
–
ViiV Healthcare’s Positive Action programme aims to explore ways to support people-centred
and community-led interventions to help meet the UN targets to end AIDS by 2030. In 2021,
the programme reached approximately 274,000 people and funded 66 grants across 28
countries.
Trust
continued
For full details of our progress against these commitments, please see our ESG Performance Report
GSK Annual Report 2021
37
Strategic report
Governance and remuneration Financial statements Investor information
Trust
continued
Being a modern employer
Commitment
Progress in 2021
Engaged people
Achieve and maintain a
competitive employee
engagement score by 2022
–
In early 2022, we launched a new all-company survey focused on purpose, strategy,
engagement and culture progress. Engagement remains high at 78% and above the general
industry benchmark, settling back to 2019 levels after an extra boost during the early phases
of the pandemic.
Inclusion and diversity
Accelerate our progress on
inclusion and diversity,
including aspirational targets
for female and ethnically
diverse representation in senior
roles by the end of 2025, and
recognition as a disability
confident employer and in
LGBT+ indices
–
Our aspiration is that women hold at least 45% of VP and SVP roles by the end of 2025. In
2021, women held 40% of roles at VP and above, up from 38% in 2020. The FTSE Women
Leaders ranking showed that we are in the top 10% of FTSE 100 companies based on the
proportion of women on our Board and in leadership positions
1
. We also published our fifth
annual UK ‘gender pay gap’ report in 2021, which showed that we continue to outperform the
national average.
–
Our aspiration is to have at least 30% ethnically diverse leaders in our roles at VP and above in
the US and at least 18% in the UK, by the end of 2025. Our representation as at 31 December
2021 showed that we had 12.9% ethnically diverse leaders in VP and above roles in the UK, up
from 11.1% in 2020. In the US, we had 27.1% ethnically diverse leaders in roles at VP and
above, up from 23.2% in 2020. This progress is supported by our rigorous focus on equal
employment opportunity. We have launched programmes such as Accelerating Difference –
Ethnic Diversity, which supports the development of ethnically diverse employees, building on
their strengths and addressing development gaps through individual and group coaching. From
2023 we will publish GSK’s ‘ethnicity pay gap’ data for the UK.
–
We have developed a three-year plan to increase our disability confidence. As part of this we
have rolled out our workplace adjustments programme to our biggest markets, making it
available to over 40% of our employee population so far. We also signed up to the International
Labour Organization’s Global Business and Disability Network, to promote the inclusion of
people with disabilities in workplaces.
–
We continue to be recognised in global LGBT+ indices, including being designated as a Best
Place to Work for LGBTQ+ Equality in the Human Rights Campaign Foundation’s 2021
Corporate Equality Index.
Health, wellbeing and
development
Be a leading company in how
we support employee health,
wellbeing and personal
development
–
GSK’s Leadership Team has continued to oversee our COVID-19 response, including the
health, wellbeing and engagement of our employees in all our locations. We continuously
monitor the impact of COVID-19 on our employees and as public health vaccination
programmes continue, we’re helping to educate and raise awareness about them. Where
there are no public health vaccination programmes available, we have committed to offer
vaccinations at minimal cost to our employees and their eligible dependents.
–
We continued to make mental health training available for all our employees, and 66% of
managers have completed it since it launched in 2019. We make confidential support
available through our global Employee Assistance Programme, and we successfully piloted a
new wellbeing programme focused on resilience strategies and energy management and will
continue to implement a global rollout in 2022.
–
We run health and safety training for our people, which covers how to identify and take
measures to reduce workplace risks. In 2021, our reportable injury and illness rate remained
at 0.16 per 100,000 hours worked and there were no fatalities.
–
All our employees have access to our internal development portal – the Keep Growing
Campus. This offers extensive development courses, videos and articles on a range of topics,
including decision making, building change capability, coaching, influencing others and health
and wellbeing. In 2021, our people completed 84,493 leadership and business courses.
For full details of our progress against these commitments, please see our ESG Performance Report
1
Data on employees by gender (including total employees, Board and management) is provided in our non-financial information statement on page 54
38
GSK Annual Report 2021
Trust
continued
Being a responsible business
Commitment
Progress in 2021
Reliable supply
Commit to quality, safety and
reliable supply of our products
for patients and consumers
–
It’s a priority to make sure there is a high-quality and reliable supply of our products for
patients and consumers. This has continued to be of high importance throughout the
pandemic, which has put increased strain on global supply chains. For more on how we
manage continuity of supply, see pages 31 and 33.
–
Our quality management systems allow for continuous improvement, helping us to keep up
high standards for product quality and safety. In 2021, we had 171 external regulatory
inspections at our manufacturing sites and local operating companies – many conducted
virtually because of the pandemic. We respond to all inspection findings, no matter how minor.
We also ran 1,833 quality audits of suppliers, and 312 audits of clinical trials run by, or on
behalf of, GSK to assess their quality and safety. Where we find areas to improve, we create
improvement plans and track their progress.
Ethics and values
Operate an ethical, values-
driven culture, in which any
issues are responded to swiftly
and transparently
–
Everyone at GSK has to complete training on what the company expects from them. In 2021,
we renamed this mandatory employee code of conduct training ‘Working at GSK’ and
improved the content to focus on risk and compliance, as well as diversity and creating an
inclusive workplace. In 2021, 99.4% of employees and 92.9% of contract workers completed
this training.
–
Anyone inside or outside GSK can raise concerns or speak to an independent third party
through our Speak Up reporting channels, confidentially or anonymously, without fear of
retaliation. We continue to take every concern raised seriously, and review every report to
identify whether we need to investigate formally. If investigations show an employee has
breached our policies, we take action.
–
In 2021, we changed the way we report disciplinary data and expanded the scope to include
cases which were initiated in previous years. In 2021, 2,065 employees had concerns raised
against them, with an additional 757 employees with concerns raised from prior year’s open
cases. We disciplined 1,176 employees (298 of whom initially had concerns raised in previous
years), an increase from 2020 primarily driven by late completion of mandatory training. Of
these, 265 either left voluntarily or were dismissed, and 923 received a written warning. In
other cases, we took action short of a written warning. At the end of 2021, we had 427 cases
awaiting investigation or a disciplinary decision.
–
During 2021, we undertook an independent assessment of our approach to managing
human rights, to help us better understand how we can continue to improve how we manage
our priority human rights areas. The assessment showed that there is good understanding
of our human rights impacts and we will be reviewing and addressing the findings in the year
to come.
–
How our third parties act can have a direct impact on us meeting our priorities. It is important
to manage our relationships with them well, including the way we choose, contract and
monitor them. Our Third-Party Oversight (TPO) programme evaluates and mitigates the risks
introduced through engaging third-parties to provide goods or services for GSK. We
complete assessments for the portion of our third parties that may present greater potential
risk, for example, interactions with government officials or annual transfers of value above
certain pre-defined limits. In 2021, we ran more than 12,800 assessments of these higher
risk third parties across more than 20 risk areas, identifying over 55% as high-risk in one or
more areas. Most of these third parties are goods and services providers (70%), contract
manufacturers and external suppliers (2%) or distributors and wholesalers (9%). We are
evaluating our TPO programme to simplify the upfront assessment and broaden its focus to
risk management throughout the third-party relationship, using user feedback and findings
from our ongoing monitoring.
For full details of our progress against these commitments, please see our ESG Performance Report
GSK Annual Report 2021
39
Strategic report
Governance and remuneration Financial statements Investor information
Trust
continued
Being a responsible business
continued
Commitment
Progress in 2021
Data and engagement
–
In 2021, we simplified our privacy notices and made them easier to access through a portal
on all our websites. Privacy is a key part of the mandatory ‘Working at GSK’ annual training
that all our people have to complete. This helps employees to understand that everyone at
GSK is responsible for handling personal information in the right way.
–
Our patient panels give us insights and advice, as well as building trusting, long-term
relationships with patients and carers that help us develop medicines that meet patients’ needs.
In 2021, we ran panels in disease areas including cancer, rheumatoid arthritis and hepatitis B.
–
As part of our commitment to data transparency for our clinical studies, we have published
2,776 clinical study reports and 6,239 summaries of results. We have listed 2,550 studies for
data sharing via www.vivli.org and www.clinicalstudydatarequest.com.
–
We want our clinical trials to be as representative and accessible as possible, reflecting the
patient populations with the disease including age, race, ethnicity, sex and gender. Over the
past five years, we have endeavoured to improve patient diversity in our clinical trials by
implementing training and support to personnel at investigator sites including awareness
training on conducting clinical trials in under served communities. In 2021, we formed a Global
Demographics and Diversity team to coordinate our learning about epidemiology, burden of
disease and health equity, and how they relate to age, sex, gender, race and ethnicity, so we
can apply these lessons when planning our trials.
Environment
Have a net zero impact on
climate and a net positive
impact on nature by 2030
Climate
–
To achieve our ambitious net zero goal we have set targets across our value chain carbon
footprint. The targets have been accredited by the Science Based Targets Initiative as aligning
to a 1.5
o
C pathway.
–
In 2021, we reduced our operational carbon emissions (scope 1 and 2) by 15% compared to
2020, primarily through increased use of renewable energy
1
. In September 2021, we
announced a £50 million investment in UK and US manufacturing sites to secure renewable
power generation. This includes new wind turbines and a 20-year power purchase agreement
to supply solar electricity for our Irvine facility in Scotland, and solar energy for our Oak Hill
facility in New York.
–
In 2020 (our latest available data), emissions from our suppliers, logistics and people using our
products (scope 3) reduced by 8% reflecting the evolution of our product portfolio and
reductions in business travel and commuting as a result of the pandemic. Our metered dose
inhalers for asthma and COPD account for 40% of our carbon footprint so in 2021 we started
an R&D programme to find a lower-impact propellant that could reduce emissions from them by
about 90%.
Nature
–
Collaboration is an important part of our strategy and during the year we joined nine other
global pharmaceutical companies to launch the Energize programme. This is the first
collaboration of its kind to use the scale of a single industry’s global supply chain to drive
greater use of renewable electricity. We were a Principal Partner of the UN Global Climate
Change Conference (COP26) in Glasgow and we championed the need for action on climate
and nature to protect health. We also joined the Health Systems Task Force of the
Sustainable Markets Initiative to drive collective action in digital healthcare, supply chains and
patient care pathways to accelerate the shift to net zero.
–
We make our Climate-Related Financial Disclosure on pages 49 to 52 along with our energy
and carbon emissions data. GSK’s carbon reduction pathway to become net zero by 2030
can be found
on gsk.com
.
1
Energy and carbon emissions data is provided in our Climate-related financial disclosure on pages 49 to 52.
For full details of our progress against these commitments, please see our ESG Performance Report
40
GSK Annual Report 2021
Trust
continued
Being a responsible business
continued
Commitment
Progress in 2021
Environment
continued
–
We are involved in developing standardised guidance on measuring our impact on nature
through working with the Science Based Targets for Nature Initiative and the Taskforce on
Nature-related Financial Disclosures (TNFD). We will achieve our net nature positive goal by
reducing our environmental impacts across water, materials and biodiversity and investing in
protecting and restoring nature.
–
In 2021, we reduced overall water use in our operations by 16% compared to 2020, and by
21% in sites in high water stress regions. 91% of our sites are now good water stewards, in line
with the Alliance for Water Stewardship’s definition. During the year, we joined the Water
Resilience Coalition (WRC), partnering to develop our approach to water neutrality in water-
stressed regions and to deliver water resilience projects on the ground. Our Cape Town site in
South Africa is the first in our network to embark on the journey towards water neutrality, and
we are working with the WRC and local partners to address shared water challenges by
clearing alien plant species and replanting local flora to create greater resilience in the basin.
–
In 2021, we reduced the waste from our sites by 7% and recovered 43% of these materials
through circular routes like reuse or recycling. Consumer Healthcare launched 40 million
recycle-ready toothpaste tubes in over 20 markets.
–
In 2021, we piloted our approach to biodiversity at our Stevenage site in the UK, working in
partnership with Kew Gardens to deliver a 39% increase of biodiversity at the site. We aim to
have measurable and effective biodiversity plans in place across all GSK sites by 2025.
–
In 2021, we joined the public-private Lowering Emissions by Accelerating Forest Finance
(LEAF) coalition which contributes high-quality emissions reductions by supporting countries
to protect their tropical forests from deforestation.
For full details of our progress against these commitments, please see our ESG Performance Report
GSK Annual Report 2021
41
Strategic report
Governance and remuneration Financial statements Investor information
Consumer Healthcare
Our future standalone Consumer Healthcare business, Haleon, which is on
track to separate from GSK in mid-2022, will be a new world leader focused
on consumer healthcare.
A sector more relevant than ever
Global consumer healthcare is a growing, £150 billion-plus
market. Events of the last two years have underscored the
industry’s importance. The pandemic, which continues to have
an impact across the world, means consumers are focusing
more on health and wellness, whether it’s managing their
symptoms, or proactively looking after their wellbeing with
vitamins, minerals and supplements.
Self-care supports healthcare
The burden on healthcare systems is increasing, driven by an
ageing population and a rising middle class population. The
consumer healthcare sector, particularly over-the-counter (OTC)
products, play an important role in addressing this challenge.
Data shows that for every $1 spent on OTC medicines in the
US, the healthcare system saves over $7 which amounts to
$146 billion annually.
The opportunity for a standalone consumer
healthcare company
The consumer healthcare sector’s role in supporting broader
public health presents a significant opportunity for a standalone
company focused on consumer healthcare.
In 2018, we announced our plan to separate our Consumer
Healthcare business as a UK-listed company through a
demerger.
Since then, we have made significant progress in preparing
for that separation, which is due to happen in mid-2022.
In June 2021, we confirmed our intention to separate through
a demerger. In July 2021, Brian McNamara was named as
CEO-designate for the new Consumer Healthcare company,
and in December 2021 Sir Dave Lewis was appointed
Chairman designate. In February 2022 we laid out our strategic
priorities, key growth drivers, detailed financial information and
the name, Haleon, for the future Consumer Healthcare
business.
See gsk.com for information
.
Passing key milestones and looking ahead
Despite the challenges we’ve all faced during the pandemic,
we successfully completed the integration of Pfizer Consumer
Healthcare in 2021 with no delay to timings as well as over-
delivering on our synergy targets. This was a complex
integration which impacted multiple parts of our business
including commercial, manufacturing and R&D. The completion
marked a major milestone in our separation planning.
Our new Consumer Healthcare company, Haleon, will be
UK-based and listed, and in October 2021 we announced
proposals for new company headquarters to be located in
Weybridge at a newly built campus which will also feature
an innovation centre. Due to open at the end of 2024, subject
to consultation and planning approvals, our ambition is for it
to reflect our ambitious sustainability targets that we set out
in 2020.
We are set up for success. We have grown from a business
with about £6 billion in annual sales and an operating margin
of 11.3% in 2015, to one with sales of £9.6 billion and an
operating margin of 23.3% in 2021; a world-leading consumer
healthcare business.
An industry-leading portfolio
As a world leader in consumer healthcare, we hold leadership
positions in the five categories that we operate in: oral health
1
;
vitamins, minerals and supplements (VMS); pain relief;
respiratory health; and digestive health.
Our growth strategy is based on prioritising investment in
our nine power brands and a number of other strategically
important brands concentrated in key countries and regions.
Our previously described operating model has been designed
to drive the performance of these brands. Through the
divestment of low growth brands, we have a focused portfolio.
Geographically, we are number one or two in 70% of the OTC
and VMS markets we operate in.
2
This includes our priority
markets in the US and China.
–
Consumer Healthcare had 26 first-market launches for
new innovations in 2021
–
Total 2021 turnover £9.6 billion -1% AER, +4% CER
(excluding brands divested/under review)
–
E-commerce represented 8% of total sales
–
Delivered 3.7 billion consumer healthcare products
–
Committed to producing one billion recyclable toothpaste
tubes by 2025
–
Significant investment in on-site solar power towards goal
to source 100% of our electricity from renewable sources
by 2025
–
Announced growth ambitions of 4-6% annual organic sales
growth in the medium term, sustainable moderate margin
expansion and high cash conversion
1 Therapeutic oral health segment
2 Nicholas Hall's DB6 Consumer Healthcare (OTC/VMS) Database,
2020 Store and E-commerce sales
42
GSK Annual Report 2021
2021 performance
Consumer Healthcare turnover in the year of £9,607 million
decreased 4% AER and was stable at CER reflecting dilution
from divestments given the completion of the portfolio
rationalisation at the end of Q1 2021. On a two-year CAGR,
sales excluding brands divested/under review grew 4% overall,
despite the adverse impact of the COVID-19 pandemic.
Sales excluding brands divested/under review decreased 1%
AER but increased 4% CER reflecting the underlying strength
of brands across the portfolio and categories, and continuing
growth in e-commerce. Overall, sales benefited from strong
growth across all categories excluding respiratory health which
was negatively impacted in Q1 2021 by the historically low cold
and flu season. The decrease in cold and flu sales resulted in an
approximately 1% drag on full-year growth.
International sales excluding brands divested/under review grew
high single digit on a CER basis with double digit growth in
emerging markets including India, China, the Middle East and
Africa. Excluding brands divested/under review, US sales grew
low single digits but European sales were stable on a CER
basis. Both regions were particularly negatively impacted by
the historically low cold and flu season during Q1 2021.
See Group financial review on page 65 for more detail
Science-based innovation to address unmet
consumer needs
Innovation continues to be a driver of growth. In 2021, we
delivered major innovations based on trusted science and
human understanding to meet the needs of consumers across
the world. In total, we delivered 26 first-market launches of new
innovations, and more than 350 brand-market launches overall.
Our research shows that a third of tooth sensitivity sufferers
are searching for a trusted, long-lasting solution to address
the cause of the pain, rather than just treat the symptoms. To
address this key consumer need, we innovated to develop and
launch
Sensodyne Repair and Protect Deep Repair
in more
than 25 markets. This is a product scientifically proven to
provide deep and targeted repair within the dentine tubules –
holes in the tissue beneath the tooth enamel that are the source
of the pain – while also providing long-lasting protection from
sensitivity.
In oral health, we have also expanded our Gum Health expert
offering under our
paradontax
brand in the US. Research shows a third of people globally suffer from bleeding gums, which may
be a sign of gum disease. Our
parodontax Active Gum Repair
innovation is clinically proven to help reverse the early signs of
gum disease. It also strengthens the appeal of the brand to
more consumers with gum problems by reinforcing our
credentials with dental experts.
The COVID-19 pandemic has also accelerated a consumer
shift towards greater proactivity in managing their health and
wellness, with research highlighting that 22% of consumers, in
the US for example, took more supplements in 2020 than they
did in the prior year. Research also uncovered that more than
85% of
Centrum
consumers favour solutions which are more
targeted than a multivitamin. Based on this insight, we launched
tailored solutions that are scientifically blended for
Centrum
in a number of key markets. In Australia we moved beyond ‘the
multivitamin’ and launched a new
Centrum Benefits
range with
multi-ingredient combinations in order to cater for consumer
needs across mind, body and beauty including Mind & Memory,
Rest & Renew, Immune Defence & Recovery and Collagen
Boost & Glow. In China we successfully launched
Centrum
Dual Probiotics
, a proposition that is specially designed to
appeal to the growing consumer trend around gut health and
the body's self-defence power. In the US, we continued to
innovate in new formats by expanding the
Centrum Minis
and
Centrum Gummies
portfolios, including the launch of
Centrum
Organic Multigummies
. These innovations help us evolve the
brand from a single multivitamin pill and bring a number of
personalised solutions – all based on trusted science and
informed by clinical data.
We have continued to see an increased interest in our
Emergen-C
brand in the US, as consumers continue to look for
ways to support their immune health. Our research revealed that
consumers are looking to botanicals, for their natural qualities,
in order to support their wellness goals. We launched a
formulation which combines the natural goodness of plant-
based botanicals and all the nutrients from our core
Emergen-C
formula with antioxidants, B and C vitamins and electrolytes.
We also continue to invest in locally relevant innovation. In
China, one of our key markets, we launched
Contac Multi-
Symptom
. This innovation, the biggest OTC launch (by sales)
for our business in China in 2021, provides fast relief from
multiple cold and flu symptoms.
Contac Multi-Symptom
comprises three active ingredients in a single pill to relieve
seven cold and flu symptoms: fever, headache, sneezing, runny
nose, limb pain, sore throat and nasal congestion.
Investment in digital driving growth
The pandemic has also seen an explosion in digital commerce
and digital engagement. We have been well positioned to
capture that digital opportunity.
E-commerce sales grew in the mid-20% range in 2021 versus
2020. Overall, e-commerce represents 8% of total sales.
We saw good growth in some of our key e-commerce markets
including China.
We also invested in capabilities around digital media. A
significant proportion of our total advertising spend is now in
digital media, allowing us to be more efficient and effective in
targeting our consumers.
Consumer healthcare
continued
GSK Annual Report 2021
43
Strategic report
Governance and remuneration Financial statements Investor information
Consumer healthcare
continued
A purpose and culture guiding all we do
We serve hundreds of millions across the world and, through
our brands, have a significant effect on their everyday health.
Our future standalone company will be rooted in a purpose to
deliver better everyday health with humanity. This will guide
everything we do and the choices we make.
Our success depends on creating the right culture. As a
consumer healthcare business, it’s clear that what we do
matters.
Our culture starts with always doing the right thing. Acting with
integrity is non-negotiable, and that means we can always be
proud of how we operate. Our culture focuses on three
behaviours:
–
Go beyond
– this is about our hunger and desire, our drive
to be better, to move with pace, and to outperform the
competition.
–
Do what matters most
– this is about prioritising the
important things and challenging the unnecessary.
–
Keep it human
– this is about our dedication to the
consumers and customers we serve. But, equally important,
it’s about our dedication and commitment to each other,
which demands unmatched understanding and empathy.
Building the right culture starts with having a diverse workforce
and creating an inclusive environment where colleagues can
thrive. We believe that inclusion and diversity (I&D) leads to
business success by unleashing the enormous potential of all
our people and strengthening our ability to respond to the
differing needs of our patients and consumers.
Our commitment to accelerate our progress on I&D remains
a priority, including working towards aspirational targets for
female and ethnically diverse representation in senior roles by
the end of 2025.
Running a responsible business
Having a strong ESG strategy and performance will be a critical
expectation our future standalone company. It is an integral part
of how we live our purpose – to deliver better everyday health
with humanity – and a key pillar of our strategy. ESG is
increasingly important to our stakeholders.
The health of the world affects the health of people. People
can’t enjoy better everyday health in a world where our
environment is under threat and society is increasingly unequal
and divided, with heightened economic inequality manifesting
itself in growing health inequalities. The focus of our ESG
strategy is therefore to tackle the environmental and social
barriers to everyday health.
–
Environmental:
by tackling carbon emissions and climate
change, developing more sustainable packaging and using
trusted ingredients which are sustainably sourced, we are
taking steps to create a healthy environment for people to
live in.
–
Social:
by improving health inclusivity; tackling the bias,
discrimination and prejudice which holds people back from
everyday health and educating and empowering people
towards better, sustainable self-care, we will help create
a healthy social environment for people to live in.
–
Governance:
by defining our strategy and governance to
reflect increasing stakeholder expectations; supported by the
appointment of a Board led by Sir Dave Lewis, who brings a
wealth of international consumer sector experience.
This year, we have step-changed action on sustainability,
including significant investment in on-site solar power as part
of our goal to source 100% of our electricity from renewable
sources by 2025, committing to make a billion toothpaste tubes
recyclable by 2025 and achieving full palm oil derivatives
accreditation by 2025. Through our
Otrivin
Actions to Breathe
Cleaner Project, we are campaigning to help children learn
more about air pollution and identify the best way to minimise
our exposure to it. We scaled up our education on this topic
to a broader population through a high profile presence at the
2021 COP26.
In 2022, ahead of becoming a standalone company, we will
continue our work to define our Social Sustainability Strategy
and Governance, reflecting increasing stakeholder
expectations.
44
GSK Annual Report 2021
Stakeholder engagement
Engaging and building trust with a broad range of stakeholders is vital
for our long-term success.
Here, we summarise who our key stakeholders are, how we engage with them, which issues matter most to them and how
we’re responding. To see how we enable the Board and management to understand stakeholders’ views and include them in
decision making, see our section 172 statement on page 116.
Patients and consumers
Insights from patients and consumers enable us to develop
products that better meet their needs.
How we engage
Advisory boards, disease-specific patient panels and Patient Advocacy
Leaders Summits to provide patient insights.
Engagement and support for patient groups (disclosed on GSK.com),
and initiatives that empower patients to get involved in medicine
development.
Market research including consumer sensory labs.
What matters to patients and consumers
Differentiated product innovation based on patient and consumer
needs.
Access to a reliable supply of high-quality products.
Pricing of healthcare products, particularly out-of-pocket expenses.
What we’re doing
Strengthening our pipeline of innovative products.
Maintaining high standards for product quality and safety.
Continuing to take a value-based approach to pricing to balance
reward for innovation with access and affordability.
Investors
We maintain regular and constructive dialogue with investors to
communicate our strategy and performance in order to promote
investor confidence and ensure our continued access to capital.
How we engage
Ongoing communications including the AGM, quarterly results calls,
in-person and virtual roadshows and detailed company information
online.
One-to-one meetings between Board members, senior executives and
institutional investors.
Biennial investors and analysts perception study.
What matters to investors
Sustainable performance for long-term shareholder value.
Understanding how our R&D strategy is successfully developing our
pipeline.
Commitment to strong management of ESG issues.
What we’re doing
Creating two new leading companies through demerger
in 2022.
Good financial performance and transparent reporting.
Business and R&D updates and events on key pipeline milestones.
Driving leading-edge ESG performance and a culture of ambition,
accountability and responsibility.
Healthcare professionals and medical experts
We work with healthcare professionals (HCPs) and medical
experts to understand the patients’ journey, partner to resolve
unmet medical needs and make sure that our products are used
safely and effectively.
How we engage
Scientific dialogue to increase understanding of disease management
and patient experience.
Providing high-quality, balanced information about our vaccines and
medicines.
Collaborating on clinical trials and research.
What matters to HCPs and medical experts
Access to product and scientific information.
Responsible sales and marketing practices.
Safety, efficacy and differentiated innovation.
What we’re doing
Increasing the use of digital channels to deliver more personalised and
effective sharing of information to HCPs.
Ensuring we attract and retain the best talent and uphold responsible
sales and marketing standards.
Using HCP insights on disease management and patient experience to
inform the development of our vaccines and medicines.
R&D partners and academia
We partner with scientific institutions, national health systems,
academia and industry partners to help us develop the most
effective vaccines and medicines to meet unmet patient needs.
How we engage
Collaborating with outstanding scientists at academic institutions to
accelerate discovery and development of new vaccines and medicines.
Licensing advanced technology and potential vaccines and medicines
from biotechs.
Establishing joint ventures to strengthen innovation and improve
efficiency.
What matters to R&D partners and academia
Finding the right partner to identify and accelerate a potential vaccine
or medicine to reach the patients that need it.
Pushing the science and technology as far as it can go to advance
human health.
Dissemination and advancement of scientific knowledge.
What we’re doing
Working with world-leading experts at biotechs, research institutes
and universities to improve drug and vaccine discovery to increase the
productivity of our R&D pipeline.
Collaborating with a broad range of partners to support our R&D focus
on the science of the immune system, human genetics and advanced
technologies (see pages 17 to 27).
Supporting the advancement of scientific knowledge with our
long-standing commitment to sharing research see page 39.
GSK Annual Report 2021
45
Strategic report
Governance and remuneration Financial statements Investor information
Stakeholder engagement
continued
Governments and regulators
We work with governments and regulators to advocate for policies
that encourage innovation and promote efficient management of
healthcare spending.
How we engage
Meeting with regulatory bodies throughout the development process to
ensure high-quality new products.
Engaging with government health agencies to demonstrate the value of
our products for patients and economies.
Working with governments to protect and strengthen the operating
environment for life sciences innovation and new medicine and vaccine
launches.
Participating in international efforts to address global health threats,
such as the pandemic.
What matters to governments and regulators
Investment in innovation and life sciences.
Scientific funding and collaboration.
Medicines pricing and reimbursement.
Public health threats – COVID-19 and antimicrobial resistance (AMR).
Investment in preventive health and strengthening health systems.
What we’re doing
Engaging in US policy pricing/reimbursement debates and, with
phRMA, commenting on legislative proposals for healthcare reform.
Partnering across industry and governments to tackle AMR.
Engaging with governments, including the US, UK and EU regarding
production and procurement of COVID-19 vaccines and treatments.
NGOs and multilateral organisations
We work with partners to improve access to healthcare services
and our products, and to advocate for the policy environment in
which we can be successful and deliver on our ambitions
for patients.
How we engage
Working with non-governmental organisations (NGOs) and partners to
research and develop products to address global health challenges.
Collaborating with NGOs and generic manufacturers to sustainably
supply our products to lower income countries.
Partnering to strengthen health systems in lower income countries and
drive progress on global health priorities.
What matters to NGOs and multilateral organisations
Access to vaccines and medicines.
UN SDGs and WHO targets for specific disease areas.
Universal health coverage and the future of health systems.
Financing for global health, including COVID-19 solutions.
What we’re doing
Focusing on our unique role as a global health partner to develop
products where we have scientific expertise.
Partnering with organisations that have complementary capabilities
and reach to create sustainable models that share risk, including our
partnership with Gavi to support access to vaccines in lower income
countries.
Leveraging our community investment programmes to support our
scientific expertise and deliver greater impact for patients.
Suppliers
We work with thousands of suppliers, large and small, who provide
goods and services that support us in delivering a reliable supply
of high-quality, safe products for our patients and consumers.
How we engage
Regular direct engagement with suppliers to ensure they support
GSK’s strategies and targets.
Engaging with suppliers through our Third-Party Oversight programme
and by conducting in-depth audits.
Participating in forums such as the Pharmaceutical Supply Chain
Initiative and the Consumer Goods Forum to improve supply chain
sustainability.
What matters to suppliers
Prompt payment to agreed terms.
Understanding GSK policies to ensure compliance.
Opportunities to innovate and grow the relationship.
What we’re doing
Engaging with suppliers to develop improvement plans and track
progress when we identify areas for improvement.
Providing proactive support through our third-party EH&S team in
countries where our priority suppliers are located.
Our people
We involve and listen to our people to increase employee
engagement, drive business performance and retain talented
people.
How we engage
Regular interactive broadcast events with the GLT and other senior
leaders.
Facilitating dialogue and collaboration through our internal
communications platforms, Works Councils, Employee Forums and
Employee Resource Groups.
Providing feedback to managers via the global all-company survey and
One80 questions.
What matters to our people
Our purpose and being able to see the difference we make.
Having a great line manager.
Feeling understood and valued.
Being part of an inclusive and diverse workplace.
What we’re doing
Fostering a culture of accountability and ambition, underpinned by
integrity and humanity.
Launched new leadership programmes to help managers motivate,
focus, care for and develop their teams.
Campaigns and programmes to support safety, mental wellbeing and
enable work-life balance.
Driving our diversity and inclusion activities in support of new
aspirational targets.
46
GSK Annual Report 2021
Risk management
Our risk management and internal control framework is well-embedded,
mature, and continuously reviewed and overseen by the Board.
Identifying, evaluating and managing risk
Our risk management and internal control framework is well-
embedded and provides the ability for the Board to evaluate and
oversee how the company manages principal and emerging risks
in line with our long-term objectives. We have a company-wide
policy that sets out the requirements, roles and responsibilities
for the management and governance of risks, controls and
supporting guidance on the essential elements of our internal
control framework. We routinely evaluate our framework for
improvements.
Our governance
The Board oversees our risk management system and
establishes our risk appetite, supported by the Audit & Risk
Committee (ARC). The Corporate Responsibility Committee
(CRC) and Science Committee further assess the effectiveness
of risk management strategies pertinent to their defined remits.
Our Risk Oversight & Compliance Council (ROCC) helps the
ARC and CRC to oversee the risks, and the strategies used to
address them.
Risk management and compliance boards across the Group
promote the ‘tone from the top’. They also establish our risk
culture and oversee the effectiveness of risk management
activities, as well as communicating information about internal
controls. Our business is accountable for delivering on its
objectives in line with its established risk appetite.
An Enterprise Risk Owner is responsible for each principal risk,
with oversight by a GLT member. Risk owners report risk and
mitigation to ROCC, the GLT and the appropriate Board
committee. Legal and Compliance support these efforts by
advising on our business strategies, activities, risks and controls,
and Audit & Assurance provides assessments of the adequacy
and effectiveness of our framework.
Considering current and emerging risks
Our risk assessment process considers the likelihood and
impact of risks, and the timescale over which a risk could occur.
We consider both current and emerging risks that could affect
our ability to achieve our long-term objectives. Emerging risks
are those on the three-year horizon, in line with our viability
statement. We also define risks in this way if we need to know
more about how likely they are to materialise, or what impact
they’d have if they did. We will evaluate if additional investigation
is required before classifying them as principal risks. Risk
management and compliance boards at all levels of the
organisation identify emerging risks on an ongoing basis, and
ROCC discusses emerging risks at each meeting. We also scan
the risk horizon throughout the year to identify external trends
that may be opportunities and/or emerging risks and monitor our
business activities and internal environment for new, emerging
and changing risks.
ROCC conducts an annual risk review to assess principal and
emerging risks for the company. This review is supported by
extensive analysis of external trends and insights, senior level
interviews and recommendations from risk management and
compliance boards and risk owners. ROCC shares this annual
review with the ARC and Board for assessment and this forms
the basis for the following year’s risk management focus.
Putting risk management plans in place
We define enterprise risk plans that include a description of the
risk, its context, our assessment, risk appetite, how we will treat
the risk, and the actions businesses need to take in line with our
internal control framework to mitigate the risk. They also enable
our Board committees to assess the effectiveness of our risk
management strategies. This year, along with our annual business
risk reports, we continued quarterly reporting of risks to ROCC
and the Board committees, to drive more dynamic, data-driven
discussions, agile risk management strategies and oversight. We
report on existing control measures, implementation, emerging
risks, external insights and out-of-tolerance key risk indicators,
where tolerance aligns to risk appetite. We include risks and
mitigations associated with COVID-19.
Our risk management framework complements our culture and
Speak Up processes in ensuring that risks are actively and
effectively identified and mitigated. It also provides reasonable
assurance against material misstatement and mitigates potential
losses that could arise in the ordinary course. Each business
monitors its most important risks and takes action to address
issues. Our annual confirmation exercise checks that key risks
are well managed, or actions are in place to address gaps, at
each business.
Business continuity planning is embedded in our framework.
Our principal risks include controls for responding to problems
within their risk plans. We also have business continuity planning
for our critical processes, so we can continue business
operations in the event of a crisis.
Changes to our risks for 2022
In our November 2021 annual risk review, the ROCC agreed
our principal risks for 2022 which remain largely unchanged,
with the evolution of Privacy to Data Ethics and Privacy, Non-
Promotional Engagement to Scientific and Patient Engagement,
and Transformation and Separation to Separation. Additionally,
we agreed that Environmental Sustainability will be managed
under our ESG areas of focus. Also we identified two new
emerging risks, Geopolitical Tensions and Healthcare Reform,
which will be evaluated during 2022 before being classified as
principal risks.
The table on the following pages shows our current principal
risks and respective trends, assessments and mitigation
activities for the year. These are not in order of significance.
For full risk definitions, potential impact, context and mitigating
activities please see Principal risks and uncertainties on
pages 275 to 287.
Viability statement, see page 53. Risks associated with
COVID-19, see page 54. ARC report, see page 111.
Internal control framework, see page 112.
GSK Annual Report 2021
47
Strategic report
Governance and remuneration Financial statements Investor information
Risk
Trend
Assessment and mitigation activities
Patient safety
The macro risk level is stable but remains challenging. Public awareness of drug safety has increased
following media coverage of the safety and efficacy of COVID-19 vaccines and therapies in 2021.
Misinformation and negative characterisations of the industry have fuelled vaccine hesitancy. Highly
publicised information security threats and data breaches require us to consider how we securely
collect safety information from external sources.
GSK’s risk exposure is stable. Our portfolio is evolving, with a greater focus on advanced therapy
medicinal products that may require specialised pharmacovigilance. We need to carefully balance
resources to execute routine pharmacovigilance while we manage change initiatives including the
separation of the Consumer Healthcare business, the accelerated pace of drug development and the
simplification of our safety processes.
Product quality
The macro risk has increased following COVID-19, with regulators resuming multiple on-site inspections
to check that product quality expectations are met. There continues to be a focus on data governance
and data integrity requirements, and on evaluation of products for the presence of nitrosamines.
GSK's risk exposure has increased, as we need to respond to the heightened inspectorate presence.
We have launched inspection readiness programmes to ensure full preparedness. We have continued to
invest in technology and digital platforms to further strengthen our controls around good data management
practices. Governance and control strategies have been deployed for timely nitrosamine evaluations. All
these mitigations will require focus and diligence as GSK undergoes significant organisational change.
Financial
controls
and reporting
The external environment remains challenging due to political uncertainty, proposed increases in the
obligations of directors and auditors, increasing threats of cyber attacks (information security) and fraud,
and increasing environmental disclosure requirements.
GSK’s risk exposure has remained stable due to our ongoing focus on the resilience of personnel and
the testing of our internal control framework. We implement optimal risk mitigation through
transformational programmes, technology, centralised processes, and risk and control assessments,
and maintain effective tax and treasury strategies. We continually strengthen our control frameworks
and collaborate with external bodies on standard setting.
Anti-bribery
and corruption
(ABAC)
The macro risk level for bribery and corruption remained unchanged in 2021. We continued to see the
ongoing impact of the pandemic on governments, people and businesses; rigorous anti-bribery and
corruption standards aided by improved technology; and continued enforcement with focus on third-
party intermediaries.
GSK’s risk exposure is unchanged as we continuously improve our Anti Bribery and Corruption
programme to ensure appropriate controls, training, capability building, awareness raising, strong
monitoring and use of data analytics.
Commercial
practices
COVID-19 consequences continue to impact the macro level. Competitive pressure has increased in
many therapy areas and market segments. Future innovation requires successful launches of key
medicines and products. Vaccination rates have been impacted by accessibility and political issues.
Governments remain focused on initiatives to drive medicine and vaccine costs down for consumers.
GSK’s risk exposure level remains stable due to our mature and robust control environment. We continue
to evolve our commercial practices competitively. We have invested in new technologies that support
virtual customer engagement. We maintain proportionate controls, training and monitoring for employees
that engage with healthcare organisations and professionals. We train senior business leaders on
delivering performance and managing risk.
Non-
promotional
engagement
The macro environment for non-promotional activities and scientific engagement with HCPs and
patients is stable. It continues to be characterised by complex, dynamic disease areas and treatments
with increased patient-centric focus, increasing diversity of engagement platforms, and the continued
increase in virtual engagements since the pandemic.
GSK’s risk exposure has remained stable. Our digital practices continued to develop and modernise, and
we have applied our internal principles and policies, designed to mitigate risk, to this rapidly evolving
environment. We have internal networks to foster collaboration and best practice sharing, as well as the
identification of emerging risks associated with non-promotional activities, so we can conduct them in
compliance with GSK’s values and policies, local laws and regulations.
Risk management
continued
2021 Principal risks summary
48
GSK Annual Report 2021
Risk
Trend
Assessment and mitigation activities
Privacy
The macro risk continues to increase, with priority GSK markets such as the UK, EU, US, China and
India instituting new privacy laws, and court rulings invalidating established international data transfer
mechanisms that international companies had relied on. The increasing trend for data sovereignty
initially targeting tech companies could affect healthcare companies in their ability to drive medical
innovation and to effectively operate internationally.
GSK’s risk exposure is increasing due to the impact of the unstable privacy regulatory environment
preventing us from further standardising our privacy framework globally and due to the scale of the
changes necessary to prepare for the creation of two new data-driven companies.
Research
practices
The macro risk level is unchanged. We always need to continually assess how we do R&D in the context
of our future ambition, our benchmarks, and the evolving global regulations and quality standards. This is
particularly vital when expectations change or there are country-specific requirements (Human Genetic
Resources Administration of China, Schrems II).
GSK’s risk exposure is unchanged, as laws and regulations are continually evolving. When regulations
change, the accountable R&D function develops an action plan which can include risk and impact
assessments to determine how the internal control framework needs to change to meet the new
requirements. R&D regularly scans the external environment through membership of professional
organisations and consortiums, attendance at industry or agency-sponsored meetings and review of
publicly posted regulatory/legal reports.
Environment,
health and
safety
(EHS)
The macro risk level is unchanged as COVID-19 protocols have been embedded in our ways of
working. Site staffing has moved from essential workers only to mostly full staffing. This has meant we
have been able to resume more consistent management oversight and on-site global support through
senior leaders, subject matter experts and audit teams.
GSK’s risk exposure has levelled out due to consistent work practices related to COVID-19 control
measures. However, organisational change continues to be a factor. We have placed continued focus
on safety leadership training, embedding our Life Saving Rules, and adhering to our EHS standards.
Environmental
sustainability
The macro risk level continues to increase. Investors, regulators and other stakeholders expect
companies to understand and actively reduce the environmental footprint of their operations across their
value chain, and to mitigate the impacts climate change could have on their operations and supply chains.
GSK’s risk exposure is unchanged. We set ambitious new environmental sustainability goals at the end
of 2020 and have established an enterprise transformation programme addressing climate, water, waste
and biodiversity across our operations. We also increased the scope and depth of our Task Force on
Climate-related Financial Disclosures (TCFD) analysis, and continued to monitor trends in physical,
reputational and regulatory risks from climate change impacts.
Information
security
The macro risk level continues to rise, as large multinationals increase their digital footprints and threats
from hackers become more sophisticated. Risks identified as increasing during the pandemic have
levelled off but continue to be an ongoing threat. At the same time, governments are tightening the
regulatory frameworks, and we can expect enforcement to increase.
GSK’s risk exposure has increased. The targeting of pharmaceutical and vaccine intellectual property,
and of third-party service availability, has intensified. In response, our cyber security programme
continues to improve our controls to increase our cyber threat intelligence capabilities and protect
critical information and systems, including operational technology and networks.
Supply
continuity
The macro risk level remains high due to the ongoing impact of the pandemic on product supply. There
is also continuing potential for increasing protectionism, and Brexit uncertainty. Our COVID Issues
Management Team is actively managing supply risk and mitigation on an ongoing basis.
GSK’s risk exposure has stabilised. Our Procurement Task Force, a cross-functional group from
Procurement and Supply Chain, is accountable for the identification and management of potential
bottlenecks in the supply of components.
Transformation
and separation
The macro risk level is unchanged and remains challenging as we set up two new companies in a highly
competitive external labour market.
GSK’s risk exposure level remains unchanged. Our transformation and separation projects have
progressed as planned throughout 2021, with employee engagement remaining a priority.
Risk management
continued
2021 Principal risks summary
continued
GSK Annual Report 2021
49
Strategic report
Governance and remuneration Financial statements Investor information
Risk management
continued
Climate-related financial disclosure
GSK climate-related disclosures are consistent with the
recommendations and recommended disclosures of the Task
Force on Climate-related Financial Disclosures (TCFD), and in
compliance with the requirements of LR 9.8.6R (UK listing rules).
GSK has been reporting on climate-related financial disclosures
in accordance with the TCFD recommendations since 2019,
with the purpose of building trust and connecting both our
strategic and financial disclosures to climate change. In 2021,
we have expanded disclosure by undertaking a more detailed
review of GSK’s manufacturing operations and our inhaler
portfolio, which is the largest contributor to GSK’s current
carbon footprint within our portfolio of medicines, vaccines
and consumer products. GSK’s carbon reduction pathway to
become net zero by 2030 can be found
here
1
on gsk.com
.
We will continue to evolve our future climate-related disclosures
by building further climate risk assessments into our external
supply chain.
Governance
Environmental sustainability, which includes climate change,
was assessed as a principal risk at GSK in 2021. The Board
has overall accountability for the management of GSK’s
principal risks, with support from the GLT.
The Board-level Corporate Responsibility Committee (CRC)
oversees the environmental sustainability principal risk and
progress against environmental targets with Non-Executive
Director, Lynn Elsenhans as chair. See the CRC report on page
104. Our Risk Oversight and Compliance Council (ROCC)
helps the CRC to oversee the risks, and the strategies used to
address them through quarterly reporting. Refer to page 94 for
further details of the Board and Board committee’s architecture.
Regis Simard, President, Pharmaceuticals Supply Chain and
GLT member has management responsibility for environmental
sustainability, which includes climate change. He is responsible
for governance and oversight of risks and opportunities and
ensures there is an effective framework in place to identify and
manage the risks and opportunities across each of our business
units along with delivering on the commitments made to have a
net zero impact on climate and a net positive impact on nature by
2030. Refer to page 46 for the detailed risk management plan.
Established, specialised teams across GSK are working
together to deliver our environmental strategies and embed
them as business as usual including:
–
The GSK Sustainability Council chaired by Regis Simard
which includes leaders from business units and global
functions, including manufacturing, R&D, procurement and
facilities management, ethics and compliance and finance,
who all play a key role in delivering our environmental strategy.
The Council is supported by a dedicated Programme Steering
Team, which is run by the Global Sustainability Team who also
provide specialist expertise and advice to the business.
–
The Programme Steering Team who co-ordinate the
sustainability programme and associated workstreams and
have oversight for monitoring performance and progress of
the enablers to deliver the sustainability programme.
–
The Capital Allocations Board (CAB) which includes the
CFO and Group Financial Controller who review climate-
related capital expenditure as part of their annual planning
and capital allocation process.
–
The Finance Sustainability Network includes leaders from
across Finance, Sustainability and Procurement and focuses
on key financial enablers to deliver the sustainability
programme.
Strategy and Risk Management
Methodology and Assumptions
Since 2019 we have disclosed long-term risks from climate
change across the value chains of key products that account
for approximately 40% of revenue. In 2021, we expanded our
assessments with a focus on risks to our own manufacturing
operations and we have developed a three-year plan to further
embed climate-related analysis across significant areas of our
business.
We used two climate scenarios based on internationally
recognised data sets
2
:
–
business-as-usual (BAU): assuming little to no mitigation
leading to 3-5°C of warming by 2100.
–
low-carbon future: assumes that the global temperature
increase by 2100 is limited to well below 2°C by rapid
changes in legislation and technology.
During 2021, using the enterprise risk plan we carried out
scenario analyses on the risks and opportunities, prioritising
physical and transitional risks and opportunities according to
the likelihood and the magnitude of the potential impact to
GSK’s manufacturing operations and staff.
Each risk and opportunity was analysed and the potential
impact on our profit was classified as either low (<£100 million),
medium (£100 million-£300 million) or high (>£300 million).
We consider climate-related issues within the time horizons
used in our strategic and capital planning processes: short-term
(less than 12 months); medium-term (1-3 years); and long-term
(3-10 years). We have focused on climate risks out to 2030,
with no material risks identified as falling into short or medium
term.
We have tested the resilience of GSK’s climate-related strategy
taking into consideration different scenarios and the risks and
opportunities identified. As a result, we are continuing to
improve our management of climate-related risks and
opportunities.
1
https://www.gsk.com/media/7180/gsk-carbon-glidepath-010921.pdf
2
Scenarios are based on IPPC Representative Concentration Pathways 2.6,
4.5 and 8.5, the IEA World Energy Outlook 2018 New Policy Scenario,
Current Policy Scenario and Sustainable Development Scenario; and data
sets from WWF and WRI for water stress and flood risk modelling
50
GSK Annual Report 2021
Summary of GSK’s risks and opportunities
Risk management
continued
Physical risk/
description
Scenario
Risk management
Potential
profit impact/
timeframe
Metrics
Targets
Increasing levels
of water stress
which reduces the
availability of water
for our operations.
GSK uses freshwater
as the main source of
water to manufacture
medicines, vaccines,
and consumer health
products.
If water availability was
restricted at a factory
then production
operations would be
interrupted.
BAU
and low
carbon
We have performed water stewardship risk
assessments for all our manufacturing sites
and we have identified ten sites in our current
network that are currently in areas of high-water
risk.
We are developing plans for these sites to
become water neutral by 2030 and will partner
with other organisations to address shared
water challenges. We are currently piloting this
approach in our Cape Town site working with
partners including WWF and the Water
Resilience Coalition.
The TCFD process has helped us develop a
watch list of additional sites potentially under
long-term threat and we will monitor changes to
the risk levels and update our site water risk
assessments appropriately.
Low:
<£100m/
Long:
3-10 years
Sites that have
achieved water
stewardship*
Water use in
our operations
Sites and
supplier sites
that have
achieved water
neutrality
Achieve good
water stewardship
at 100% of our
sites by 2025
Reduce overall
water use in our
operations by
20% by 2030
Be water neutral in
our own
operations and at
key suppliers in
water stressed
regions by 2030
Increasing frequency
of extreme weather
events causing
disruption.
Extreme weather
events such as
flooding, storms etc
can result in short-term
interruptions to
manufacturing and
other operations.
BAU
and low
carbon
We have performed risk assessments for our
manufacturing and other operations and have
business continuity plans in place which are
reviewed annually to respond to the impact of
extreme weather events including adopting
appropriate mitigation plans.
The TCFD process has helped us identify a
watch list of sites that are in places where the
flood risk is expected to increase over time.
However, the risk from flooding remains very
low. GSK has a well-established loss
prevention and risk engineering programme to
identify a range of risks that could impact our
sites and where flood risks exist, we have taken
action to mitigate the risk.
Low:
<£100m/
Long:
3-10 years
Sites that
have business
continuity
plans
100% of sites
have a response
to extreme
weather events
in their business
continuity plans
An increased number
of very hot days
(>35°C) resulting in
reduced productivity.
Extreme heat could
result in heat stress
affecting our staff.
BAU
GSK has operations in countries that already
experience very hot temperatures periodically.
We already control the temperature and
humidity inside our buildings. As part of our
EHS control framework, sites conduct risk
assessments on very hot days including
adaptations for outside work.
Low:
<£100m/
Long:
3-10 years
Scope 1, 2
and 3 carbon
emissions
Net zero
emissions across
all operations by
2030
Net zero
emissions across
our full value chain
by 2030)
Risk Management
A specific and dedicated environmental sustainability enterprise
risk management plan has been put in place (for more details
see Risk management on page 46). The risk management plan
covers expectations that GSK is addressing its impact on the
environment, and that the environment has increasing impacts
on operational resilience such as access to energy, water
and the natural resources used in products, along with any
anticipated cost increases from regulatory changes or
environmental taxes.
An internal control framework has been established for
environmental sustainability, including the appointment of
dedicated senior leaders for environmental sustainability to
ensure that governance processes are in place and effective.
Our performance in reducing carbon emissions, energy and
water utilisation, and waste will continue to be delivered and
managed by our mature programmes and will be enhanced by
including further eco-design considerations into products and
packaging.
*
As defined by the Alliance for Water Stewardship
GSK Annual Report 2021
51
Strategic report
Governance and remuneration Financial statements Investor information
Transitional risk/
description
Scenario
How the risk is managed
Potential
profit impact/
timeframe
Metrics
Targets
Regulations
governing the use of
high global warming
potential (GWP)
substances are being
updated in the UK,
EU and US.
This could lead to
increasing cost and
restrictions on the use
of the high GWP
propellant (HFA134a)
in our Metered Dose
Inhaler (MDI) products.
BAU
and low
carbon
We have started an R&D programme to find a
lower-impact propellant that could reduce
emissions from our metered dose inhalers by
about 90%.
We already have a portfolio of Dry Powder
Inhaler products that do not use propellants
that are not impacted by this risk.
We are monitoring the evolving regulations
governing the use of fluorinated gases and will
review our assessments in future declarations.
Medium:
£100m to
£300m/
Long:
3-10 years
Scope 3
carbon
emissions
Net zero
emissions across
all operations by
2030
Net zero
emissions across
our full value chain
by 2030)
There is uncertainty
over future regulatory
policy responses to
address climate
change that countries
around the world will
develop including
carbon pricing.
We anticipate that
carbon pricing on
operational carbon
emissions will come
into force in some
regions in the medium
to long term which
could increase our
operating costs.
Low carbon
We are transitioning to 100% renewable
electricity by 2025 and are starting to
investigate options for renewable heat
technology to reduce our carbon emissions
from energy.
Our sales fleet aim to transition to electric
vehicles by 2030, further reducing our scope 1
carbon emissions.
Shadow carbon pricing has been embedded in
the capital investment process at $100 per
tonne and is driving conversations and
decisions around carbon emissions at all levels
of the organisation.
Low:
<£100m/
Long:
3-10 years
Scope 1&2
carbon
emissions
Net zero
emissions across
all operations by
2030
Opportunities
Scenario
How the opportunity is managed
Potential
profit impact/
timeframe
Metrics
Targets
At COP26 in
November 2021,
more than 50
countries around
the world committed
to provide low carbon
healthcare systems.
This could lead to
increasing demand for
low carbon vaccines
and medicines.
BAU and
low carbon
We are reducing our own scope 1 & 2 carbon
emissions which in turn reduces the scope 3
footprint of our customers and suppliers.
We have started a new Eco-design programme
to reduce the impacts of all our products and
packaging.
GSK have certified and published the carbon
footprints of our portfolio of respiratory inhalers
and have launched our first carbon neutral
inhaler in the UK. This enables healthcare
providers and patients make informed choices.
We have started an R&D programme to find a
lower-impact propellant that could reduce
emissions from our metered dose inhalers by
about 90%.
Low:
<£100m/
Long:
3-10 years
Scope 1, 2
and 3 carbon
emissions
Total waste
and non-
circular waste
Net zero
emissions across
our full value chain
by 2030
Zero operational
waste, including
eliminating
single-use plastics
by 2030
25%
environmental
impact reduction
for our products
and packaging by
2030
10% waste
reduction from
supply chain by
2030
Risk management
continued
52
GSK Annual Report 2021
Risk management
continued
Energy and carbon emissions
Carbon emissions
1,2
Carbon emissions ‘000 tonnes CO
2
e
2021
2020 2019
Scope 1 emissions (from energy)
393
415 416
Scope 1 emissions (other
3
)
288
349
382
Scope 2 emissions (market-based)
159
227
518
Scope 3 emissions
4
Available in 2022 report
13,427 14,260
UK Scope 1 & 2 emissions
130
141 195
Energy 2021
2020 2019
Scope 1 and 2 emissions from energy/sales revenue (tonnes CO
2
e/£m)
15.1
18.8
27.7
Scope 1 and 2 emissions from energy/FTE (tonnes CO
2
e/FTE)
6.1
6.8 9.4
Total energy used (GWh)
3,596
3,858
4,079
UK energy used (GWh)
850
945
975
1
Carbon emissions are calculated according to the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (revised edition). GSK uses
market-based Scope 2 emissions for reporting purposes and reports Scope 3 emissions across all 15 categories in our ESG Performance Report. We ask
external assurance providers, DNV, to provide limited assurance to ISAE 3000 for energy, Scope 1, 2 and selected Scope 3 carbon emission data.
Methodologies for reporting and measurements are provided in our ESG Performance Report, on the KPI definitions page
2
GSK asks DNV to provide limited assurance to ISAE 3000 for energy, Scope 1, 2 and selected Scope 3 carbon emissions, water, waste and wastewater data.
Methodologies for reporting and measurements are provided in our ESG Performance Report, on the KPI definitions pages
3
"Other" refers to emissions from sales force vehicles, propellant emissions released during manufacture of inhalers, on-site waste, or wastewater treatment
and refrigerant gas losses
4
We collect and publish scope 3 data across 15 categories. The most recent scope 3 data available is for 2020 as the process of compiling the 2021 data is
not yet complete. We will publish this data once it becomes available and it will be included in the 2022 ESG Performance Report
Metrics and targets
Our commitment is to have a net zero impact on climate and a
net positive impact on nature by 2030, across our value chain.
Additional details on the targets and carbon reduction glidepath
that contribute to these goals are available on
gsk.com
. The Science Based Targets Initiative has validated that our near-
term carbon targets align to a 1.5°C pathway. We are delivering
these goals by acting on priority impact areas and working with
stakeholders across our value chain including our suppliers and
customers. We are also working with external partners such as
the World Business Council for Sustainable Development and
the UN Water Resilience Coalition.
Details on the progress we are making towards achieving
our climate targets can be found on page 39. Additional
background on our climate and also our nature targets, the
progress we are making and the approaches we are adopting
to meet these targets can be found in the ESG performance
report, and in our public responses to the CDP Climate,
Water and Forest questionnaires.
From 2022, in order to align our approach to climate and nature
targets with the remuneration of our Executive Directors and
senior executives, we are introducing a 10% ESG target
measure initially into both our short- and long-term remuneration
incentive plans. This will include setting and measuring short-
and long-term performance of these participants against our
Nature Net Positive and Climate Net Zero ambitions. For further
details please see our Remuneration report on pages 119 to 152.
GSK Annual Report 2021
53
Strategic report
Governance and remuneration Financial statements Investor information
Risk management
continued
Viability statement
In accordance with provision 31 of the 2018 revision of the
Code, GSK has assessed the prospects of the Group over a
longer period than the 12 months required by the ‘Going
Concern’ provision. The Directors confirm that they have a
reasonable expectation that GSK will continue to operate and
meet its liabilities, as they fall due, over the next three years. The
Directors’ assessment has been made with reference to GSK’s
current position and prospects, our strategy, the Board’s risk
appetite and GSK’s principal risks and how these are managed,
as detailed on pages 46 to 48 in the strategic report.
The Board reviews our internal controls and risk management
policies and approves our governance structure and code of
conduct. It also appraises and approves major financing,
investment and licensing decisions, and evaluates and monitors
the performance and prospects of GSK as a whole. The focus
is largely on improving our long-term financial performance
through delivery of our company and three business strategies
and aligned Innovation, Performance and Trust priorities.
The Board reviews GSK’s strategy and makes significant capital
investment decisions over a long-term time horizon, based on a
multi-year assessment of return on capital, the performance of
the company and three business units, and the market
opportunity in the pharmaceutical, vaccines and consumer
sectors. This approach is aligned to GSK’s model of achieving
balanced growth by investing in high-quality, innovative
products for patients, consumers and healthcare providers.
However, since many internal and external parameters become
increasingly unpredictable over longer time horizons, GSK
focuses its detailed, bottom-up Plan on a three-year cycle. The
Plan is reviewed at least annually by the Directors, who approve
business forecasts showing expected financial impact. The
Directors believe that a three-year assessment period for the
Viability statement is most appropriate as it aligns with the
Group’s well established business planning processes that
balance the long-term nature of investments in the
pharmaceutical, vaccines and consumer sectors with an
assessment of the period over which analysis of near-term
business performance is realistically visible.
The Plan has been stress tested in a series of robust operational
and principal risk downside scenarios as part of the Board’s
review on risk. These include potential risks associated with the
ongoing COVID-19 pandemic, which have been considered
within both the Plan and stress test downside scenarios. The
Plan assumes the next several years to be challenging for the
healthcare industry with continued uncertainty related to the
impact of the COVID-19 pandemic on adult vaccinations and
continued pressure on pricing of pharmaceuticals. GSK
assumes no premature loss of exclusivity for key products over
the period. GSK also expects volume demand for its products
to increase, particularly for
Shingrix
, as healthcare systems are
expected to return to normal following disruption from
governments’ prioritisation of COVID-19 vaccination
programmes and ongoing measures to contain the pandemic.
The downside scenarios consider GSK’s cash flows,
sustainability of dividends, funding strategy, insurance provision
and recovery as well as other key financial ratios over the period.
These metrics have been subject to sensitivity analysis, which
involves flexing a number of the main assumptions underlying
the forecasts both individually and in combination, along with
mitigating actions that could realistically be taken to avoid or
reduce the impact or occurrence of the underlying risk.
The future separation of the Consumer Healthcare Joint Venture
with Pfizer, if approved by the Board and shareholders, is likely
to occur within the period covered by the viability assessment.
The Directors have therefore considered the ability of the Group
to continue in its current form (ie the scenario in which the
demerger does not proceed) for the three-year period ending
31 December 2024 as well as the viability of new GSK if the
demerger proceeds as planned.
The following hypothetical downside scenarios have been
evaluated:
Scenario 1:
Business performance risks. These include key
performance risks, including lower sales from new products;
greater adverse impact from generic competition and other
competitive launches to other GSK products; as well as
possible supply and manufacturing challenges.
Scenario 2:
External and macroeconomic risks. This scenario
reflects incremental risks to the business driven by outside
factors, such as more intense competition, increased pricing
pressure in both the US and Europe as well as the potential
impact of material negative changes in the macro-economic and
healthcare environment.
Scenario 3:
Principal risks. This scenario includes a severe
assessment of the potential loss impact from the principal risks
related to patient safety, product quality, supply chain continuity
and environmental sustainability as well as anti-bribery and
corruption and any consequent regulatory actions or fines, all of
which could fundamentally threaten our operations. These risks
are managed through mitigating activities described on pages
275 to 287.
Scenario 4:
Put option exercise. This scenario evaluates the
additional funding requirements assuming the earliest potential
exercise of the outstanding put option held by our partner in the
HIV business.
Scenario 5:
Demerger of the Consumer Healthcare Joint
Venture (CH). The final scenario focuses on the impact of the CH
demerger in early Q3 2022 as well as the downside assessment
of scenarios 1 to 4 applied to new GSK’s cash flows.
The three-year review also makes certain assumptions about
the normal level of capital recycling likely to occur and considers
whether additional financing facilities will be required and the
respective level of funding flexibility and headroom.
The results of this stress testing show that certain combinations
of these hypothetical scenarios could increase funding
demands on GSK and require mitigating changes to the
Group’s funding strategy. However, in light of the liquidity
available to the Group and based on this analysis, the Directors
have a reasonable expectation that, even under these most
severe stress tests, the Group with or without demerger will be
able to continue in operation and meet its liabilities as they fall
due over the three-year period of assessment.
54
GSK Annual Report 2021
Non-financial information statement
The following aligns to the non-financial reporting requirements contained in sections 414CA and 414CB
of the Companies Act 2006.
Description of the business model
The value we create 01
Social matters
Global health 35
Health security 35
Affordability and availability 36
Employees
Employee engagement 37
Diversity 37
Wellbeing and development 37
Gender pay gap 37
Ethics and values 38
Board diversity 83
Human rights
Ethics and values 38
Data and engagement 39
Third parties 38
Anti-corruption and bribery
Ethics and values 38
Reporting and investigating concerns 38
Anti-bribery and corruption 47
Environmental matters
Carbon, water and waste 39
Climate-related financial disclosure 49
Policy, due diligence and outcomes
Summary of our principal risks 47
Principal risks and uncertainties 275
Viability statement 53
Audit & Risk Committee report
111
Non-financial key performance
indicators
Key performance indicators 12
Our policies
All of our public policies, codes and
standards are available on
gsk.com
Risk management
continued
Employees by gender
Male Female
Total
Board
8 5
13
Management*
10,148 9,553
19,701
All employees
47,751 42,345
90,096
* Senior managers as defined in the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013
Risks associated with COVID-19
The potential impact of the COVID-19 pandemic on GSK’s
trading performance and all our principal risks has been
assessed with mitigation plans put in place. In 2021, as
anticipated, the pandemic impacted Group performance
primarily in demand for vaccines and reflected the prioritisation
of COVID-19 vaccination programmes by governments,
including social distancing rules resulting from COVID-19 that
affected customers’ ability and willingness to access vaccination
services across all regions.
We continue to remain confident in the underlying demand
for our vaccines and are encouraged by the rate at which
COVID-19 vaccinations and boosters are being administered in
many countries, which provides support for healthcare systems
and the eventual return to normal. This continues to be a dynamic
situation, with the future severity, duration and impact unknown
at this point including potential impacts on trading results, clinical
trials, supply continuity, and our employees. The situation could
change at any time and there can be no assurance that the
COVID-19 pandemic will not have a material adverse impact
on the future results of the Group.
In this section
Reporting framework 56
Our approach to tax 60
Financial performance 61
Adjusting items 70
Cash generation and conversion 73
Financial position and resources 74
Treasury policies 79
Critical accounting policies 80
Group
financial
review
GSK Annual Report 2021
55
Strategic report
Governance and remuneration Financial statements Investor information
56
GSK Annual Report 2021
Total and Adjusted results
The Group financial review discusses the operating and
financial performance of the Group, its cash flows and financial
position and our resources. The results for each year are
compared primarily with the results of the preceding year.
Total results
Total reported results represent the Group’s overall
performance.
GSK also uses a number of adjusted, non-IFRS, measures to
report the performance of its business. Adjusted results 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 are defined below
and other non-IFRS measures are defined on page 59.
GSK believes 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. 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 companies.
GSK encourages investors and analysts not to rely on any
single financial measure but to review GSK’s Annual Reports,
including the financial statements and notes, in their entirety.
Adjusted results
Adjusted results exclude the following items from Total results,
together with the tax effects of all of these items:
–
amortisation of intangible assets (excluding computer software
and capitalised development costs)
–
impairment of intangible assets (excluding computer
software) and goodwill
–
Major restructuring costs, which include impairments of
tangible assets and computer software, (under specific
Board approved programmes that are structural, of a
significant scale and where the costs of individual or related
projects exceed £25 million) including integration costs
following material acquisitions
–
transaction-related accounting or other adjustments related
to significant acquisitions
–
proceeds and costs of disposals of associates, products
and businesses; significant settlement income; significant
legal charges (net of insurance recoveries) and expenses on
the settlement of litigation and government investigations;
other operating income other than royalty income, and other
items including the impact of the revaluation of deferred tax
assets and liabilities following enactment of the increase in
the headline rate of UK corporation tax from 19% to 25%
(effective 2023)
–
separation costs include costs to establish Consumer
Healthcare as an independent business, as well as admission
listing and demerger costs
Costs for all other ordinary course smaller scale restructuring
and legal charges and expenses are retained within both Total
and Adjusted results.
As Adjusted results include the benefits of Major restructuring
programmes but exclude significant costs (such as amortisation
of intangible assets except for computer software and
capitalised development costs, significant legal, major
restructuring and transaction items), they should
not be regarded as a complete picture of the Group’s financial
performance, which is presented in its Total results. The
exclusion of other Adjusting items may result in Adjusted
earnings being materially higher or lower than Total earnings.
In particular, when significant impairments, restructuring
charges and legal costs are excluded, Adjusted earnings
will be higher than Total earnings.
GSK is undertaking a number of Major restructuring
programmes in response to significant changes in the Group’s
trading environment or overall strategy, or following material
acquisitions. Costs, both cash and non-cash, of these
programmes are provided for as individual elements
are approved and meet the accounting recognition criteria.
As a result, charges may be incurred over a number of years
following the initiation of a Major restructuring programme.
Significant legal charges and expenses are those arising from
the settlement of litigation or government investigations that
are not in the normal course and are materially larger than more
regularly occurring individual matters. They also include certain
major legacy matters.
Reconciliations between Total and Adjusted results, providing
further information on the key Adjusting items for 2020 and
2021 are set out on page 70 and for the five years to 2021 are
set out on pages 263 to 268.
GSK provides earnings guidance to the investor community on
the basis of Adjusted results. This is in line with peer companies
and expectations of the investor community, supporting easier
comparison of the Group’s performance with its peers. GSK is
not able to give guidance for Total results as it cannot reliably
forecast certain material elements of the Total results,
particularly the future fair value movements on contingent
consideration and put options that can and have given rise to
significant adjustments driven by external factors such as
currency and other movements in capital markets.
Reporting framework
Group financial review
GSK Annual Report 2021
57
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Historical record of Adjusting items
The reconciliations between Total and Adjusted operating profit over the last five years can be summarised as follows:
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Total operating profit
6,201
7,78 3
6,961 5,483 4,087
Intangible asset amortisation
802
775 777
580
591
Intangible asset impairment
322
263 83 116
688
Major restructuring
626
1,532 1,105
809
1,056Transaction-related items
1,159
1,308 345
1,977
1,599Divestments, significant legal and other items
(618)
(2,823) (299) (220) (119)
Separation costs
314
68
– – –
US tax reform
–
– – –
666
Adjusted operating profit
8,806
8,906
8,972
8,5688,745
The analysis of the impact of transaction-related items on operating profit for each of the last five years is as follows:
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Novartis Consumer Healthcare Joint Venture put option
–
– –
658
986
Contingent consideration on former Shionogi-ViiV Healthcare JV (including Shionogi preferential dividends)
1,026
1,114 31 1,188 556
ViiV Healthcare put options and Pfizer preferential dividends
48
(52) (234) (58) (126)
Contingent consideration on former Novartis Vaccines business
27
172 76
58
101
Release of fair value uplift on acquired Pfizer inventory
–
91
366
– –
Other adjustments
58
(17) 82
106
131Transaction-related items
1,159
1,308 345
1,977
1,599Full reconciliations between Total and Adjusted results for 2017–2021 are set out on pages 266 to 268. Further explanations on
the Adjusting items for 2021 are reported on page 70.
Reporting framework
continued
Non-controlling interests in ViiV Healthcare
Trading profit allocations
Because ViiV Healthcare is a subsidiary of the Group, 100%
of its operating results (turnover, operating profit, profit after tax)
are included within the Group income statement and then a
portion of the earnings is allocated to the non-controlling
interests owned by the other shareholders, in line with their
respective equity shareholdings (Pfizer 11.7% and Shionogi
10%). Each of the shareholders, including GSK, is also entitled
to preferential dividends determined by the performance of
certain products that each shareholder contributed. As the
relative performance of these products changes over time, the
proportion of the overall earnings allocated to each shareholder
also changes. In particular, the increasing proportion of sales of
dolutegravir and cabotegravir-containing products has a
favourable impact on the proportion of the preferential dividends
that is allocated to GSK. Adjusting items are allocated to
shareholders based on their equity interests. GSK was entitled
to approximately 86% of the Total earnings and 83% of the
Adjusted earnings of ViiV Healthcare for 2021.
Remeasurements of the liabilities for the preferential dividends
allocated to Pfizer and Shionogi are included within other
operating income/(expense).
Acquisition-related arrangements
As consideration for the acquisition of Shionogi’s interest in the
former Shionogi-ViiV Healthcare joint venture in 2012, Shionogi
received the 10% equity stake in ViiV Healthcare and ViiV
Healthcare also agreed to pay additional future cash
consideration to Shionogi, contingent on the future sales
performance of the products being developed by that joint
venture, dolutegravir and cabotegravir. Under IFRS 3 `Business
combinations’, GSK was required to provide for the estimated
fair value of this contingent consideration at the time of
acquisition and is required to update the liability to the latest
estimate of fair value at each subsequent period end. The
liability for the contingent consideration recognised in the
balance sheet at the date of acquisition was £659 million.
Subsequent re-measurements are reflected within other
operating income/(expense) and within Adjusting items in the
income statement in each period.
Cash payments to settle the contingent consideration are
made to Shionogi by ViiV Healthcare each quarter, based on
the actual sales performance and other income of the relevant
products in the previous quarter. These payments reduce the
balance sheet liability and hence are not recorded in the income
statement. The cash payments made to Shionogi by ViiV
Healthcare in 2021 were £826 million.
Because the liability is required to be recorded at the fair value
of estimated future payments, there is a significant timing
difference between the charges that are recorded in the Total
income statement to reflect movements in the fair value of the
liability and the actual cash payments made to settle the liability.
Group financial review
continued
58
GSK Annual Report 2021
The cash payments are reflected in the cash flow statement
partly in operating cash flows and partly within investing
activities. The tax relief on these payments is reflected in the
Group’s Adjusting items as part of the tax charge. The part
of each payment relating to the original estimate of the fair
value of the contingent consideration on the acquisition of the
Shionogi-ViiV Healthcare joint venture in 2012 of £659 million
is reported within investing activities in the cash flow statement
and the part of each payment relating to the increase in the
liability since the acquisition is reported within operating cash
flows.
Movements in contingent consideration payable to Shionogi
were as follows:
2021
£m
2020
£m
Contingent consideration at beginning of the year
5,359
5,103
Remeasurement through income statement
1,026
1,114
Cash payments: operating cash flows
(721)
(751)
Cash payments: investing activities
(105)
(107)
Contingent consideration at end of the year
5,559
5,359
Of the contingent consideration payable (on a post-tax basis)
to Shionogi at 31 December 2021, £937 million (31 December
2020 – £745 million) is expected to be paid within one year.
Exit rights
Pfizer may request an IPO of ViiV Healthcare at any time and if
either GSK does not consent to such IPO or an offering is not
completed within nine months, Pfizer could require GSK to
acquire its shareholding. Under the original agreements, GSK
had the unconditional right, so long as it made no subsequent
distribution to its shareholders, to withhold its consent to the
exercise of the Pfizer put option and, as a result, in accordance
with IFRS, GSK did not recognise a liability for the put option
on its balance sheet. However, during Q1 2016, GSK notified
Pfizer that it had irrevocably given up this right and accordingly
recognised the liability for the put option on the Group’s balance
sheet during Q1 2016 at an initial value of £1,070 million.
Consistent with this revised treatment, at the end of Q1 2016
GSK also recognised liabilities for the future preferential
dividends anticipated to become payable to Pfizer and Shionogi
on the Group’s balance sheet.
The closing balances of the liabilities related to Pfizer’s
shareholding are as follows:
2021
£m
2020
£m
Pfizer put option
1,008
960
Pfizer preferential dividend
–
1
Under the original agreements, Shionogi could also have
requested GSK to acquire its shareholding in ViiV Healthcare
in six-month windows commencing in 2017, 2020 and 2022.
GSK had the unconditional right, so long as it made no
subsequent distribution to its shareholders, to withhold its
consent to the exercise of the Shionogi put option and, as a
result, GSK did not recognise a liability for the put option on
its balance sheet.
However, during Q1 2016, GSK notified Shionogi that it had
irrevocably given up this right and accordingly recognised the
liability for the put option on the Group’s balance sheet during
Q1 2016 at an initial value of £926 million. In Q4 2016,
Shionogi irrevocably agreed to waive its put option and as a
result GSK de-recognised the liability for this put option on
the Group’s balance sheet directly to equity. The value of the
liability was £1,244 million when it was de-recognised.
GSK also has a call option over Shionogi’s shareholding in
ViiV Healthcare, which under the original agreements was
exercisable in six-month windows commencing in 2027, 2030
and 2032. GSK has now irrevocably agreed to waive the first
two exercise windows, but the last six-month window in 2032
remains. As this call option is at fair value, it has no value for
accounting purposes.
Settlement with Gilead Sciences Inc. (Gilead)
On 1 February 2022, ViiV Healthcare reached agreement with
Gilead to settle the global patent infringement litigation relating
to the commercialisation of Gilead’s Biktarvy. Under the terms
of the global settlement and licensing agreement, Gilead made
an upfront payment of $1.25 billion to ViiV Healthcare which
was received on 15 February 2022. In addition, Gilead will also
pay a 3% royalty on all future US sales of Biktarvy and in
respect of the bictegravir component of any other future
bictegravir-containing products sold in the US. These royalties
will be payable by Gilead to ViiV Healthcare from 1 February
2022 until the expiry of ViiV Healthcare’s US Patent No.
8,129,385 on 5 October 2027. Gilead’s obligation to pay
royalties does not extend into any period of regulatory paediatric
exclusivity, if awarded. The settlement resulted in a
re-measurement of the existing liabilities for contingent
consideration and the Pfizer put option at the 2021 year end.
The impact of the settlement with Gilead on the contingent
consideration liability (CCL) is to increase it by £288 million,
on a post-tax basis in Q4 2021 due to the obligation ViiV
Healthcare has to pay future cash consideration to Shionogi for
its share of the upfront and of the future US sales performance
of Biktarvy and products containing bictegravir. Including the
impact of the settlement at 31 December 2021, the liability
which is discounted at 8% stood at £5,559 million, on a
post-tax basis.
Pfizer has the right to require GSK to acquire its shareholding
in ViiV Healthcare in certain circumstances at any time. A put
option liability is therefore recorded on the Group’s balance
sheet as a current liability. It is measured on the gross
redemption basis derived from an internal valuation of the ViiV
Healthcare business.
The impact of the settlement on the Pfizer put option liability
is an increase of £114 million and is included in the
re-measurement at 31 December 2021.
See page 251 for an explanation of the post balance sheet
event impact.
Reporting framework
continued
GSK Annual Report 2021
59
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Free cash flow
Free cash flow is defined as the net cash inflow from operating
activities less capital expenditure on property, plant and
equipment and intangible assets, contingent consideration
payments, net finance costs, and dividends paid to non-
controlling interests plus proceeds from the sale of property,
plant and equipment and intangible assets, and dividends
received from joint ventures and associates. It is used by
management for planning and reporting purposes and in
discussions with and presentations to investment analysts
and rating agencies. Free cash flow growth is calculated
on a reported basis. A reconciliation of net cash inflow from
operations to free cash flow is set out on page 73.
CER and AER growth
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 comparative period. CER% represents growth
at constant exchange rates. £% or AER% represents growth
at actual exchange rates.
Return on capital employed
Return on capital employed is calculated as total profit before
taxation as a percentage of average net assets over the year.
Net debt
Please see Note 29 ‘Net Debt’ for the calculation of net debt.
2 year Compound Annual Growth Rate
CAGR is defined as the compound annual growth rate and
shows the annualised average rate of pro-forma revenue growth
between two given years, assuming growth takes place at an
exponentially compounded rate. For Consumer Healthcare,
the 2 year revenue CAGR has been presented showing the
annualised average rate of pro-forma revenue growth between
2019 and 2021.
COVID-19 solutions
COVID-19 solutions include the sales of pandemic adjuvant
and other COVID-19 solutions including vaccine manufacturing
and
Xevudy
and the associated costs but does not include
reinvestment in R&D. This categorisation is used by
management and we believe is helpful to investors through
providing clarity on the results of the Group by showing the
contribution to growth from COVID-19 solutions.
General Medicines
General medicines are usually prescribed in the primary
care or community settings by general healthcare practitioners.
For GSK, this includes medicines in inhaled respiratory,
dermatology, antibiotics and other diseases.
Specialty Medicines
Specialty medicines are typically prescription medicines used
to treat complex or rare chronic conditions. For GSK, this
comprises medicines in infectious diseases, HIV, oncology,
immunology and respiratory.
Reporting framework
continued
Group financial review
continued
60
GSK Annual Report 2021
Our approach to tax
Business makes a major contribution to the public purse
through its tax contribution. This includes direct taxes (such
as corporate income tax) and indirect taxes (such as VAT and
customs duties) as well as other taxes (such as employment
taxes and property taxes). It is therefore important that
companies explain their approach to tax. This helps inform
dialogue about tax and tax policy.
We are supportive of efforts to ensure companies are
appropriately transparent about how their tax affairs are
managed. As part of that, our Tax Strategy is set out in
detail within the Public policies section of our website.
We support the exchange of country-by-country reporting
(CBCR) data between tax authorities as, validated against
existing information held on taxpayers, it will support their ability
to ensure multinational groups pay the right amount of tax in the
right places.
As a global healthcare company, we have a substantial business
and employment presence in many countries around the world
and pay a significant amount of tax. This includes corporate
income tax and other business taxes, and tax associated with
our employees. We also collect a significant amount of tax on
behalf of governments along our supply chain, including from
our employees.
We are subject to taxation throughout our supply chain. The
worldwide nature of our operations means that our cross-border
supply routes, necessary to ensure supplies of medicines into
numerous countries, can result in conflicting claims from tax
authorities as to the profits to be taxed in individual countries.
This can lead to double taxation (with profits taxed in more than
one country).
Profits are recognised in territories by reference to the activities
performed there and the value they generate. To ensure the
profits recognised in jurisdictions are aligned to the activity
undertaken there, and in line with current OECD guidelines, we
base our transfer pricing policy on the arm’s length principle and
support our transfer prices with economic analysis and reports.
We do not engage in artificial tax arrangements – those without
business or commercial substance. We do not seek to avoid tax
by the use of ‘tax havens’ or transactions we would not fully
disclose to a tax authority. We have a zero-tolerance approach
to tax evasion and the facilitation of tax evasion.
Tax risk in all countries in which we operate is managed through
robust internal policies, processes, training and compliance
programmes. Our Board of Directors and the Audit & Risk
Committee are responsible for approving our tax policies and
risk management arrangements as part of our wider internal
control framework.
We seek to maintain open and constructive relationships with
tax authorities worldwide, meeting regularly to discuss our tax
affairs and real time business updates wherever possible.
We also monitor government debate on tax policy in our key
jurisdictions so that we can understand and share an informed
point of view regarding any potential future changes in tax law.
Where relevant, we provide pragmatic and constructive
business input to tax policy makers either directly or through
industry trade bodies, advocating reform to support economic
growth and job creation as well as the needs of our patients
and other key stakeholders.
In 2021, the Group corporate tax charge was £346 million
(2020 – £580 million) on profits before tax of £5,442 million
(2020 – £6,968 million) representing an effective tax rate of
6.4% (2020 – 8.3%). We made cash tax payments of £1,291
million in the year (2020 – £1,655 million). In addition to the
taxes we pay on our profits, we pay duties, levies, transactional
and employment taxes.
Our Adjusted tax rate for 2021 was 17.5% (2020 – 16.0%).
The rate has benefited from the closure of open issues with tax
authorities in various jurisdictions. Following separation of the
Consumer business and subject to any material changes in our
product mix, or other material changes in tax regulations or laws
in the countries in which we operate, the Group’s average
effective Adjusted tax rate in the medium term is expected to be
around 16%.
The Group’s Total tax rate for 2021 of 6.4% (2020 – 8.3%) was
lower than the Adjusted tax rate mainly due to enactment of an
increase in the UK corporate income tax rate from 19% to 25%
resulting in an increase in the value of balance sheet tax assets.
Due to the magnitude, GSK has reported this credit as an
Adjusting item in 2021 so that it does not obscure the key
trends in the Group’s performance for the period.
The OECD and the EU continue to develop new policies which
will not only lead to a substantially increased tax compliance
burden but may, in the case of the OECD’s project to ‘Address
the Tax Challenges of Digitalisation’, fundamentally change the
international corporate tax landscape and therefore the tax
profiles of multinational companies, including GSK, by: (i)
reallocating countries’ taxing rights for the largest and most
profitable multinationals; and (ii) set a new minimum global
corporate tax rate of 15%. This project achieved political
consensus during 2021, with a plan for effective implementation
in 2023. However, the detailed rules are still under discussion
and it is not therefore possible to accurately forecast the impact
for GSK at this stage.
Further details about our corporate tax charges for the year are
set out in Note 14.
GSK Annual Report 2021
61
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Adjusted operating profit (£bn)
£8.8bn
Total operating profit (£bn)
£6.2bn
£34.1bn
Financial performance
AER growth
(1)%
CER growth
9%
0
2
4 6 8 10
2021
2020
2019
8.8
8.9
9.0
AER growth
(20)%
CER growth
(9)%
0
2
4 6 8 10
2021
2020
2019
6.2
7.8
7.0
The Total results of the Group are set out below.
2021
2020 Growth
% of
% of
£m turnover
£m turnover £% CER%
Turnover
34,114
100
34,099
10 0
– 5
Cost of sales
(11,603) (34.0)
(11,704) (34.3) (1)
2
Selling, general and
administration
(10,975) (32.1)
(11,456) (33.6) (4)
–
Research and
development
(5,278) (15.5)
(5,098) (15.0)
4 7
Royalty income
419
1.2
318 0.9 32 32
Other operating
(expenses)/income
(476) (1.4)
1,624 4.8
Operating profit
6,201 18.2
7,78 3
22.8 (20) (9)
Net finance costs
(756)
(848)
Share of after-tax
profits of associates
and joint ventures
33
33
Loss on disposal
of interest in
associates
(36)
–
Profit before taxation
5,442
6,968 (22) (10)
Taxation (346) (580)
Profit after taxation
for the year
5,096
6,388 (20) (9)
Profit attributable to
shareholders
4,385
5,749
Earnings per share (p)
87.6p
115.5 (24) (13)
Earnings per ADS
(US$)
2.42
2.98
The Adjusted results for the Group are set out below.
Reconciliations between Total results and Adjusted results for
2021 and 2020 are set out on page 70.
2021
2020 Growth
£m
% of
turnover
£m
% of
turnover £% CER%
Turnover
34,114
100
34,099
10 0
– 5
Cost of sales
(10,726) (31.4)
(10,191) (29.9)
5 8
Selling,
general and
administration
(10,225) (30.0)
(10,717) (31.4) (5) (1)
Research and
development
(4,776) (14.0)
(4,603) (13.5)
4 8
Royalty
income
419
1.2
318 0.9 32 32
Adjusted
operating
profit
8,806 25.8
8,906 26.1 (1)
9
Adjusted
profit
attributable
to shareholders
5,665
5,769
(2)
9
Adjusted
earnings
per share (p)
113.2p
115.9 (2)
9
Group turnover
(£bn)
AER growth
0%
CER growth
5%
0 5 10 15 20 25 30
2021
2020
2019
35
34.1
34.1
33.8
GSK uses a number of adjusted, non-IFRS, measures to report
the performance of its business. Adjusted results 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 56 and 59.
Group financial review
continued
62
GSK Annual Report 2021
Pharmaceuticals
Pharmaceuticals turnover in the year was £17,729 million, up
4% AER, 10% CER. Sales of
Xevudy
, the monoclonal antibody
treatment for COVID-19 of £958 million contributed
approximately 6 percentage points to Pharmaceuticals growth.
HIV sales were down 2% AER but up 3% CER, to £4,777
million, with growth in
Dovato
and Juluca
partly offset by Tivicay
and
Triumeq
. Respiratory sales were up 21% AER, 28% CER,
to £2,863 million, on growth of
Trelegy
and Nucala
. Oncology
and Immuno-inflammation therapy areas each continued to
show strong double-digit sales growth. Sales of Established
Pharmaceuticals decreased 11% AER, 6% CER to £7,757
million.
In the US, sales grew 13% AER, 21% CER including sales of
Xevudy
, which contributed approximately 9 percentage points to
total growth. Continued strong performance of
Trelegy
,
Nucala
,
Benlysta
and
Dovato
also drove growth of New and Specialty
products in the Region. Established Products were stable at
AER but grew 6% CER, reflecting strong demand for
Established Respiratory products in the COVID-19 environment
and certain supply challenges faced by generic competitor
products, plus the benefit of favourable prior period RAR
adjustments.
In Europe, sales decreased 4% AER, 2% CER, with decreases
in the Established Pharmaceuticals portfolio, impacted by
generic competition including
Seretide
,
Duodart
and
Volibris
,
lower antibiotic demand, and the divestment of cephalosporin
products at the start of the fourth quarter. The decrease was
partly offset by strong growth of
Trelegy
,
Benlysta
and
Oncology products, and of
Dovato
which more than doubled in
the year. Sales of
Xevudy
totalling £69 million also contributed
approximately 2 percentage points to total growth.
International sales decreased 3% AER but grew 4% CER.
Decreases in Established Pharmaceuticals reflected the impact
of COVID-19 suppressed antibiotics markets and increased
generic competition in the first half of the year. This was offset
by strong growth in Respiratory,
Dovato
,
Tivicay
tenders, and
sales of
Xevudy
, which added approximately 6 percentage
points to International total growth.
Pharmaceuticals
Financial performance
continued
Group turnover by business
2021
£m
2020
£m
Growth
£%
Growth
CER%
Pharmaceuticals
17,7 2 9
17,0564
10
Vaccines (3)
6,778
6,9822
Consumer Healthcare
9,607
10,033 (4)
–
34,114
34,071
– 5
Corporate and other
unallocated turnover
–
28
34,114
34,099
– 5
Group turnover by geographic region
2021
£m
2020
£m
Growth
£%
Growth
CER%
US
15,093
14,556
4
10
Europe
7,838
8,164 (4) (2)
International
11,183
11,379 (2)
4
34,114
34,099
– 5
Group turnover was £34,114 million in the year, stable at AER
but up 5% CER. Sales of COVID-19 solutions contributed
approximately 4 percentage points to growth in the year.
Pharmaceuticals turnover
2021
£m
2020
(revised*)
£m
Growth
£%
Growth
CER%
Respiratory 21 28
2,863
2,360HIV
4,777
(2)4,876
3
Immuno-inflammation 29
885
727
22Oncology
489
372
3137
Pandemic
958
– – –
New and Specialty
9,972
8,335 20 26
Established Pharmaceuticals
7,757
8,721 (11) (6)
17,72 9
17,056
4
10
* GSK has reviewed the presentation of its pharmaceuticals products and from 1 January
2021 has moved sales of
Arnuity Ellipta
,
Incruse Ellipta
and Relvar/Breo Ellipta
from the Respiratory therapeutic area to the Established Pharmaceuticals therapeutic area.
Comparative information has been revised onto a consistent basis.
Group turnover
Turnover (£bn)
£17.7 bn
52% of Group turnover
AER growth
4%
CER growth
10%
0 5 10 15 20
2021
2020
2019
17.7
17.1
17.6
GSK Annual Report 2021
63
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Respiratory
Total Respiratory sales were up 21% AER, 28% CER, with
sales of
Trelegy
and Nucala
each exceeding £1 billion per year for the first time. International Respiratory sales grew 33% AER,
42% CER including
Nucala
up 23% AER, 34% CER, and Trelegy
up 81% AER, 92% CER including the impact of the
Trelegy
asthma launch in Japan in Q4 2020. In Europe,
Respiratory grew 11% AER, 13% CER with double digit CER
growth of
Trelegy
and Nucala
. In the US, Respiratory grew 23% AER, 30% CER, driven by continued strong performance of
Trelegy
and
Nucala
.
Sales of
Nucala
were £1,142 million in the year and grew 15% AER, 22% CER, with consistent, strong growth across all three
regions. US sales were up 15% AER, 23% CER to £690
million and International sales of £195 million grew 23% AER,
34% CER. Europe sales of £257 million grew 8% AER, 11%
CER.
Trelegy
sales were up 49% AER, 57% CER to £1,217 million
driven by growth in all regions. In the US, sales continue to grow
strongly including benefit of the asthma indication approved and
launched in Q3 2020, with sales up 52% AER, 62% CER. In
Europe, sales grew 19% AER, 21% CER and in International,
where
Trelegy
for asthma was approved in Japan in Q4 2020,
sales grew 81% AER, 92% CER to £163 million.
HIV
HIV sales were £4,777 million a decrease of 2% AER but
growth of 3% CER for the year.
Triumeq
sales were £1,882
million, down 18% AER, 14% CER and
Tivicay
sales were
£1,381 million, down 10% AER, 4% CER. The mature portfolio
resulted in less than 1 percentage point of CER sales decrease.
New HIV products
Juluca
,
Dovato
,
Rukobia
and
Cabenuva
delivered sales of £1,387 million representing 29% of the total
HIV portfolio (18% in 2020). Sales of the two drug regimens
Juluca
and
Dovato
were £517 million and £787 million,
respectively, with combined growth of 50% AER, 58% CER.
Rukobia
sales were £45 million.
Cabenuva
, the first long acting
injectable, recorded £38 million of sales for the full year.
In the US, total sales were £2,898 million with a decrease of
4% AER, but growth of 3% CER. New HIV products delivered
sales of £896 million, including:
Dovato
£428 million with growth of 87% AER, 99% CER,
Juluca
£393 million with growth of 2% AER, 8% CER,
Rukobia
£43 million and Cabenuva
£32 million. Combined
Tivicay
and Triumeq
sales
were £1,953 million declining 16% AER, 11% CER. In Europe,
total sales were £1,194 million with a decrease of 2% AER,
but growth of 1% CER. New HIV products delivered sales of
£420 million, including: Dovato sales of £302 million, which
more than doubled at AER and CER, and
Juluca
£111 millio n
with growth of 14% AER, 18% CER. Combined
Tivicay
and
Triumeq
sales were £738 million declining 21% AER, 19%
CER. International continued to grow strongly with total sales of
£685 million, with growth of 4% AER, 11% CER, driven by the
Tivicay
tender business and new HIV products.
Immuno-inflammation
Immuno-inflammation sales of £885 million grew 22% AER,
29% CER with
Benlysta
sales up 22% AER, 29% CER to £874 million, benefitting from lupus nephritis launches in US
and Japan in H2 2020.
Oncology
Sales of
Zejula
, the PARP inhibitor treatment for ovarian cancer were £395 million, up 17% AER, 22% CER, impacted by
ongoing lower diagnosis rates due to the COVID-19 pandemic,
particularly in the US. Sales included £212 million in the US and
£163 million in Europe.
Blenrep
for the treatment of patients with relapsed or refractory
multiple myeloma was approved and launched in the US and
Europe in Q3 2020, with ongoing launches throughout Europe
in 2021.
Blenrep
sales globally totalled £89 million.
Pandemic sales
Sales of
Xevudy
were £958 million in the year, reflecting the ongoing fulfilment of contracts across the world and most
significantly in the US, which reported sales of £602 million.
International recorded sales of £287 million and Europe £69
million.
Established Pharmaceuticals
Sales of Established Pharmaceuticals in the year were £7,757
million, down 11% AER, 6% CER.
Established Respiratory products decreased 7% AER, 2%
CER to £4,327 million. This includes the impact of generic
competition to
Xyzal
in Japan, and to
Advair/Seretide
globally.
The decrease was partially offset by approximately 6
percentage points impact on growth of favourable prior period
RAR adjustments.
The remainder of the Established Pharmaceuticals portfolio
decreased by 16% AER, 11% CER to £3,430 million on lower
demand for antibiotics during the COVID-19 pandemic period,
the divestment of GSK’s cephalosporin products at the start of
the fourth quarter, and the impact of government mandated
changes increasing use of generics in markets including France,
Japan and China.
Financial performance
continued
Group financial review
continued
64
GSK Annual Report 2021
Influenza
Fluarix/FluLaval
sales decreased 7% AER, 2% CER, to £679
million as a result of unfavourable prior period RAR movements
in the US, partially offset by higher volume in the US and strong
southern hemisphere demand in International.
Shingles
Shingrix
decreased 13% AER, 9% CER to £1,721 million,
primarily driven by lower demand in the US and International for
routine adult vaccination due to COVID-19 vaccination
programme deployment and disease circulation. In Europe,
sales growth was driven by Germany and launches in the UK,
Spain and Italy.
Shingrix
was sold in 17 countries, including 9 markets launched during 2021.
Established Vaccines
Hepatitis vaccines sales were down 20% AER, 16% CER to
£460 million, adversely impacted by de-prioritisation of routine
US adult vaccination, increased Hepatitis B vaccine competition
and unfavourable CDC stockpile movements in the US, and by
COVID-19 related travel restrictions in Europe and International.
Sales of DTPa-containing vaccines (
Infanrix
,
Pediarix
and
Boostrix
) decreased 4% AER but grew 1% CER.
Infanrix/
Pediarix
sales decreased 14% AER, 9% CER to £543 million,
reflecting lower tender volume in Europe and International as
well as a change in recommendation for the dosing schedule in
Germany, partly offset by increased demand in the US.
Boostrix
sales grew 9% AER, 14% CER to £521 million, largely driven
by demand recovery and tender volumes in International, as well
as higher demand and share in the US.
Rotarix
sales were down 3% AER but up 1% CER to £541
million, reflecting demand recovery in International.
Synflorix
sales decreased by 11% AER, 8% CER to £357
million, primarily due to lower tender demand in Emerging
markets.
MMRV vaccines sales were stable at AER but grew 4% CER to
£260 million, largely driven by higher demand in International.
Pandemic Vaccines
Pandemic vaccines sales of £447 million included £444 million
of pandemic adjuvant sales to the US and Canadian
governments.
Turnover (£bn)
£6.8bn
20% of Group turnover
AER growth
(3)%
CER growth
2%
0 2 4 6 8 10
2021
2020
2019
6.8
7.0
7.2
Vaccines
Vaccines turnover
2021
£m
2020
£m
Growth
£%
Growth
CER%
Meningitis
961
1,029 (7) (2)
Influenza (2)
679
(7)733
Shingles
1,721
1,989 (13) (9)
Established Vaccines
2,970
3,231 (8) (4)
6,331
6,982 (9) (5)
Pandemic Vaccines
447
– – –
6,778
6,982 (3)
2
Vaccines turnover in the year decreased 3% at AER, but grew
2% CER to £6,778 million, primarily driven by pandemic
adjuvant sales, partially offset by lower demand for routine adult
vaccination due to COVID-19 vaccination programme
deployment and disease circulation across regions, resulting in
lower
Shingrix
and Hepatitis vaccines sales. Unfavourable US
prior period RAR adjustments reduced overall Vaccines growth
by approximately 2 percentage points, particularly in
Fluarix/
FluLaval
and
Shingrix
where the impact on product growth was
a decrease of 7% and a decrease of 2% respectively.
Vaccines turnover excluding pandemic vaccines decreased 9%
AER, 5% CER to £6,331 million.
Meningitis
Meningitis sales decreased 7% AER, 2% CER to £961 million
driven primarily by unrepeated International tender volumes for
other meningitis vaccines.
Bexsero
sales were stable at AER,
but grew 5% CER to £650 million, reflecting increased market
share in the US.
Menveo
sales were up 3% AER, 9% CER to £272 million,
primarily driven by 2020 cohort catch-up vaccinations and 2021
higher demand, as well as increased market share in the US.
Financial performance
continued
GSK Annual Report 2021
65
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Oral health
Oral health sales decreased 1% AER, but grew 5% CER to
£2,732 million.
Sensodyne
delivered high single digit growth
reflecting underlying brand strength, continued innovation and
strong growth across key markets including the US, China, India
and Japan. Gum health also delivered broad based high single
digit growth across key markets. Denture care grew low single
digits driven partly by a return to growth in Q4 2021.
Pain relief
Pain relief sales increased 3% AER, 7% CER to £2,276 million.
Panadol
, which benefitted from seasonal demand in the last
quarter, grew double digits.
Voltaren
grew mid-single digits,
offsetting the expected short-term decrease in the second half
of the year in the US after the introduction of private label
competition earlier in 2021.
Excedrin
delivered growth of over 40% versus a prior year decrease reflecting supply
improvements.
Vitamins, minerals and supplements
Vitamins, minerals and supplements sales were stable at AER
but grew 4% CER to £1,512 million building on the significant
(19% CER) growth in 2020.
Centrum
grew mid-teens percent
driven by successful innovation, improved supply capacity in the
US and continued consumer focus on health and wellness.
Caltrate
grew mid-single digits and
Emergen-C
decreased
high-single digits reflecting a particularly challenging 2020
comparator due to unprecedented demand during the early
stages of the pandemic.
Respiratory health
Respiratory health sales decreased 6% AER, 1% CER to
£1,133 million. In Q4 2021, cold and flu sales rebounded
strongly and were above 2019 levels in Europe and slightly
below 2019 levels in the US. For the full year, cold and flu
products were down mid-single digits as the H2 2021 rebound
was insufficient to offset the considerable decrease in the first
quarter of 2021 which resulted from historically low demand for
cold and flu products, effectively halving the global market in the
period. Allergy products grew mid-single digits.
Digestive health and other
Digestive health and other brands sales decreased 1% AER
but grew 4% CER to £1,803 million. Digestive health brands
were up high-single digits with particularly strong growth in
Tums
and
Eno
. Skin health and Smoker’s health brands were
up mid-single digits, offset partly by a decrease in small,
non-strategic brands.
Consumer Healthcare turnover
2021
£m
2020
£m
Growth
£%
Growth
CER%
Oral health
2,732
2,753 (1)
5
Pain relief
2,276
2,219
3 7
Vitamins, minerals and supplements
1,512
1,506
– 4
Respiratory health
1,133
1,209 (6) (1)
Digestive health and other
1,803
1,824 (1)
4
9,456
9,511 (1)
4
Brands divested/under review
151
522 (71) (69)
9,607
10,033 (4)
–
2021
£m
2020
£m
Growth
£%
Growth
CER%
US
3,179
3,408 (7) (1)
Europe (6) (3)
2,468
2,619International (1)
3,960
4,0064
9,607
10,033 (4)
–
Consumer Healthcare turnover in the year of £9,607 million
decreased 4% AER and was stable at CER reflecting dilution
from divestments given the completion of the portfolio
rationalisation at the end of Q1 2021. On a two-year CAGR
sales excluding brands divested under review grew 4% overall
despite the adverse impact of the COVID-19 pandemic.
Sales excluding brands divested/under review decreased 1%
AER but increased 4% CER reflecting the underlying strength
of brands across the portfolio and categories and continuing
growth in e-commerce. Overall, sales benefited from strong
growth across all categories excluding Respiratory health which
was negatively impacted in Q1 2021 by the historically low cold
and flu season. The decrease in cold and flu sales resulted in an
approximately 1% drag on full year growth.
International sales excluding brands divested/under review grew
high single digit on a CER basis with double digit growth in
emerging markets including India, China, the Middle East and
Africa. Excluding brands divested/under review, US sales grew
low single digits but European sales were stable on a CER
basis. Both regions were particularly negatively impacted by the
historically low cold and flu season during Q1 2021.
Turnover (£bn)
£9.6bn
28% of Group turnover
AER growth
(4)%
CER growth
0%
0 2 4 6 8 10
2021
2020
2019
9.6
10.0
9.0
Consumer Healthcare
Financial performance
continued
Group financial review
continued
66
GSK Annual Report 2021
Cost of sales
2021
£m
2020
£m
Growth
£%
Growth
CER%
Total cost of sales
(11,603)
(11,704) (1)
2
Adjusted cost of sales
(10,726)
(10,191)
5 8
Total cost of sales as a percentage of turnover was 34.0%, 0.3
percentage points lower at AER and 1.1 percentage points
lower in CER terms compared with 2020. This primarily
reflected lower write-downs in a number of manufacturing sites
and the unwind in 2020 of the fair market value uplift on
inventory arising on completion of the Consumer Healthcare
Joint Venture with Pfizer.
Excluding these and other Adjusting items, Adjusted cost of
sales as a percentage of turnover was 31.4%, 1.6 percentage
points higher at AER and 0.8 percentage points higher at CER
compared with 2020. This primarily reflected higher pandemic
sales (
Xevudy
) as well as higher supply chain costs in Vaccines resulting from lower demand and higher inventory adjustments
and higher commodity and freight costs in Consumer
Healthcare, partly offset by price benefits in Pharmaceuticals,
including the benefit from prior period RAR adjustments, a
further contribution from restructuring savings across all three
businesses and favourable mix in Vaccines.
Selling, general and administration
2021
£m
2020
£m
Growth
£%
Growth
CER%
Total selling, general and
administration
(10,975)
(11,456) (4)
–
Adjusted selling, general and
administration
(10,225)
(10,717) (5) (1)
Total SG&A costs as a percentage of turnover were 32.2%,
1.4 percentage points lower at AER and 1.8 percentage points
lower at CER compared with 2020. This included increased
separation costs partly offset by lower restructuring charges.
Excluding Adjusting items, Adjusted SG&A costs as a
percentage of turnover were 30.0%, 1.5 percentage points
lower at AER than in 2020 and 1.8 percentage points lower on
a CER basis. Adjusted SG&A costs decreased 5% AER, 1%
CER which reflected the tight control of ongoing costs and
reduced variable spending across all three businesses as a
result of the COVID-19 lockdowns, and the continuing benefit
of restructuring in Pharmaceuticals, Consumer Healthcare and
support functions. The decrease also reflected a favourable
legal settlement in 2021 compared to increased legal costs in
2020 as well as one-off benefits in pensions and insurance
which were partly offset by the one-off benefit from
restructuring of post-retirement benefits in 2020. This was
partly offset by increased investment behind launches in HIV
and Vaccines.
Research and development
2021
£m
2020
£m
Growth
£%
Growth
CER%
Total research and development
(5,278)
(5,098)
4 7
Adjusted research and development
(4,776)
(4,603)
4 8
Total R&D expenditure was £5,278 million (15.5% of turnover),
up 4% AER, 7% CER, including an increase in impairments
partly offset by a decrease in major restructuring charges.
Adjusted R&D expenditure was £4,776 million (14.0% of
turnover), 4% higher at AER, 8% higher at CER than in 2020.
Pharmaceuticals R&D expenditure was £3,578 million (20.2%
of turnover), stable at AER, up 4% CER, primarily driven by
increased investment in our Specialty portfolios, including the
early stage research projects. Efficiency savings continued from
the implementation of the One R&D programme for
Pharmaceuticals and Vaccines as part of the Separation
preparation restructuring programme.
The growth of the Specialty portfolio in 2021 was primarily
driven by our two programmes for COVID-19 treatment (
Xevudy
and otilimab) along with the other otilimab programme for
rheumatoid arthritis, bepirovirsen, our HBV antisense
oligonucleotide and depemokimab, our anti-IL5 for asthma. This
has been partly offset by reduced spend on daprodustat due to
the completion of programmes. In Oncology, there is continued
investment reflecting our commitment to synthetic lethality and
in
Blenrep
, together with bintrafusp alfa, where we have
accelerated close-out costs for the programme but this has
been largely offset by a reduction in spend on feladilimab
following the decision to terminate the programme in April.
R&D expenditure in Vaccines was £887 million (13.1% of
turnover), up 29% AER, 34% CER, reflecting increased
investment in clinical programmes for meningitis and RSV and
investment in our mRNA platform, partly offset by efficiency
savings from the implementation of the One Development
programme and variable spending as a result of COVID-19
lockdowns. R&D expenditure in Consumer Healthcare was
£249 million.
Royalty income
Royalty income was £419 million (2020 – £318 million), up
32% AER, 32% CER, primarily driven by higher sales of
Gardasil.
Financial performance
continued
GSK Annual Report 2021
67
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Other operating income/(expense)
Net other operating expenses of £476 million (2020 –
£1,624 million income) primarily reflected accounting charges
of £1,101 million (2020 – £1,234 million) arising from the
re-measurement of the contingent consideration liabilities
related to the acquisitions of the former Shionogi-ViiV
Healthcare joint venture and the former Novartis Vaccines
business and the liabilities for the Pfizer put option and Pfizer
and Shionogi preferential dividends in ViiV Healthcare. This
included a re-measurement charge of £1,026 million (2020 –
£1,114 million) for the contingent consideration liability due
to Shionogi, as a result of the unwinding of the discount for
£380 million and a charge for £646 million primarily from
adjustments to sales forecasts and the settlement with Gilead
(see page 58). This was partly offset by a number of asset
disposals including the disposal of royalty rights on
cabozantinib, the disposal of the cephalosporin business and
disposal of a number of Consumer Healthcare brands and fair
value uplifts on investments. 2020 included the net profit on
disposal of Horlicks and other Consumer Healthcare brands
of £2,815 million, partly offset by the related loss on sale of the
shares in Hindustan Unilever of £476 million.
Operating profit
Total operating profit was £6,201 million compared with
£7,783 million in 2020. This primarily reflected an unfavourable
comparison to the net profit on disposal in Q2 2020 of Horlicks
and other Consumer brands and resultant sale of shares in
Hindustan Unilever. This was partly offset by lower major
restructuring costs, lower re-measurement charges on the
contingent consideration liabilities and the unwind in 2020 of
the fair market value uplift on inventory arising on completion of
the Consumer Healthcare Joint Venture with Pfizer.
Excluding these and other Adjusting items, Adjusted operating
profit was £8,806 million, 1% lower than 2020 at AER, but 9%
higher at CER on a turnover increase of 5% CER. The Adjusted
operating margin of 25.8% was 0.3 percentage points lower at
AER, 0.9 percentage points higher on a CER basis than in
2020.
The increase in Adjusted operating profit primarily reflected the
benefit from incremental pandemic sales (
Xevudy
and adjuvant)
contributing approximately 6% AER, 7% CER to Adjusted
Operating profit growth. Adjusted Operating profit also
benefited from sales growth in Pharmaceuticals including the
benefit from prior period RAR adjustments and tight control of
ongoing costs including reduced promotional and variable
spending across all three businesses as a result of the
COVID-19 lockdowns, favourable legal settlements compared
to increased legal costs in 2020 and benefits from continued
restructuring across the business. This was partly offset by
lower sales in Vaccines, primarily
Shingrix
, higher supply chain
costs in Vaccines and Consumer Healthcare, divestments in
Consumer Healthcare and increased investment in R&D across
Vaccines and Pharmaceuticals.
Contingent consideration cash payments which are made to
Shionogi and other companies reduce the balance sheet liability
and hence are not recorded in the income statement.
Total contingent consideration cash payments in 2021
amounted to £856 million (2020 – £885 million). This included
cash payments made to Shionogi of £826 million (2020 –
£858 million).
Adjusted operating profit by business
Pharmaceuticals operating profit was £4,681 million, up 12%
AER, 24% CER on a turnover increase of 10% CER. The
operating margin of 26.4% was 1.9 percentage points higher at
AER than in 2020 and 3.3 percentage points higher on a CER
basis. This primarily reflected price benefits in Pharmaceuticals,
including the benefit from a prior period RAR adjustment,
reduced supply chain costs, the tight control of ongoing costs,
short term benefits to changes in ways of working, a favourable
legal settlement in 2021 compared to increased legal costs in
2020 and the continuing benefit of restructuring. This was partly
offset by support to launches in HIV and increased investment
in R&D.
Vaccines operating profit was £2,256 million, down 17% AER,
11% CER on 2% turnover increase at CER. The operating
margin of 33.3% was 5.6 percentage points lower at AER than
in 2020 and 4.8 percentage points lower on a CER basis. This
was primarily driven by higher supply chain costs resulting from
higher inventory adjustments and lower demand, along with
higher R&D spend to support key strategic priorities and
increased SG&A investment to support business growth, partly
offset by higher royalty income and pandemic adjuvant
beneficial mix.
Consumer Healthcare operating profit was £2,239 million, up
1% AER, 9% CER on stable turnover at CER. The operating
margin of 23.3% was 1.2 percentage points higher at AER and
2.0 percentage points higher on a CER basis than in 2020. This
primarily reflected sales growth of continuing brands, price
increases and favourable mix, synergy delivery from the Pfizer
Joint Venture Integration and tight cost control, partially offset by
the impact of divestments (1.2 percentage points), increased
advertising and promotion investment, increased commodity
and freight costs and investment in manufacturing sites.
Financial performance
continued
Group financial review
continued
68
GSK Annual Report 2021
Net finance costs
Finance income
2021
£m
2020
£m
Interest and other income
26
39
Fair value movements
2
5
28
44
Finance expense
Interest expense
(746)
(822)
Unwinding of discounts on provisions
(2)
(3)
Remeasurements and fair value movements
–
(4)
Finance expense on lease liabilities
(31)
(40)
Other finance expense
(5)
(23)
(784)
(892)
Total net finance costs were £756 million compared with
£848 million in 2020. Adjusted net finance costs were
£753 million compared with £844 million in 2020. The
decrease is primarily as a result of reduced interest expense
from lower debt levels, favourable movements in foreign
exchange rates, a premium paid on the early repayment and
refinancing of bond debt in 2020 and reduced interest on tax
partly offset by lower interest income on overseas cash post-
closing of the divestment of Horlicks and other Consumer
Healthcare nutrition products in India and a number of other
countries.
Share of after tax profits of associates and joint
ventures
The share of after tax profits of associates and joint ventures
was £33 million (2020 – £33 million).
Loss on disposal of interests in associates
The net loss on disposal of interests in associates was
£36 million, primarily driven by a loss on disposal of our
interest in the associate Innoviva Inc.
Profit before tax
Taking account of net finance costs, the share of profits of
associates and loss on disposal of interest in associates, profit
before taxation was £5,442 million compared with £6,968
million in 2020.
Taxation
2021
£m
2020
£m
UK current year charge
132
30
Rest of world current year charge
1,044
1,177
Charge in respect of prior periods
172
66
Total current taxation
1,348
1,273
Total deferred taxation
(1,002)
(693)
Taxation on total profits
346
580
The charge of £346 million represented an effective tax rate on
Total results of 6.4% (2020 – 8.3%) and reflected the different
tax effects of the various Adjusting items, including a credit of
£397 million resulting from the revaluation of deferred tax
assets following enactment of an increase in the headline rate of
UK corporation tax (effective 1 April 2023). 2020 reflected the
disposal of Horlicks and other Consumer brands and the
subsequent disposal of shares received in Hindustan Unilever.
Tax on Adjusted profit amounted to £1,415 million and
represented an effective Adjusted tax rate of 17.5% (2020 –
16.0%).
Issues related to taxation are described in Note 14, ‘Taxation’ in
the Annual Report 2021. The Group continues to believe it has
made adequate provision for the liabilities likely to arise from
periods which are open and not yet agreed by tax authorities.
The ultimate liability for such matters may vary from the amounts
provided and is dependent upon the outcome of agreements
with relevant tax authorities.
Non-controlling interests
The allocation of Total earnings to non-controlling interests
amounted to £711 million (2020 – £639 million). The increase
was primarily due to an increased allocation of Consumer
Healthcare Joint Venture profits of £460 million (2020 –
£374 million) and an increased allocation of ViiV Healthcare
profits of £196 million (2020 – £223 million), including reduced
credits for re-measurement of contingent consideration liabilities.
The allocation of Adjusted earnings to non-controlling interests
amounted to £1,006 million (2020 – £1,031 million). The
reduction in allocation primarily reflected a reduced allocation
of ViiV Healthcare profits of £438 million (2020 – £474 million),
partly offset by higher net profits in some of the Group’s other
entities with non-controlling interests. The allocation of Consumer
Healthcare Joint Venture profits was £515 million (2020 – £515
million).
Earnings per share
Total EPS was 87.6p compared with 115.5p in 2020. This
primarily reflected an unfavourable comparison to the net
profit on disposal in Q2 2020 of Horlicks and other Consumer
brands partly offset by the related loss on sale of the shares in
Hindustan Unilever, partly offset by a credit of £397 million to
Taxation in 2021 resulting from the revaluation of deferred tax
assets following enactment of an increase in the headline rate
of UK corporation tax (effective 1 April 2023), lower major
restructuring costs and lower remeasurement charges on the
contingent consideration liabilities.
Adjusted EPS was 113.2p compared with 115.9p in 2020,
down 2% AER but up 9% CER, on a 9% CER increase in
Adjusted operating profit primarily reflecting incremental
pandemic sales, sales increases in Pharmaceuticals, tight cost
control and favourable legal settlements and lower interest
costs, partly offset by lower sales in Vaccines, primarily
Shingrix
, higher supply chain costs in Vaccines, increased R&D
investment and a higher effective tax rate. The contribution to
growth from COVID-19 solutions was approximately 8% AER,
9% CER.
Financial performance
continued
GSK Annual Report 2021
69
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Dividends
The Board has declared four interim dividends resulting in a total
dividend for the year of 80 pence, in line with the dividend declared
for 2020. See note 16 to the financial statements, ‘Dividends’.
Dividend policy
On 23 June 2021, at the new GSK Investor Update, GSK set out
that from 2022 a progressive dividend policy will be implemented.
The dividend policy, the total expected cash distribution, and the
respective dividend pay-out ratios for new GSK and new
Consumer Healthcare remain unchanged.
GSK expects to declare a 27p per share dividend payable by the
current group for the first half. This comprises 22 pence per share
for new GSK and 5 pence per share representing Consumer
Healthcare during the first half whilst part of the group. For the
second half of 2022, new GSK continues to expect to declare a
22p per share dividend. As previously communicated, new GSK
would expect to declare a dividend of 45 pence per share for
2023.
Following separation, the dividend policy for the new Consumer
Healthcare company will be the responsibility of its Board of
Directors and is expected to be guided by a 30 to 50 per cent
pay-out ratio. On this basis, we now expect a second-half
dividend from the new Consumer Healthcare company equivalent
to a payout of around 3 pence per share, subject to its Board’s
decisions on the intra-year phasing of dividend payments. This
expected distribution per share for the second half of the year has
been adjusted from that highlighted at the GSK Investor Update
in June 2021 to reflect the total number of shares (up to circa
9.25 billion shares) in the new Consumer Healthcare company
that are expected to be in issue upon demerger. In June 2021 the
planning assumption for the Investor Update reflected only the
GSK shares in issue at that time (circa 5 billion shares).
In aggregate, this would represent on the full year 2022 basis
the equivalent of a Group dividend of around 52p per share.
Dividends payable by Consumer Healthcare will only be
receivable by shareholders who remain invested in Consumer
Healthcare post-separation and at the appropriate record dates.
Guidance and Outlook
In 2022 we expect to continue to deliver on our strategic
priorities. We plan to increase targeted investment in R&D, to
build on and invest behind our top line momentum for key growth
drivers and to deliver the demerger of our Consumer Healthcare
business in mid-year. Assuming global economies and healthcare
systems approach normality as the year progresses, we expect
sales of Specialty Medicines to grow approximately 10% at CER
and sales of General Medicines to show a slight decrease,
primarily reflecting increased genericisation of established
Respiratory products. Vaccines sales are expected to grow at a
low teens percentage at CER for the year as a whole. However,
governments’ prioritisation of COVID-19 vaccination programmes
and ongoing measures to contain the pandemic are expected to
result in some continued disruption to adult immunisations, with
the impact weighted to the first half. For
Shingrix
, despite the potential for short-term pandemic disruption, we continue to
expect strong double-digit growth and record annual sales based
on strong demand in existing markets and geographical
expansion.
Reflecting these factors, in 2022 for new GSK we expect sales to
grow between 5% to 7% at CER and Adjusted operating profit to
grow between 12% to 14% at CER as compared with 2021. This
includes the future benefit in royalty income from the settlement
and license agreement with Gilead Sciences, Inc. (Gilead)
announced on 1 February 2022.
In June 2021, GSK announced that it expected new GSK to
deliver sales growth and adjusted operating profit growth of more
than 5% and more than 10%, respectively, CAGR at constant
exchange rates over the five year period 2021-2026 (with 2021
as the base year). These financial outlooks exclude any
contribution from COVID-19 related revenues. New GSK
expects to improve adjusted operating margin from the mid-20s%
in 2021 to over 30% by 2026 and cash generated from
operations is expected to exceed £10 billion by 2026. By 2031,
new GSK aims to deliver sales of more than £33 billion (at
constant exchange rates).
Medium term outlooks were provided for Consumer Healthcare
at a Capital Markets Day scheduled for 28 February 2022. Until
such time as the formal criteria for treating Consumer Healthcare
as a ‘Discontinued operation’ have been satisfied (currently
expected in Q2 2022), GSK will continue to present the
Consumer Healthcare business within ‘Continuing operations’
and will consolidate the business for reporting purposes until the
demerger has completed.
In 2022, based on known binding agreements from governments
we expect that COVID-19 solutions will contribute a similar sales
level to 2021, but a substantially reduced profit contribution due
to the increased proportion of lower margin
Xevudy
sales. We
expect this to reduce new GSK Adjusted Operating profit growth
(including COVID-19 solutions in both years) by between 5% to
7%. We continue to discuss further opportunities with
governments.
Financial performance
continued
Group financial review
continued
70
GSK Annual Report 2021
Adjusted results reconciliation
31 December 2021
Total
results
£m
Intangible
asset
amortisation
£m
Intangible
asset
impairment
£m
Major
restructuring
£m
Transaction-
related
£m
Divestments,
significant
legal and
other items
£m
Separation
costs
£m
Adjusted
results
£m
Turnover 34,114 34,114
Cost of sales
(11,603) 154 28
701
(33)27
(10,726)Gross profit
22,511 154 28
701
(33)27
23,388Selling, general and administration
(10,975) 426 25 (10,225)
17
282Research and development
(5,278)
101
35546
(4,776)Royalty income
419 419
Other operating (expense)/income
(476)
1,106 (662) 32
–
Operating profit
6,201 802 322 626 1,159 (618) 314 8,806
Net finance costs
(756)
2 1
(753)
Loss on disposal of interest in associates
(36)
36
–
Share of after-tax profits of associates and joint ventures
33 33
Profit before taxation
5,442 802 322 628 1,159 (581) 314 8,086
Taxation (346) (159) (81) (114) (196) (1,415)
(470)
(49)Tax rate
6.4% 17.5%
Profit after taxation
5,096 643 241 514 963 (1,051) 265 6,671
Profit attributable to non-controlling interests
711 295 1,006
Profit attributable to shareholders
4,385 643 241 514 265 5,665
668
(1,051)Earnings per share
87.6p 12.9p 4.8p 10.3p 13.3p (21.0)p 5.3p 113.2p
Weighted average number of shares (millions)
5,003 5,003
Adjusted results reconciliation
31 December 2020
Total
results
£m
Intangible
asset
amortisation
£m
Intangible
asset
impairment
£m
Major
restructuring
£m
Transaction-
related
£m
Divestments,
significant
legal and
other items
£m
Separation
costs
£m
Adjusted
results
£m
Turnover
34,099 34,099
Cost of sales
(11,704) (10,191)
699
31667
116Gross profit
22,395 23,908
699
31667
116Selling, general and administration
(11,456)
1
18 659 (23) 16
68
(10,717)Research and development
(5,098) 75 214 206 (4,603)
Royalty income
318 318
Other operating (expense)/income
1,624 1,215 (2,839)
–
Operating profit
7,78 3
775
263 1,532 1,308 (2,823)
68
8,906Net finance costs
(848)
2 2
(844)
Share of after-tax profits of associates and joint ventures
33 33
Profit before taxation
6,968 1,534 1,308 (2,821)
775
26368
8,095Taxation (580) (150) (47) (292) (229) (1,295)
17
(14)Tax rate
8.3% 16.0%
Profit after taxation
6,388 625 216 1,242
1,079
(2,804)54
6,800Profit attributable to non-controlling interests
639 392 1,031
Profit attributable to shareholders
5,749
625 216 1,242
687
(2,804)54
5,769
Earnings per share
115.5p 12.6p 4.4p 25.0p 13.8p (56.5)p 1.1p 115.9p
Weighted average number of shares (millions)
4,976 4,976
Adjusting items
GSK Annual Report 2021
71
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Major restructuring and integration
Within the Pharmaceuticals sector, the highly regulated
manufacturing operations and supply chains and long life
cycle of the business mean that restructuring programmes,
particularly those that involve the rationalisation or closure of
manufacturing or R&D sites are likely to take several years
to complete.
Major restructuring costs are those related to specific
Board-approved Major restructuring programmes and are
excluded from Adjusted results. Major restructuring
programmes, including integration costs following material
acquisitions, are those that are structural and are of a significant
scale where the costs of individual or related projects exceed
£25 million. Other ordinary course smaller-scale restructuring
costs are retained within Total and Adjusted results.
Total Major restructuring charges incurred in 2021 were
£626 million (2020 – £1,532 million), analysed as follows:
2021
2020
Cash
£m
Non-
cash
£m
Total
£m
Cash
£m
Non-
cash
£m
Total
£m
2018 major
restructuring
programme
(incl. Tesaro)
18
9
27
105 210
315
Consumer
Healthcare Joint
Venture integration
programme
173
11
184
298 28 326
Separation
Preparation
restructuring
programme
371
59 430
625 216 841
Combined
restructuring
and integration
programme
8
(23) (15)
39
11
50
570
56
626
1,067 465 1,532
Cash charges of £371 million under the Separation Preparation
programme primarily arose from restructuring of some
administrative and central manufacturing functions as well as
commercial pharmaceuticals and R&D functions. The non-cash
charges of £59 million primarily reflected write-down of assets
in administrative locations and R&D sites.
Cash charges of £173 million on the Consumer Healthcare
Joint Venture programme primarily related to severance and
integration costs. The non-cash credit in the Combined
restructuring and integration programme primarily reflected a
write back on disposal of a site.
Total cash payments made in 2021 were £753 million (2020
– £737 million), £434 million (2020 – £152 million) relating to
the Separation Preparation restructuring programme, a further
£176 million (2020 – £291 million) relating to the Consumer
Healthcare Joint Venture integration programme, £95 million
(2020 – £179 million) under the 2018 major restructuring
programme including the settlement of certain charges accrued
in previous quarters and £48 million (2020 – £115 million) for
the existing Combined restructuring and integration programme.
The analysis of Major restructuring charges by business was as
follows:
2021
£m
2020
£m
Pharmaceuticals
233
671
Vaccines
(40)
214Consumer Healthcare
196
374
389
1,259
Corporate and central functions
237
273
Total Major restructuring charges
626
1,532
The analysis of Major restructuring charges by income
statement line was as follows:
2021
£m
2020
£m
Cost of sales
154
667
Selling, general and administration
426
659
Research and development
46
206
Other operating income/(expense)
-
–
Total Major restructuring charges
626
1,532
The benefit in the year from restructuring programmes was
£0.7 billion, the benefit from the Separation Preparation
restructuring programme was £0.3 billion, the benefit from the
Consumer Healthcare Joint Venture integration was £0.2 billion
and the benefit from the 2018 Restructuring programme was
£0.2 billion.
The 2018 major restructuring programme, including Tesaro,
has cost £1.5 billion to the end of 2021, with cash costs of
£0.6 billion and non-cash costs of £0.9 billion, and has
delivered annual savings of around £0.5 billion by the end of
2021 (at 2019 rates). These savings were fully re-invested to
help fund targeted increases in R&D and commercial support
of new products. The programme is substantially complete and
therefore GSK will cease external reporting of total costs and
benefits of the 2018 major restructuring programme from 2022
onwards.
The completion of the Consumer Healthcare Joint Venture with
Pfizer has realised substantial cost synergies and has largely
delivered the expected total annual cost savings of £0.5 billion
by 2021. The cash costs are expected to be £0.7 billion and
non-cash charges expected to be £0.1 billion, plus additional
capital expenditure of £0.2 billion. Up to 25% of the cost
savings are intended to be reinvested in the business to
support innovation and other growth opportunities.
Adjusting items
continued
Group financial review
continued
72
GSK Annual Report 2021
The Group initiated in Q1 2020 a two-year Separation
Preparation programme to prepare for the separation of GSK
into two companies: new GSK, a biopharma company with an
R&D approach focused on science related to the immune
system, the use of genetics and new technologies, and a new
leader in Consumer Healthcare. The programme aims to:
–
Drive a common approach to R&D with improved capital
allocation
–
Align and improve the capabilities and efficiency of global
support functions to support new GSK
–
Further optimise the supply chain and product portfolio,
including the divestment of non-core assets.
–
A strategic review of prescription dermatology is underway
–
Prepare Consumer Healthcare to operate as a standalone
company
The programme continues to target delivery of £0.8 billion of
annual savings by 2022 and £1.0 billion by 2023, with total
costs estimated at £2.4 billion, of which £1.6 billion is expected
to be cash costs. The proceeds of divestments have largely
covered the cash costs of the programme.
Transaction-related adjustments
Transaction-related adjustments resulted in a net charge of
£1,159 million (2020 – £1,308 million). This included a net
£1,101 million accounting charge for the re-measurement of the
contingent consideration liabilities related to the acquisitions of
the former Shionogi-ViiV Healthcare joint venture and the former
Novartis Vaccines business and the liabilities for the Pfizer put
option and Pfizer and Shionogi preferential dividends in ViiV
Healthcare.
Charge/(credit)
2021
£m
2020
£m
Contingent consideration on former Shionogi-ViiV
Healthcare Joint Venture (including Shionogi
preferential dividends)
1,026
1,114
ViiV Healthcare put options and Pfizer preferential
dividends
48
(52)
Contingent consideration on former Novartis
Vaccines business
27
172
Release of fair value uplift on acquired Pfizer
inventory
–
91
Other adjustments
58
(17)
Total transaction-related charges
1,159
1,308
The £1,026 million charge relating to the contingent
consideration for the former Shionogi-ViiV Healthcare joint
venture represented an increase in the valuation of the
contingent consideration due to Shionogi, as a result of the
unwind of the discount for £380 million and a charge of £646
million primarily from adjustments to sales forecasts and the
settlement with Gilead as well as updated exchange rate
assumptions. The £48 million charge relating to the ViiV
Healthcare put option and Pfizer preferential dividends
represented an increase in the valuation of the put option as a
result of the settlement with Gilead, offset by lower cash and
updated exchange rate assumptions.
The ViiV Healthcare contingent consideration liability is fair
valued under IFRS. The potential impact of the COVID-19
pandemic remains uncertain and at 31 December 2021, it has
been assumed that there will be no significant impact on the
long-term value of the liability. This position remains under
review and the amount of the liability will be updated in future
quarters as further information on the impact of the pandemic
becomes available. An explanation of the accounting for the
non-controlling interests in ViiV Healthcare is set out on
page 57.
Divestments, significant legal charges and other items
Divestments and other items also included gains from a number
of asset disposals, including the disposal of royalty rights on
cabozantinib, disposal of the cephalosporins business and
disposal of a number of Consumer Healthcare brands, fair value
gains on investments and certain other Adjusting items,
including the impact of the enactment of the increase in the
headline rate of UK Corporate tax as discussed on page 189.
The Consumer Healthcare brands disposal programme is
complete and has delivered net proceeds of £1.1 billion. In
2021 the net loss on disposal of interests in associates was
£36 million, primarily driven by a loss on disposal of the interest
in the associate Innoviva Inc. A charge of £26 million (2020:
£7 million) was recorded for significant legal matters arising in
the period. Significant legal cash payments were £5 million
(2020 – £9 million). Included within Divestments, significant
legal and other items, is a deferred tax credit of £157 million
arising on the transfer of intellectual property within the group
during the quarter. This deferred tax credit arises due to
differences between group value and the market value of the
assets transferred.
Separation costs
From Q2 2020, the Group started to report additional costs to
prepare for establishment of the Consumer Healthcare
business as an independent entity (“Separation costs”). Total
Separation costs incurred in 2021 were £314 million (2020
– £68 million). This includes £38 million relating to transaction
costs including preparatory admission costs (costs relating to
achieve a listing).
Total separation costs are estimated to be £600-700 million,
excluding transaction costs.
Adjusting items
continued
GSK Annual Report 2021
73
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
A summary of the consolidated cash flow statement is set out
below.
2021
£m
2020
£m
Net cash inflow from operating activities
7,952
8,441
Net cash inflow/(outflow) from investing activities
(1,777)
2,161
Net cash outflow from financing activities
(7,589)
(10,132)
Increase in cash and bank overdrafts
(1,414)
470
Cash and bank overdrafts at beginning of year
5,262
4,831
Increase in cash and bank overdrafts
(1,414)
470
Exchange adjustments
(29)
(39)
Cash and bank overdrafts at end of year
3,819
5,262
Cash and bank overdrafts at end of year comprise:
Cash and cash equivalents
4,274
6,292
Overdrafts
(455)
(1,030)3,819
5,262
Capital expenditure and financial investment
Cash payments for tangible and intangible fixed assets
amounted to £2,931 million (2020 – £2,239 million) and
disposals realised £898 million (2020 – £1,582 million).
Cash payments to acquire equity investments amounted to
£162 million (2020 –£411 million), primarily relating to
Vir Biotechnology, and sales of equity investments realised
£202 million (2020 – £3,269 million).
Free cash flow
Free cash flow is the amount of cash generated by the Group
after meeting our obligations for contingent consideration,
interest, tax and dividends paid to non-controlling interests,
and after capital expenditure on property, plant and equipment
and intangible assets.
2021
£m
2020
£m
Free cash inflow
4,437
5,406
Total cash payments to Shionogi in relation to the ViiV
Healthcare contingent consideration liability in the year were
£826 million (2020 – £858 million), of which £721 million
was recognised in cash flows from operating activities and
£105 million was recognised in contingent consideration paid
within investing cash flows. These payments are deductible for
tax purposes.
Reconciliation of net cash inflow from operating
activities to free cash flow
A reconciliation of net cash inflow from operating activities,
which is the closest equivalent IFRS measure to free cash flow,
is shown below.
2021
£m
2020
£m
Net cash inflow from operating activities
7,952
8,441
Purchase of property, plant and equipment
(1,172)
(1,226)
Purchase of intangible assets
(1,759)
(1,013)
Proceeds from sale of property, plant and equipment
143
68
Proceeds from disposal of intangible assets
772
1,255
Interest paid
(786)
(864)
Interest received
27
39
Dividends from associates and joint ventures
9
31
Contingent consideration paid (reported in
investing activities)
(114)
(120)
Contribution from non-controlling interests
7
3
Distributions to non-controlling interests
(642)
(1,208)
Free cash flow
4,437
5,406
Future cash flow
Over the long term, we expect that future cash generated from
operations will be sufficient to fund our operating and debt
servicing costs, normal levels of capital expenditure, obligations
under existing licensing agreements, expenditure arising from
restructuring programmes and other routine outflows including
tax, pension contributions and dividends, subject to the
‘Principal risks and uncertainties’ discussed on pages 275
to 287. We may from time to time have additional demands for
finance, such as for acquisitions, including potentially acquiring
increased ownership interests in the ViiV Healthcare business
where a minority shareholder hold put options. We have access
to multiple sources of liquidity from short and long-term capital
markets and financial institutions for such needs, in addition to
the cash flow from operations.
Investment appraisal and capital allocation
We have a strong framework for capital allocation, including
a board to govern the allocation of capital between our
businesses. We utilise a consistent cash return on invested
capital (CROIC) methodology to prioritise investment across
the Group as a whole, so that we can more effectively compare
the returns from each of the businesses as we allocate capital
between them. We also consider the impact on EPS and our
credit profile where relevant.
Cash generation and conversion
Group financial review
continued
74
GSK Annual Report 2021
2021
£m
2020
£m
Assets
Non-current assets
Property, plant and equipment
9,932
10,176
Right of use assets
740
830
Goodwill
10,552
10,597
Other intangible assets
30,079
29,824
Investments in associates and joint ventures
88
364
Other investments
2,126
3,060
Deferred tax assets
5,218
4,287
Derivative financial instruments
18
5
Other non-current assets
1,676
1,041
Total non-current assets
60,429
60,184
Current assets
Inventories
5,783
5,996
Current tax recoverable
486
671
Trade and other receivables
7,860
6,952
Derivative financial instruments
188
152
Liquid investments
61
78
Cash and cash equivalents
4,274
6,292
Assets held for sale
22
10 6
Total current assets
18,674
20,247
Total assets
79,103
80,431
Liabilities
Current liabilities
Short-term borrowings
(3,601)
(3,725)
Contingent consideration liabilities
(958)
(765)
Trade and other payables
(17,554)
(15,840)
Derivative financial instruments
(227)
(221)
Current tax payable
(489)
(545)
Short-term provisions
(841)
(1,052)
Total current liabilities
(23,670)
(22,148)
Non-current liabilities
Long-term borrowings
(20,572)
(23,425)
Corporation tax payable
(180)
(176)
Deferred tax liabilities
(3,556)
(3,600)
Pensions and other post-employment benefits
(3,113)
(3,650)
Other provisions
(630)
(707)
Derivative financial instruments
(1)
(10)
Contingent consideration liabilities
(5,118)
(5,104)
Other non-current liabilities
(921)
(803)
Total non-current liabilities
(34,091)
(37,475)
Total liabilities
(57,761)
(59,623)
Net assets
21,342
20,808
Total equity
21,342
20,808
Property, plant and equipment
Our business is science-based, technology-intensive and highly
regulated by governmental authorities. We allocate significant
financial resources to the renewal and maintenance of our
property, plant and equipment to minimise risks of interruption to
production and to ensure compliance with regulatory standards.
A number of our processes use hazardous materials.
The total cost of our property, plant and equipment at 31
December 2021 was £20,778 million, with a net book value of
£9,932 million. Of this, land and buildings represented £3,667
million, plant and equipment £4,558 million and assets in
construction £1,707 million. In 2021, we invested £1,205 million
in new property, plant and equipment. This was mainly related to
a large number of projects for the renewal, improvement and
expansion of facilities at various worldwide sites to support new
product development and launches as well as to improve the
efficiency of existing supply chains. Property is mainly held
freehold. New investment is financed from our liquid resources.
At 31 December 2021, we had contractual commitments for
future capital expenditure of £616 million. We believe that our
property and plant facilities are adequate for our current needs.
We observe stringent procedures and use specialist skills to
manage environmental risks from our activities. Environmental
issues, sometimes dating from operations now modified or
discontinued, are reported under ‘Environment’ on pages 39
to 40 and in Note 46 to the financial statements, ‘Legal
proceedings’.
Right of use assets
Right of use assets amounted to £740 million at 31 December
2021 compared with £830 million on 1 January 2021. The
decrease in the year reflected the impact of depreciation and
disposals of £213 million and £70 million respectively, partly
offset by additions of £215 million.
Goodwill
Goodwill decreased to £10,552 million at 31 December 2021,
from £10,597 million.
Other intangible assets
Other intangible assets include the cost of intangibles acquired
from third parties and computer software. The net book value of
other intangible assets as at 31 December 2021 was £30,079
million (2020 – £29,824 million). The increase primarily
reflected additions, net of disposals and write offs of £1,913
million, offset by amortisation and impairment losses, net of
reversals, in the year of £1,597 million.
Financial position and resources
GSK Annual Report 2021
75
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Investments in associates and joint ventures
We held investments in associates and joint ventures with
a carrying value at 31 December 2021 of £88 million
(2020 – £364 million). In 2021, the Group sold all of its
shares in Innoviva Inc. back to Innoviva. Following this
divestment, the Group held no investments in associates
or joint ventures which are listed entities. See Note 21 to
the financial statements, ‘Investments in associates and
joint ventures’.
Other investments
We held other investments with a carrying value at 31
December 2021 of £2,126 million (2020 – £3,060 million).
The highest value investments held at 31 December 2021 were
in CureVac AG, which had a book value at 31 December 2021
of £380 million (2020 – £887 million), and Vir Biotechnology,
which had a book value of £266 million (2020 – £130 million).
The other investments included equity stakes in companies with
which we have research collaborations, and which provide
access to biotechnology developments of potential interest and
interests in companies that arise from business divestments.
Derivative financial instruments: assets
We held current derivative financial assets at fair value of
£188 million (2020 – £152 million) and non-current derivative
financial assets held at fair value of £18 million (2020 –
£5 million). The majority of these financial instruments related
to foreign exchange contracts both designated and not
designated as accounting hedges.
Inventories
Inventory of £5,783 million decreased from £5,996 million
in 2020.
Trade and other receivables
Trade and other receivables of £7,860 million increased from
£6,952 million in 2020.
Deferred tax assets
Deferred tax assets amounted to £5,218 million (2020 –
£4,287 million) at 31 December 2021.
Derivative financial instruments: liabilities
We held current and non-current derivative financial liabilities
at fair value of £228 million (2020 – £231 million). This primarily
related to foreign exchange contracts both designated and not
designated as accounting hedges.
Trade and other payables
At 31 December 2021, trade and other payables were
£17,554 million compared with £15,840 million at 31
December 2020. The increase primarily reflected the impact
of higher customer return and rebate accruals and higher
accruals relating to our collaborations. See Note 28 to the
financial statements, ‘Trade and other payables’.
Provisions
We carried deferred tax provisions and other short-term and
non-current provisions of £5,027 million at 31 December 2021
(2020 – £5,359 million). Other provisions at the year-end
included £196 million (2020 – £320 million) related to legal and
other disputes and £652 million (2020 – £860 million) related
to Major restructuring programmes. Provision has been made
for legal and other disputes, indemnified disposal liabilities,
employee related liabilities and the costs of the restructuring
programme to the extent that at the balance sheet date a legal
or constructive obligation existed and could be reliably
estimated.
Pensions and other post-employment benefits
We account for pension and other post-employment
arrangements in accordance with IAS 19. The net deficits were
£1,129 million (2020 – £2,104 million) on pension arrangements
and £1,243 million (2020 – £1,363 million) on unfunded
post-employment liabilities. See Note 30 to the financial
statements, ‘Pensions and other post-employment benefits’.
Other non-current liabilities
Other non-current liabilities amounted to £921 million at 31
December 2021 (2020 – £803 million).
Contingent consideration liabilities
Contingent consideration amounted to £6,076 million at
31 December 2021 (2020 – £5,869 million), of which
£5,559 million (2020 – £5,359 million) represented the
estimated present value of amounts payable to Shionogi relating
to ViiV Healthcare and £479 million (2020 – £477 million)
represented the estimated present value of contingent
consideration payable to Novartis related to the Vaccines
acquisition.
The liability due to Shionogi included £231 million in respect
of preferential dividends. The liability for preferential dividends
due to Pfizer at 31 December 2021 was £nil (2020 –
£1 million). An explanation of the accounting for the non-
controlling interests in ViiV Healthcare is set out on page 57.
Of the total contingent consideration payable (on a post-tax
basis) at 31 December 2021, £958 million (2020 – £765
million) is expected to be paid within one year. The consideration
payable is expected to be paid over a number of years. As a
result, the total estimated liabilities are discounted to their
present values, on a post-tax basis using post-tax discount rates.
The impact of the settlement with Gilead on the contingent
consideration liability (CCL) is to increase it by £288 million,
on a post-tax basis in Q4 2021 due to the obligation ViiV
Healthcare has to pay future cash consideration to Shionogi for
its share of the upfront and of the future US sales performance
of Biktarvy and products containing bictegravir. Including the
impact of the settlement at 31 December 2021, the liability
which is discounted at 8% stood at £5,559 million, on a
post-tax basis.
The Shionogi-ViiV Healthcare contingent consideration liability
is discounted at 8% and the Novartis Vaccines contingent
consideration liability is discounted partly at 7.5% and partly
at 8.5%.
Financial position and resources
continued
Group financial review
continued
76
GSK Annual Report 2021
Net debt
2021
£m
2020
£m
Cash, cash equivalents and liquid investments
4,335
6,370
Borrowings – repayable within one year
(3,601)
(3,725)
Borrowings – repayable after one year
(20,572)
(23,425)
Net debt
(19,838)
(20,780)
At 31 December 2021, net debt was £19.8 billion, compared
with £20.8 billion at 31 December 2020, comprising gross debt
of £24.1 billion and cash and liquid divestments of £4.3 billion.
Net debt reduced due to £4.4 billion free cash flow and £0.5
billion proceeds from investments, including £0.3 billion
proceeds from the Innoviva disposal and £0.3 billion of net
favourable exchange impacts from the translation of non-Sterling
denominated debt and exchange on other financing items partly
offset by the dividends paid to shareholders of £4.0 billion and
additional investments of £0.2 billion.
At 31 December 2021, GSK had short-term borrowings
(including overdrafts and lease liabilities) repayable within
12 months of £3.6 billion and £4.0 billion repayable in the
subsequent year.
At 31 December 2021, GSK’s cash and liquid investments were
held as follows:
2021
£m
2020
£m
Bank balances and deposits
2,825
3,000
US Treasury and Treasury repo only money
market funds
54
317
Liquidity funds
1,395
2,975
Cash and cash equivalents
4,274
6,292
Liquid investments – government securities
61
78
4,335
6,370
Cash and liquid investments of £2.9 billion (2020 – £5.4 billion)
were held centrally at 31 December 2021.
The analysis of cash and gross debt after the effects of hedging
is as follows:
2021
£m
2020
£m
Cash and liquid investments
4,335
6,370
Gross debt – fixed
(23,167)
(24,538)
(1,006)
(2,612)
–
–
Net debt
(19,838)
(20,780)
Movements in net debt
2021
£m
2020
£m
Net debt at beginning of year
(20,780)
(25,215)
(Decrease)/increase in cash and bank overdrafts
(1,414)
470
(Decrease)/increase in liquid investments
(18)
1
Increase in long-term loans
–
(3,298)
Net repayment of short-term loans
1,995
7,305
Repayment of lease liabilities
215
227
Exchange movements
314
(135)
Other movements
(150)
(135)
Net debt at end of year
(19,838)
(20,780)
Financial position and resources
continued
3,500
4,000
4,500
2,500
2,000
1,500
1,000
500
3,000
Maturity profile of bond debt
£m equivalent
G
BP bonds
EUR bonds
USD
bonds
2022 2025 2027 2033 2034 2038 2039 2042
2023 2043
2045
2024 2026 2029
0
2028 2030 2035
GSK Annual Report 2021
77
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Financial position and resources
continued
Interest rate benchmark reform
Interest rate benchmark reform - Amendments to IFRS 9, IAS
39, IFRS 4, IFRS 7 and IFRS 16’ Phase I and Phase II were
issued by the IASB in September 2019 and August 2020, and
adopted by the UK Endorsement Board on 5 January 2021.
Phase I of the amendment modifies specific hedge accounting
requirements to allow hedge accounting to continue for affected
hedges during the period of uncertainty before the hedged
items or hedging instruments affected by the current interest
rate benchmarks are amended as a result of the ongoing
interest rate benchmark reforms. Phase II also provides that,
for financial instruments measured using amortised cost
measurement, changes to the basis for determining the
contractual cash flows required by interest rate benchmark
reform should be reflected by adjusting their effective interest
rate and no immediate gain or loss should be recognised.
The Group has closely monitored the market and the output
from the various industry working groups managing the
transition to new benchmark interest rates. This includes
announcements made by LIBOR regulators, including the
Financial Conduct Authority (FCA) and the US Commodity
Futures Trading Commission, regarding the transition away
from LIBOR (including GBP LIBOR, USD LIBOR and
EURIBOR) to the Sterling Overnight Index Average Rate
(SONIA), the Secured Overnight Financing Rate (SOFR),
and the Euro Short-Term Rate (€STR) respectively.
At 31 December 2021, the Group was not directly exposed
to interest rate benchmark reform as it held no interest rate
derivatives or floating rate debt that referenced to LIBOR. The
Group did not transition any material derivatives or floating rate
debt into a new index as all of the instruments referencing
LIBOR matured before December 2021.
Total equity
At 31 December 2021, total equity had increased from
£20,808 million at 31 December 2020 to £21,342 million.
A summary of the movements in equity is set out below:
2021
£m
2020
£m
Total equity at beginning of year
20,808
18,357
Total comprehensive income for the year
4,759
7,358
Dividends to shareholders
(3,999)
(3,977)
Ordinary shares issued
21
29
Changes in non-controlling interests
–
(131)
Transaction with non-controlling interest
10
–
Share-based incentive plans
367
381
Tax on share-based incentive plans
11
(4)
Contributions from non-controlling interests
7
3
Distributions to non-controlling interests
(642)
(1,208)
Total equity at end of year
21,342
20,808
Share purchases
At 31 December 2021, GSK held 355.2 million shares as
Treasury shares (2020 – 355.2 million shares), at a cost of
£4,969 million (2020 – £4,969 million), which has been
deducted from retained earnings.
No ordinary shares were repurchased in the period 1 January
2021 to 28 February 2022 and the company does not expect
to make any ordinary share repurchases in the remainder
of 2022.
In 2021, no Treasury shares were transferred to the Employee
Share Ownership Plan (ESOP) Trusts. Shares are held by the
Trusts to satisfy future exercises of options and awards under
the Group share option and award schemes.
A proportion of the shares held by the Trusts are in respect
of awards where the rules of the scheme require GSK to satisfy
exercises through market purchases rather than the issue of
new shares. The shares held by the Trusts are matched to
options and awards granted.
At 31 December 2021, the ESOP Trusts held 23.2 million
(2020 – 49.0 million) GSK shares against the future exercise
of share options and share awards. The carrying value of
£27 million (2020 – £194 million) has been deducted from
other reserves. The market value of these shares was £371
million (2020 – £655 million).
On 10 February 2022, 50.3 million shares were transferred to
the ESOP Trusts after which the Trusts held 72.9 million shares
against the exercise of share options and share rewards.
Group financial review
continued
78
GSK Annual Report 2021
Contractual obligations and commitments
Financial commitments are summarised in Note 35 to the
financial statements, ‘Commitments’.
The following table sets out our contractual obligations and
commitments at 31 December 2021 as they fall due for
payment.
Total
Under 1 yr 1-3 yrs 3-5 yrs 5 yrs+
£m £m £m £m £m
Loans 23,296 3,399 5,624 2,800 11,473
Interest on loans
7,603 1,038 4,685
686
1,194Lease obligations
1,015 203 305 166 341
Future finance charges
153 25 41
30
57
Intangible assets
12,082 583 1,013 1,914
8,572
Property, plant & equipment
616
468
148– –
Investments 146 45 61
40
–
Purchase commitments
484 360
115
8 1
Pensions
44 44
– – –
Total 45,439 5,813 8,501 5,996 25,129
Commitments in respect of loans and future interest payable
on loans are disclosed before taking into account the effect of
derivatives.
We have entered into a number of research collaborations to
develop new compounds with other pharmaceutical companies.
The terms of these arrangements can include upfront fees,
equity investments, loans and commitments to fund specified
levels of research. In addition, we will often agree to make
further payments if future ‘milestones’ are achieved.
As some of these agreements relate to compounds in the early
stages of development, the potential obligation to make
milestone payments will continue for a number of years if the
compounds move successfully through the development
process. Generally, the closer the product is to marketing
approval, the greater the probability of success. The amounts
shown above within intangible assets represent the maximum
that would be paid if all milestones were achieved. There was a
decrease in the commitments in 2021 as a result of a reduction
in outstanding loan commitments.
In 2018, we reached an agreement with the trustees of the
UK pension schemes to make additional contributions, to
assist in eliminating the pension deficit identified as part of
the 31 December 2017 actuarial funding valuation. The table
includes this commitment but excludes the normal ongoing
annual funding requirement in the UK of approximately
£110 million. For further information on pension obligations,
see Note 30 to the financial statements, ‘Pensions and
other post-employment benefits’.
Contingent liabilities
Other contingent liabilities are set out in Note 34 to the financial
statements, ‘Contingent liabilities’.
The following table sets out contingent liabilities, comprising
performance guarantees, letters of credit and other items arising
in the normal course of business, and when they are expected
to expire.
Total
Under 1 yr 1-3 yrs 3-5 yrs 5 yrs+
£m £m £m £m £m
Guarantees 12
9 2 – 1
Other contingent liabilities
114 13 12 31
58
Total 126 22 14 31
59
In the normal course of business, we have provided various
indemnification guarantees in respect of business disposals
in which legal and other disputes have subsequently arisen. A
provision is made where an outflow of resources is considered
probable and a reliable estimate can be made of the likely
outcome of the dispute and this is included in Note 31 to
the financial statements, ‘Other provisions’.
We provide for the outcome of tax, legal and other disputes
when an outflow of resources is considered probable and a
reliable estimate of the outflow may be made. At 31 December
2021, other than for those disputes where provision has been
made, it was not possible to make a reliable estimate of the
potential outflow of funds that might be required to settle
disputes where the possibility of there being an outflow was
more than remote.
The ultimate liability for such matters may vary significantly
from the amounts provided and is dependent upon negotiations
with the relevant tax authorities and the outcome of litigation
proceedings, where relevant. This is discussed further in
‘Principal risks and uncertainties’ on pages 275 to 287 and
Note 46 to the financial statements, ‘Legal proceedings’.
Financial position and resources
continued
GSK Annual Report 2021
79
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
Treasury policies
We report in Sterling and pay dividends out of Sterling cash
flows. The role of Treasury is to monitor and manage the
Group’s external and internal funding requirements and financial
risks in support of our strategic objectives. GSK operates on a
global basis, primarily through subsidiary companies, and we
manage our capital to ensure that our subsidiaries are able to
operate as going concerns and to optimise returns to
shareholders through an appropriate balance of debt and
equity. Treasury activities are governed by policies approved
annually by the Board of Directors, and most recently on
14 October 2021. A Treasury Management Group (TMG)
meeting, chaired by our Chief Financial Officer, takes place
on a regular basis to review Treasury activities. Its members
receive management information relating to these activities.
Treasury operations
The objective of GSK’s Treasury activities is to minimise the
post-tax net cost of financial operations and reduce its volatility
in order to benefit earnings and cash flows. GSK uses a variety
of financial instruments to finance its operations and derivative
financial instruments to manage market risks from these
operations. Derivatives principally comprise foreign exchange
forward contracts and swaps which are used to swap
borrowings and liquid assets into currencies required for Group
purposes, as well as interest rate swaps which are used to
manage exposure to financial risks from changes in interest
rates.
Derivatives are used exclusively for hedging purposes in relation
to underlying business activities and not as trading or
speculative instruments.
Capital management
GSK’s financial strategy, implemented through the Group’s
financial architecture, supports GSK’s strategic priorities and is
regularly reviewed by the Board. We manage the capital
structure of the Group through an appropriate mix of debt and
equity. We continue to manage our financial policies to a credit
profile that particularly targets short-term credit ratings of A-1
and P-1 while maintaining single A long-term ratings consistent
with those targets.
GSK’s long-term credit rating with Standard and Poor’s is A
(stable outlook) and with Moody’s Investor Services (‘Moody’s’)
is A2 (stable outlook). Our short-term credit ratings are A-1 and
P-1 with Standard and Poor’s and Moody’s respectively.
Liquidity risk management
GSK’s policy is to borrow centrally in order to meet anticipated
funding requirements. Our cash flow forecasts and funding
requirements are monitored by the TMG on a regular basis. Our
strategy is to diversify liquidity sources using a range of facilities
and to maintain broad access to financial markets.
Each day, we sweep cash from a number of global subsidiaries
to central Treasury accounts for liquidity management purposes.
Interest rate risk management
GSK’s objective is to minimise the effective net interest cost
and to balance the mix of debt at fixed and floating interest rates
over time. The policy on interest rate risk management limits the
net amount of floating rate debt to a specific cap, reviewed and
agreed no less than annually by the Board.
Foreign exchange risk management
Our objective is to minimise the exposure of overseas operating
subsidiaries to transaction risk by matching local currency
income with local currency costs where possible. Foreign
currency transaction exposures arising on external and internal
trade flows are selectively hedged. GSK’s internal trading
transactions are matched centrally and we manage
inter-company payment terms to reduce foreign currency risk.
Where possible, we manage the cash surpluses or borrowing
requirements of subsidiary companies centrally using forward
contracts to hedge future repayments back into the originating
currency.
In order to reduce foreign currency translation exposure, we
seek to denominate borrowings in the currencies of our
principal assets and cash flows. These are primarily
denominated in US Dollars, Euros and Sterling.
Borrowings can be swapped into other currencies as required.
Borrowings denominated in, or swapped into, foreign
currencies that match investments in overseas Group assets
may be treated as a hedge against the relevant assets. Forward
contracts in major currencies are also used to reduce exposure
to the Group’s investment in overseas Group assets. The TMG
reviews the ratio of borrowings to assets for major currencies
regularly.
Commodity risk management
Our objective is to minimise income statement volatility arising
from fluctuations in commodity prices, where practical and cost
effective to do so. The TMG is authorised to approve the
execution of certain financial derivatives to hedge commodity
price exposures.
Counterparty risk management
We set global counterparty limits for each of our banking and
investment counterparties based on long-term credit ratings
from Moody’s and Standard and Poor’s. Usage of these limits is
actively monitored and any breach of these limits would be
reported to the CFO immediately.
In addition, relationship banks and their credit ratings are
reviewed regularly so that, when changes in ratings occur,
changes can be made to investment levels or to authority limits
as appropriate. All banking counterparty limits are reviewed at
least annually.
Group financial review
continued
80
GSK Annual Report 2021
The Group consolidated financial statements have been
prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006
and the International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standard Board (IASB).
We are required to make estimates and assumptions that
affect the amounts of assets, liabilities, revenue and expenses
reported in the financial statements. Actual amounts and
results could differ from those estimates.
The critical accounting policies relate to the following areas:
–
Turnover
–
Taxation (Note 14)
–
Legal and other disputes (Notes 46 and 31)
–
Contingent liabilities (Note 34)
–
Pensions and other post-employment benefits (Note 30).
Information on the judgements and estimates made in these
areas is given in Note 3 to the financial statements, ‘Critical
accounting judgements and key sources of estimation
uncertainty’.
Turnover
In respect of the Turnover accounting policy, our largest
business is US Pharmaceuticals, and the US market has
the most complex arrangements for rebates, discounts and
allowances. The following briefly describes the nature of the
arrangements in existence in our US Pharmaceuticals business:
–
We have arrangements with certain indirect customers
whereby the customer is able to buy products from
wholesalers at reduced prices. A chargeback represents
the difference between the invoice price to the wholesaler
and the indirect customer’s contractual discounted price.
Accruals for estimating chargebacks are calculated based
on the terms of each agreement, historical experience and
product growth rates
–
Customer rebates are offered to key managed care and
Group Purchasing Organisations and other direct and indirect
customers. These arrangements require the customer to
achieve certain performance targets relating to the value of
product purchased, formulary status or pre-determined market
shares relative to competitors. The accrual for customer
rebates is estimated based on the specific terms in each
agreement, historical experience and product growth rates
–
The US Medicaid programme is a state-administered
programme providing assistance to certain poor and
vulnerable patients. In 1990, the Medicaid Drug Rebate
Program was established to reduce state and federal
expenditure on prescription drugs. In 2010, the Patient
Protection and Affordable Care Act became law. We
participate by providing rebates to states. Accruals for
Medicaid rebates are calculated based on the specific
terms of the relevant regulations or the Patient Protection
and Affordable Care Act
–
Cash discounts are offered to customers to encourage
prompt payment. These are accrued for at the time of
invoicing and adjusted subsequently to reflect actual
experience
–
We record an accrual for estimated sales returns by applying
historical experience of customer returns to the amounts
invoiced, together with market-related information such as
stock levels at wholesalers, anticipated price increases and
competitor activity.
A reconciliation of gross turnover to net turnover for the US
Pharmaceuticals business is as follows:
2021
2020 2019
£m
Margin
%
£m
Margin
%
£m
Margin
%
Gross turnover
19,928
100
20,035
100
18,471100
Market-driven
segments
(6,656) (33)
(6,754) (34) (5,976) (32)
Government
mandated and
state programmes
(4,553) (23)
(5,205) (26) (4,264) (23)
Cash discounts
(377) (2)
(388) (2) (356) (2)
Customer returns
(117) (1)
(117) (1) (141) (1)
Prior year adjustments
838
4
402
2
247
1Other items
(621) (3)
(522) (2)
(579)
(3)Total deductions
(11,486)
(58)
(12,584)
(63)
(11,069)(60)
Net turnover
8,442 42
7,451
37
7,40240
Market-driven segments consist primarily of managed care and
Medicare plans with which we negotiate contract pricing that is
honoured via rebates and chargebacks. Mandated segments
consist primarily of Medicaid and federal government
programmes which receive government-mandated pricing via
rebates and chargebacks.
Critical accounting policies
GSK Annual Report 2021
81
Group financial review
continued
Strategic report
Governance and remuneration Financial statements Investor information
The decreased deductions in the Government mandated and
state programmes of the gross turnover to net turnover
reconciliation primarily reflected lower rebates and chargebacks
on respiratory products, and on
Advair
in particular.
During the year
Advair
accounted for 6% of US Pharmaceuticals turnover and approximately 21% of the
total deduction for rebates and returns.
The respiratory portfolio as a whole, including Established
Respiratory products, accounted for approximately 77% of
the total deduction in the year.
The balance sheet accruals for rebates, discounts, allowances
and returns for the US Pharmaceuticals and Vaccines
businesses are managed on a combined basis. At 31 December
2021, the total accrual amounted to £5,044 million (2020 –
£4,686 million).
A monthly process is operated to monitor inventory levels at
wholesalers for any abnormal movements. This process uses
gross sales volumes, prescription volumes based on third party
data sources and information received from key wholesalers.
The aim of this is to maintain inventories at a consistent level
from year to year based on the pattern of consumption.
On this basis, US Pharmaceuticals and Vaccines inventory
levels at wholesalers and in other distribution channels at
31 December 2021 were estimated to amount to
approximately four weeks of turnover. This calculation uses
third party information, the accuracy of which cannot be totally
verified, but is believed to be sufficiently reliable for this
purpose.
Legal and other disputes
In respect of the accounting policy for Legal and other disputes,
the following briefly describes the process by which we
determine the level of provision that is necessary.
In accordance with the requirements of IAS 37, ‘Provisions,
contingent liabilities and contingent assets’, we provide for
anticipated settlement costs where an outflow of resources is
considered probable and a reliable estimate may be made of
the likely outcome of the dispute and legal and other expenses
arising from claims against the Group.
We may become involved in significant legal proceedings, in
respect of which it is not possible to meaningfully assess
whether the outcome will result in a probable outflow, or to
quantify or reliably estimate the liability, if any, that could result
from ultimate resolution of the proceedings. In these cases,
appropriate disclosure about such cases would be included
in the Annual Report, but no provision would be made.
This position could change over time and, therefore, there can
be no assurance that any losses that result from the outcome of
any legal proceedings will not exceed by a material amount the
amount of the provisions reported in the Group’s financial
statements.
Like many pharmaceutical companies, we are faced with
various complex product liability, anti-trust and patent litigation,
as well as investigations of our operations conducted by various
governmental regulatory agencies. Throughout the year, the
General Counsel of the Group, as head of the Group’s legal
function, and the Senior Vice President and Head of Global
Litigation for the Group, who is responsible for all litigation and
government investigations, routinely brief the Chief Executive
Officer, the Chief Financial Officer and the Board of Directors
on the significant litigation pending against the Group and
governmental investigations of the Group.
These meetings, as appropriate, detail the status of significant
litigation and government investigations and review matters
such as the number of claims notified to us, information on
potential claims not yet notified, assessment of the validity of
claims, progress made in settling claims, recent settlement
levels and potential reimbursement by insurers.
The meetings also include an assessment of whether or not
there is sufficient information available for us to be able to make
a reliable estimate of the potential outcomes of the disputes.
Often, external counsel assisting us with various litigation
matters and investigations will also assist in the briefing of the
Board and senior management. Following these discussions,
for those matters where it is possible to make a reliable estimate
of the amount of a provision, if any, that may be required, the
level of provision for legal and other disputes is reviewed and
adjusted as appropriate. These matters are discussed further
in Note 46 to the financial statements, ‘Legal proceedings’.
Critical accounting policies
continued
Strategic report
The Strategic report was approved by the Board of Directors on
28 February 2022
Iain Mackay
Chief Financial Officer
28 February 2022
82
GSK Annual Report 2021
Corporate
Governance
In this section
The Board and GSK Leadership Team 83
Chair’s Governance statement 89
Board roles and responsibilities 92
Board committee information 93
Board architecture 94
Board activity 95
Board progress in 2021 96
Board’s approach to continuous engagement 99
Board-led purpose and culture 102
Board performance 103
Board committee reports 104
Section 172 statement 116
Directors’ report 117
82
GSK Annual Report 2021
GSK Annual Report 2021
83
Strategic report Investor information
Governance and remuneration
Financial statementsKey
Committee Chair
N
Nominations & Corporate Governance
A
Audit & Risk
R
Remuneration
S
Science
C
Corporate Responsibility
The Board
Sir Jonathan Symonds, CBE
Non-Executive Chair
Age:
63
Nationality:
British
Appointed:
1 September 2019
N
Skills and experience
Jon has extensive international financial, life sciences and governance experience.
Jon served as an Independent Non-Executive Director of HSBC Holdings plc from April 2014, and as Deputy
Group Chairman from August 2018, until his retirement from the Board in February 2020. He was previously
Chairman of HSBC Bank plc, Chief Financial Officer of Novartis AG, Partner and Managing Director of Goldman
Sachs, Chief Financial Officer of AstraZeneca plc, and a Partner at KPMG. His governance experience includes
roles as Non-Executive Director and Chair of the Audit Committees of Diageo plc and QinetiQ Group plc and
Non-Executive Chair of Proteus Digital Health Inc.
Jon is a Fellow of the Institute of Chartered Accountants in England and Wales.
External appointments
Non-Executive Director, Rubius Therapeutics, Inc; Non-Executive Director, Genomics England Limited having
previously served as its Chairman; Member, European Round Table for Industry; Senior Advisor to Chatham House.
Dame Emma Walmsley
Chief Executive Officer
Age:
52
Nationality:
British
Appointed:
1 January 2017
Chief Executive Officer from
1 April 2017
Skills and experience
Prior to her appointment as GSK’s CEO, Emma was the CEO of GSK Consumer Healthcare, a Joint Venture
between GSK and Novartis, from its creation in March 2015. Emma joined GSK in 2010 from L’Oreal, having
worked for 17 years in a variety of roles in Paris, London, New York and Shanghai. Emma was previously a
Non-Executive Director of Diageo plc.
Emma holds an MA in Classics and Modern Languages from Oxford University.
External appointments
Independent director, Microsoft, Inc.
Iain Mackay
Chief Financial Officer
Age:
60
Nationality:
British
Appointed:
14 January 2019
Chief Financial Officer from
1 April 2019
Skills and experience
Prior to joining GSK, Iain was Group Finance Director at HSBC Holdings plc, a position he held for eight years.
A chartered accountant, Iain has lived and worked in Asia, the US and Europe and before HSBC was at General
Electric, Schlumberger Dowell and Price Waterhouse. Iain was previously a Trustee of the British Heart
Foundation and Chair of its Audit and Risk Committee.
Iain holds an MA in Business Studies and Accounting and holds an Honorary Doctorate from Aberdeen University
in Scotland.
Iain is a member of the Institute of Chartered Accountants of Scotland.
External appointments
Member, Court of the University of Aberdeen and Chair of its Remuneration Committee; Member, The 100 Group
and Chair of its Stakeholder Communications and Reporting Committee.
Dr Hal Barron
Chief Scientific Officer
and President, R&D
Age:
59
Nationality:
American
Appointed:
1 January 2018
Chief Scientific Officer and
President, R&D from 1 April 2018
Skills and experience
Prior to joining GSK, Hal was President, R&D at Calico LLC (California Life Company), an Alphabet-funded
company that uses advanced technologies to increase understanding of lifespan biology. Prior to this, Hal was
Executive Vice President, Head of Global Product Development, and Chief Medical Officer of Roche, responsible
for all the products in the combined portfolio of Roche and Genentech. At Genentech, he was Senior Vice
President of Development and Chief Medical Officer. Hal was a Non-Executive Director and Chair of the Science
& Technology Committee at Juno Therapeutics, Inc until March 2018, when it was acquired by Celgene
Corporation. Hal previously served as a Non-Executive Board Director of GRAIL, Inc and an Advisory Board
Member of Verily Life Sciences LLC.
As announced on 19 January 2022 Tony Wood will succeed Hal as CSO and Head of R&D with effect from
1 August 2022. From that date, Hal will transition to a non-independent Non-Executive Director with additional
responsibilities to support R&D.
External appointments
Non-Executive Director of Altos Labs Inc; Associate Adjunct Professor, Epidemiology & Biostatistics, University
of California, San Francisco.
Board composition
Composition
Executive 23%
Non-Executive 77%
Tenure Non-Executive
Up to 3 years 40%
3-6 years 20%
6-9 years 30%
9-10 years 10%
Board diversity
Gender
Male 62%
Female 38%
Ethnicity
Ethnically diverse 15%
White 85%
See more information on page
110
International experience
Global 85%
US 100%
Europe 77%
EMAP 69%
84
GSK Annual Report 2021
Charles Bancroft
Independent Non-Executive
Director
Age:
62
Nationality:
American
Appointed:
1 May 2020
A
N
Skills and experience
Charlie has a wealth of financial and management experience in global biopharma.
Charlie retired from a successful career at Bristol Myers Squibb (BMS) in March 2020 where he held a number
of leadership roles in commercial, strategy and finance. Beginning his career at BMS in 1984, he held positions
of increasing responsibility within the finance organisation and had commercial operational responsibility for Latin
America, Middle East, Africa, Canada, Japan and several Pacific Rim countries. He was appointed Chief
Financial Officer in 2010, Chief Financial Officer and Executive Vice President, Global Business Operations in
2016 and Executive Vice President and Head of Integration and Strategy & Business Development in 2019.
Charlie successfully steered BMS through a period of strategic transformation, including its recent $74 billion
acquisition of Celgene. Charlie also served as a member of the Board of Colgate-Palmolive Company from 2017
until March 2020.
External appointments
Board Member, Kodiak-Sciences Inc; Board Member, BioVector Inc; Advisory Board Member, Drexel University’s
LeBow College of Business.
The Board determined that Charlie has recent and relevant financial experience and agreed that he has the
appropriate qualifications and background to be an audit committee financial expert.
Manvinder Singh (Vindi) Banga
Senior Independent Non-Executive
Director
Age:
67
Nationality:
British
Appointed:
1 September 2015
Senior Independent Non-Executive
Director from 5 May 2016
N
A
R
Skills and experience
Vindi has many years of commercial experience and a track record of delivering outstanding performance in
highly competitive global consumer-focused businesses.
Prior to joining GSK, Vindi spent 33 years at Unilever plc, where his last role (amongst several senior positions)
was President of the Global Foods, Home and Personal Care businesses, and a member of the Unilever
Executive Board. Vindi sat on the Prime Minister of India’s Council of Trade & Industry from 2004 to 2014 and
was on the Board of Governors of the Indian Institute of Management (IIM), Ahmedabad. Vindi is also the
recipient of the Padma Bhushan, one of India’s highest civilian honours. Vindi has been a Non-Executive Director
of the Confederation of British Industry (CBI) and Thomson Reuters Corp, Chairman of the Supervisory Board of
Mauser Group, Chairman of Kalle GmbH, Director of High Ridge Brands LLC, Member of the Indo UK CEO
Forum, and Senior Independent Director of Marks & Spencer Group plc.
External appointments
Partner, Clayton Dubilier & Rice; Non-Executive Director, The Economist Newspaper Limited; Member, Holdingham
International Advisory Board; Board Member, International Chamber of Commerce United Kingdom; Member,
Governing Board of the Indian School of Business, Hyderabad; Member, Global Leadership Council of Saïd
Business School, Oxford; Chair of the Board of Trustees, Marie Curie; Chairman, UK Government Investments.
Dr Anne Beal
Independent Non-Executive
Director
Age:
59
Nationality:
American
Appointed:
6 May 2021
C
A
Skills and experience
Anne brings extensive healthcare experience to the Board as a physician and entrepreneur combined with a
passion for patient advocacy. She is a recognised health policy expert in the development of global and national
programmes for improving healthcare access for all patient groups and in ensuring the voice of patients is
reflected in research programmes.
Prior to her current roles, Anne spent six years at Harvard Medical School and Massachusetts General Hospital,
where she was an instructor in paediatrics. She has also held leadership roles at the Commonwealth Fund and
the Aetna Foundation. Anne was previously Deputy Executive Director and Chief Engagement Officer for The
Patient-Centered Outcomes Research Institute in the U.S. and Chief Patient Officer and Global Head of Patient
Solutions at Sanofi.
External appointments
Founder and CEO, AbsoluteJOI Skincare; Board Member, AcademyHealth; Board Member, Prolacta Bioscience.
Dame Vivienne Cox
Independent Non-Executive
Director & Workforce
Engagement Director
Age:
62
Nationality:
British
Appointed:
1 July 2016
R
C
Skills and experience
Vivienne has wide experience of business gained in the energy, natural resources and publishing sectors. She
also has a deep understanding of regulatory organisations and government.
Vivienne worked for BP plc for 28 years, in Britain and Continental Europe, in posts including Executive Vice
President and Chief Executive of BP’s gas, power and renewable business and its alternative energy unit.
Vivienne was previously a Non-Executive Director of BG Group plc and Rio Tinto plc, the Senior Independent
Director of Pearson plc, Chairman of the Supervisory Board of Vallourec and the Lead Independent Director at
the UK Government’s Department for International Development. Vivienne was made a Dame Commander of
the Order of the British Empire (DBE) in the 2022 UK New Year’s Honours List for services to sustainability,
diversity, and inclusion in business.
External appointments
Chair Designate, Victrex plc; Non-Executive Director, Stena AB; Advisory Board Member, African Leadership
Institute; Vice President, Energy Institute; Advisory Board Member, Montrose Associates; Investment Advisor,
QantX Ventures; Chair, Rosalind Franklin Institute; Vice Chair, Saïd Business School, Oxford and Member of its
Global Leadership Council; Patron, Hospice of St Francis.
The Board
continued
Key
Committee Chair
N
Nominations & Corporate Governance
A
Audit & Risk
R
Remuneration
S
Science
C
Corporate Responsibility
GSK Annual Report 2021
85
Strategic report Investor information
Governance and remuneration
Financial statementsDr Harry (Hal) C Dietz
Independent Non-Executive
Director and Scientific &
Medical Expert
Age:
63
Nationality:
American
Appointed:
1 January 2022
S
Skills and experience
Hal brings extensive experience in the field of human genetics which is central to GSK’s approach to R&D. He
is a former President of the American Society of Human Genetics and is recognised as the world’s leading
authority on a genetic disorder known as Marfan Syndrome. He also brings experience in development of novel
therapies, through his role as Founder of and Scientific Adviser to Blade Therapeutics, a biopharmaceutical
company focused on disease-modifying treatments for fibrotic and neurodegenerative diseases. In total, Hal
has authored 282 original publications in peer-reviewed journals across his career.
As a physician scientist, he has dedicated his entire career to the care and study of individuals with heritable
connective tissue disorders with primary perturbations of extracellular matrix homeostasis and function. His lab
has identified the genes for many of these conditions, for which he uses model systems to elucidate disease
mechanisms.
Hal has received multiple prestigious awards including the Curt Stern Award from the American Society of
Human Genetics, the Colonel Harland Sanders Lifetime Achievement Award in Medical Genetics, the Taubman
Prize for excellence in translational medical science, the Harrington Prize from the American Society for Clinical
Investigation and the Harrington Discovery Institute, the Pasarow Award in Cardiovascular Research, the
InBev-Baillet Latour Health Prize from the country of Belgium, and the Research Achievement Award from the
American Heart Association.
He is an inductee of the American Society for Clinical Investigation, American Association for the Advancement
of Science, Association of American Physicians, National Academy of Medicine, and National Academy of
Sciences.
External appointments
Victor A. McKusick Professor of Paediatrics, Medicine, and Molecular Biology & Genetics in the Department of
Genetic Medicine, The Johns Hopkins University School of Medicine; Investigator, Howard Hughes Medical
Institute; Founder and Scientific Advisor, Blade Therapeutics; Consultant and Chair of Scientific Advisory
Board, Aytu Biopharma; Independent Chair, GSK’s Human Genetics Scientific Advisory Board.
Lynn Elsenhans
Independent Non-Executive
Director
Age:
65
Nationality:
American
Appointed:
1 July 2012
C
N
A
Skills and experience
Lynn has a wealth of experience of running a global business and significant knowledge of the global markets in
which GSK operates.
Lynn served as Chair, President and Chief Executive Officer of Sunoco Inc from 2009 to 2012. Prior to joining
Sunoco in 2008 as President and Chief Executive Officer, Lynn worked for Royal Dutch Shell, which she joined
in 1980, and where she held a number of senior roles, including Executive Vice President, Global
Manufacturing from 2005 to 2008. Lynn was previously a Non-Executive Director of the First Tee of Greater
Houston, Flowserve Corporation, the Texas Medical Center, and a Trustee of the United Way of Greater
Houston.
External appointments
Non-Executive Director and Chair of the Governance and Corporate Responsibility Committee, Baker Hughes
Company; Board Director and Chair of the Audit Committee, Saudi Aramco; Advisory Board Member, Johns
Hopkins University Whiting School of Engineering; Member, Audit Committee Leadership Network.
Dr Laurie Glimcher
Independent Non-Executive
Director and Scientific &
Medical Expert
Age:
70
Nationality:
American
Appointed:
1 September 2017
A
S
Skills and experience
Laurie brings scientific and public health expertise to the Board’s deliberations, and a wealth of global, publicly
listed pharmaceutical business experience.
In addition to a number of senior leadership positions held at both Harvard Medical School and Harvard School
of Public Health, Laurie has also served as Stephen and Suzanne Weiss Dean and Professor of Medicine at
Weill Cornell Medical College and as an Attending Physician at the New York Presbyterian Hospital/Weill
Cornell Medical Center. Laurie stepped down from the Board of Bristol-Myers Squibb (BMS) in 2017 after
serving for 20 years on its Board. Laurie was previously a Non-Executive Director of the Waters Corporation
and co-founder and Chair of the Scientific Advisory Board of Quentis Therapeutics Inc.
External appointments
Professor of Medicine, Harvard Medical School; CEO, President and an Attending Physician, Dana-Farber
Cancer Institute.
Member, US National Academy of Sciences and the National Academy of Medicine; Member, Scientific
Steering Committee of the Parker Institute for Cancer Immunotherapy; Independent Director, Analog Devices
Inc; Director and Member of the Executive Committee, Breakthrough Cancer; Member, Scientific Advisory
Boards of Repare Therapeutics Inc, Abpro Therapeutics, Kaleido Biosciences Inc, BioCentury Inc and Stand
Up 2 Cancer.
Judy Lewent joined the Board on 1 April 2011. She retired from the Board on 5 May 2021.
The Board
continued
Key
Committee Chair
N
Nominations & Corporate Governance
A
Audit & Risk
R
Remuneration
S
Science
C
Corporate Responsibility
86
GSK Annual Report 2021
The Board
continued
Key
Committee Chair
N
Nominations & Corporate Governance
A
Audit & Risk
R
Remuneration
S
Science
C
Corporate Responsibility
Dr Jesse Goodman
Independent Non-Executive
Director and Scientific &
Medical Expert
Age:
70
Nationality:
American
Appointed:
1 January 2016
S
C
Skills and experience
Jesse brings scientific and public health expertise to the Board’s deliberations. He has a wealth of experience
spanning science, medicine, vaccines, regulation and public health, and has a proven record in addressing pressing
public health needs from both the academic and federal sectors.
Jesse previously served in senior leadership positions at the US Food and Drug Administration (FDA), including
most recently as the FDA’s Chief Scientist and previously as Deputy Commissioner for Science and Public Health
and as Director of the Center for Biologics Evaluation and Research (CBER).
Jesse played a leadership role in developing the FDA’s Regulatory Science and Medical Countermeasures Initiatives
and has worked collaboratively with industry, academia, government and global public health and regulatory
partners to prepare for and respond to major public health threats, including emerging infectious diseases, disasters
and terrorism. He led the FDA’s response to West Nile Virus and to the 2009 H1N1 influenza pandemic and served
on the Senior Leadership Team for the 2010 White House Medical Countermeasure Review. Jesse was previously a
member of both the Scientific Advisory Committee and the Regulatory and Legal Working Group of the Coalition
for Epidemic Preparedness Innovations (CEPI).
External appointments
Professor of Medicine and Attending Physician, Infectious Diseases, Georgetown University and directs the
Georgetown University Center on Medical Product Access, Safety and Stewardship (COMPASS); Board Member
(formerly President), United States Pharmacopeia (USP); Board Member, Scientific Counselors for Infectious
Diseases, Centers for Disease Control and Prevention (CDC); Board Member, Intellia Therapeutics Inc; Member,
US National Academy of Medicine; Board Member, Adaptive Phage Therapeutics, Inc.
Urs Rohner
Independent Non-Executive
Director
Age:
62
Nationality:
S
wiss
Appointed:
1 January 2015
R
N
Skills and experience
Urs has a broad business, banking and legal background and extensive senior level experience at multinational
companies.
Urs has served as Chairman on a number of Boards, most recently for Credit Suisse Group from 2011 until
April 2021. Prior to joining Credit Suisse in 2004, Urs served as Chairman of the Executive Board and CEO of
ProSieben and ProSiebenSat.1 Media AG. This followed a number of years in private practice at major law
firms in Switzerland and the US, having been admitted to the bars of the canton of Zurich in Switzerland in 1986
and the state of New York in the US in 1990.
External appointments
Member, International Advisory Board, Investcorp; Chair, Vega Cyber Associates AG.
GSK Annual Report 2021
87
Strategic report Investor information
Governance and remuneration
Financial statementsGSK Leadership Team
Skills and experience
Dr Hal Barron
1
Chief Scientific Officer
and President, R&D
Hal joined GSK and the GSK Leadership Team (GLT) in 2018. See Board biographies on pages
83 to 86.
Roger Connor
President, Vaccines and Global Health
Roger joined the GLT in 2013. He was appointed President of GSK Vaccines in 2018. In addition
to leadership of the Vaccines business, he leads GSK’s Global Health organisation since 2021
and is also responsible for GSK’s global procurement organisation. Roger is a member of the
Board of Gavi, the Vaccine Alliance, and the Chair of the International Federation of
Pharmaceutical Manufacturers & Associations (IFPMA) CEO Vaccines Committee. Previously
he was President, Global Manufacturing & Supply and, before that, Vice President, Office of the
CEO and Corporate Strategy. Roger joined GSK in 1998 from AstraZeneca. Roger holds a
degree in Mechanical and Manufacturing Engineering from Queen’s University, Belfast and a
Master’s in Manufacturing Leadership from Cambridge University. He is a Chartered Accountant.
Diana Conrad
Chief People Officer
Diana was appointed Chief People Officer and member of the GLT in April 2019. She was
previously Senior Vice President, HR, Pharmaceuticals R&D from 2016 where she played a key
strategic role as leader of the R&D people and culture agenda to support its transformation.
Diana joined GSK Canada’s HR team in 2000 where she held several roles of increasing
responsibility before becoming Senior Vice President, HR for Consumer Healthcare in 2009.
Prior to joining GSK, she held HR roles in companies including GE Capital, Gennum Corporation
and Zenon Environmental Laboratories. Diana has an Honours Bachelor of Arts from McMaster
University in Canada.
James Ford
SVP and Group General Counsel,
Legal and Compliance
James joined the GLT in 2018, when he was appointed Senior Vice President and Group General
Counsel, Legal and Compliance. He joined GSK in 1995 and has served as General Counsel
Consumer Healthcare, General Counsel Global Pharmaceuticals, Vice President of Corporate
Legal and was Acting Head of Global Ethics and Compliance. Prior to GSK, James was a solicitor
at Clifford Chance and DLA. He holds a law degree from University of East Anglia and a Diploma in
Competition Law from King's College. He is qualified as a solicitor in England and Wales and is an
attorney at the New York State Bar. James is based in London but has practised law and lived in the
US, Singapore and Hong Kong. James is co-chair of the US-based Civil Justice Reform Group and
a director of the European General Counsel Association.
Sally Jackson
SVP, Global Communications
and CEO Office
Sally joined the GLT in March 2019 as Senior Vice President, Global Communications and CEO
Office. She leads our Communications and Government Affairs function globally and is also the
CEO’s Chief of Staff. Prior to this, Sally was Senior Vice President Office of the CEO and CFO and
she previously served as Head of Investor Relations. She joined GSK in 2001. Sally holds a degree
in Natural Sciences from the University of Cambridge.
Iain Mackay
Chief Financial Officer
Iain joined GSK and the GLT in 2019. See Board biographies on pages 83 to 86.
Brian McNamara
CEO, GSK Consumer Healthcare
Brian is CEO, GSK Consumer Healthcare and CEO designate of the new Consumer Healthcare
company, Haleon. He joined GSK in 2015 as Head of Europe and Americas for Consumer Healthcare
and has led two successful Joint Ventures, first between GSK and Novartis and, more recently, with
Pfizer. Previously, he was head of Novartis’ OTC division. Brian began his career at P&G.
Brian is a Board member of the Consumer Goods Forum and a former Chairman and Board member
of the Global Self-Care Federation (GSCF). He earned an undergraduate degree in Electrical
Engineering from Union College in New York and an MBA in Finance from the University of Cincinnati.
1 On 1 August 2022 Hal Barron will transition from his current role to become a Non-Executive Director and Tony Wood will join GLT as Chief
Scientific Officer
88
GSK Annual Report 2021
GSK Leadership Team
continued
Skills and experience
Luke Miels
Chief Commercial Officer
Luke joined GSK and the GLT in 2017. As Chief Commercial Officer he is responsible for our
commercial portfolio of medicines and vaccines. Luke also co-chairs the Portfolio Investment Board
with Hal.
He previously worked for AstraZeneca as Executive Vice President of their European business and,
prior to that, was Executive Vice President of Global Product and Portfolio Strategy, Global Medical
Affairs and Corporate Affairs. Before that, he was head of Asia for Roche, based in Shanghai and
then Singapore. Prior to that he held roles of increasing seniority at Roche and Sanofi-Aventis in
the US, Europe and Asia.
Luke holds a Bachelor of Science degree in Biology from Flinders University in Adelaide and a MBA
from the Macquarie University, Sydney.
Shobie Ramakrishnan
Chief Digital and Technology Officer
Shobie joined the GLT in 2021 when she was appointed Chief Digital and Technology Officer.
She joined GSK in 2018 and has deep and broad experience in both biotech and hi-tech companies
and, most recently, has led Digital and Technology for GSK’s Global Commercial organisation,
transforming the company’s capabilities in digital, data and analytics and playing a pivotal role in
establishing a more agile commercial operating model. Before joining GSK, Shobie held senior
technology leadership roles in organisations including AstraZeneca, Salesforce, Genentech and
Roche. She is a board member of Remediant and on the advisory board of Pistoia Alliance.
Shobie holds a Bachelor’s degree in Electronics Engineering from Vellore Institute of Technology,
University of Madras, India.
David Redfern
Chief Strategy Officer
David joined the GLT as Chief Strategy Officer in 2008 and is responsible for corporate development
and strategic planning. Previously, he was Senior Vice President, Northern Europe with responsibility
for GSK’s pharmaceutical businesses in that region and, before that, he was Senior Vice President
for Central and Eastern Europe. He joined GSK in 1994. David was appointed Chairman of the
Board of ViiV Healthcare Limited in 2011 and a Non-Executive Director of the Aspen Pharmacare
Holdings Limited Board in 2015.
He has a Bachelor of Science degree from Bristol University and is a Chartered Accountant.
Regis Simard
President, Pharmaceuticals
Supply Chain
Regis joined the GLT in 2018, when he became President, Pharmaceuticals Supply Chain.
He is responsible for the manufacturing and supply of GSK’s pharmaceutical products. He also
leads Quality and Environment, Health, Safety and Sustainability at a corporate level. Regis joined
GSK in 2005 as a Site Director in France, rising to become Senior Vice President of Global
Pharmaceuticals Manufacturing before his current role. Previously, he held senior positions at
Sony, Konica Minolta and Tyco Healthcare. He is a member of the Board of ViiV Healthcare.
He is a mechanical engineer and holds an MBA.
Phil Thomson
President, Global Affairs
Phil joined the GLT in 2011. He was appointed President, Global Affairs in 2017, and has
responsibility for the Group’s strategic approach to stakeholder engagement, reputation and policy
development. Previously, Phil was Senior Vice President, Communications and Government Affairs.
Phil is Chair of The Whitehall & Industry Group and a Board member of the China–Britain Business
Council.
He earned his degree in English, History and Russian Studies from Durham University.
Emma Walmsley
Chief Executive Officer
Emma joined GSK in 2010 and the GLT in 2011. See Board biographies on pages 83 to 86.
Deborah Waterhouse
CEO, ViiV Healthcare
Deborah was appointed to the GLT in January 2020. She became Chief Executive Officer of ViiV
Healthcare in April 2017.
Deborah joined GSK in 1996 and prior to ViiV was the Senior Vice President of Primary Care
within GSK’s US business. She has a strong track record of performance in both specialty
and primary care. Deborah led the HIV business in the UK before heading the HIV Centre of
Excellence for Pharma Europe and held roles as General Manager of Australia and New Zealand
and Senior Vice President for Central and Eastern Europe.
Deborah is a Non-Executive Director of Schroders plc and holds a degree in Economic History
and English Literature from Liverpool University.
Nick Hirons was a member of the GLT and Senior Vice President, Global Ethics and Compliance until 31 July 2021. Karenann Terrell was a member of the
GLT and Chief Digital and Technology Officer until 8 December 2021.
GSK Annual Report 2021
89
Strategic report Investor information
Governance and remuneration
Financial statementsChair’s Governance statement
Board priorities: governance and delivery
In the last three years there has been significant change
for GSK, in a highly dynamic operating environment, as it
progresses towards the formation of two independent
companies in the middle of 2022. In supporting both the
separation of Consumer Healthcare (CH) and creation of new
GSK, there have been three stages in our oversight work. The
first was to ensure that there was clarity between the Board and
management on GSK’s strategy, its execution and, therefore,
our key priorities. Then we focused on articulating our ambitions
for a transformed GSK. This was completed for the biopharma
business at the Investor Update (IU) in June 2021 and for the
CH business at the end of February 2022. These ambitions
will provide the foundation for enhanced performance
management and a highly transparent way to track progress.
The final stage has been to ensure the company’s
compensation system reinforces the performance culture
that we are seeking to embed and only rewards delivery at
and beyond our IU ambitions. The compensation system for
CH will be determined by its new Board.
Our work has also been focused on creating the best platform
for our CH business to be demerged to grow sustainably ahead
of its categories in the years to come. The mechanism of
separation of CH is a value-based process and at all times the
Board has regard for what is in the best long-term interests of
shareholders.
It has never been more important for the Board to operate to
the highest standards of corporate governance in supporting
and overseeing the delivery of GSK’s transformation and the
separation of CH. The Board continues to focus its work on our
key priorities and on taking the important decisions necessary
to progress them, and be held accountable for doing so by our
shareholders and other key stakeholders.
Throughout 2021, the Board has significantly stepped up its
engagement with shareholders. During 2021, I held over 40
meetings with a range of investors, who make up around nearly
40% of the company’s share register. It is of prime importance
for the Board to have a clear understanding of their views on the
company’s performance against our strategy and the Board’s
effectiveness in oversight of the transformation and separation
processes. I share shareholders’ perspectives with the Board,
so we can continue to improve our alignment.
In October, Vindi Banga, the SID, and I attended a meeting with
members of the Investor Forum at which we shared progress in
preparing for the creation of new GSK as a pure biopharma
company and the separation of the CH business. Included in
this discussion were the plans and timings to create two boards
with continuing oversight of the biopharma and CH businesses.
In December, at our annual Governance Meeting, my Board
colleagues and I were pleased to share more specifics with
investors about our priorities, focus and oversight, as well as the
progress made in 2021. The presentation slides from both these
meetings are available on our website for your information.
Urs Rohner, Chair of the Remuneration Committee, has also
consulted extensively on the new compensation proposals for
the biopharma business. This statement seeks to summarise the
governance work undertaken by the Board and our committees,
in what was another exceptionally busy year.
The Board has maintained and continues to build on our ESG
leadership which benefits the company, shareholders and all
our stakeholders.
Current Board accountability: Priorities and focus
At the start of the year, following its annual evaluation, the Board
reconfirmed its priorities. Namely to:
–
remain objective and act in the best interests of the company
and all shareholders
–
put sustained value creation at the heart of our agenda
–
align the Board agenda with our strategy, performance and
pipeline priorities
–
ensure management performance and succession is
assessed against delivery
–
use the IU targets to provide the foundation for enhanced
performance management
–
ensure that the separation of CH is a value-based process
Being explicit on the Board’s priorities has meant that we have
been able to maximise our time and focus at each meeting on
further strengthening the fundamentals for GSK which will
support value creation. We have concentrated our oversight on
commercial execution, cost base, capital allocation, pipeline and
culture to ensure delivery of the transformation of GSK.
This clarity has also helped underpin an increased agility in the
way the Board has operated. You will see on page 94 that the
Board, in combination with the Chairs' Committee, met over 36
times in 2021. We sought to improve our ability to respond
quickly and adapt to events as they occur, whilst continuing to
deliver our plans. The Chairs’ Committee (comprised of our SID
and Committee Chairs) has been authorised, where necessary,
to engage and take decisions on urgent matters that arise
between scheduled Board meetings. Being agile has been
important in improving and sustaining our competitiveness so
that, despite the challenging environment, we can continue to
compete and deliver for patients and shareholders.
90
GSK Annual Report 2021
Having set our strategy, the Board challenged the proposed
new ambitions and targets for the biopharma business which
were then agreed and published at our IU. These new growth
outlooks and ambitions seek to be clear on the step change in
performance expected from new GSK from 2022. The Board
will oversee and hold management to account for delivery
against these public ambitions.
The Board adopted the same process of maximising value for
GSK shareholders when considering the creation of CH as an
independent, listed company (Haleon). We have focused on
ensuring the business is well-positioned to grow sustainably
ahead of its categories in the years to come and has a highly
skilled management team to lead it.
Having completed this work, the Board was well-positioned to
consider the unsolicited, conditional and non-binding proposals
received to acquire the CH business. In exercising its fiduciary
duties, all proposals were considered but rejected by the Board
as they were not in the best interests of shareholders. This is
because they fundamentally undervalued the business and its
future prospects. The Board is confident that Haleon can deliver
sustained organic annual sales growth in the range of 4-6%
(CER) over the medium term.
We carefully considered how best to present our world-leading
CH business and its management team to shareholders,
analysts and prospective investors at the CH Capital Markets
Day on 28 February. Management continues to make good
progress towards our target to separate the CH business in
the middle of the year, creating a publicly listed world-leading
consumer health company. The Board's attention has been
directed at overseeing the smooth execution of the demerger.
Chair's Governance statement
continued
Current Board accountability
Priorities and focus
–
Remain objective and act in the best
interests of company and all
shareholders
–
Commitment to drive sustained value
creation
–
Board agenda aligned with strategy
and performance and pipeline priorities
–
Management performance and
succession assessed against delivery
–
Investor Update and targets provides
foundation for enhanced performance
management
–
Separation of Consumer Healthcare, to
create Haleon, is a value-based process
–
Continuous engagement with
shareholders
Board
Transformation & Separation
Mandate:
How to separate to unlock and maximise long-term
shareholder value
(Devolved into committee architecture in December 2021)
Nominations & Corporate Governance
Mandate:
GSK Board design and transition, and Haleon Board
and management team formation
Science
Mandate:
Pipeline progress, Board strategic collaborations, key
priorities in science and innovation
Corporate Responsibility
Mandate:
GSK Trust priority for a responsible and sustainable
business
Audit & Risk
Mandate:
Financial reporting, risk and controls plus public
documents delivering separation
Remuneration
Mandate:
Alignment of GSK remuneration to Investor Update
targets, Haleon's remuneration policy and separation impact
GSK Annual Report 2021
91
Strategic report Investor information
Governance and remuneration
Financial statementsChair's Governance statement
continued
Board committee mandates
Our Board committees have never been more pivotal in
supporting the Board. Their activities during 2021 are set out
later in this report, but I would like to highlight below their key
contributions in discharging the mandates allocated to them
during the last year.
Transformation & Separation Committee:
has dealt with the
fundamentals of separation, not just the technical requirements,
but how to best release and maximise long-term shareholder
value. It considered: how we should best separate the CH
business and the principal value to be achieved from each
option; the capital structures required for the two companies to
be competitive; how we should distribute shares in Haleon to
our shareholders, and on which exchanges Haleon should list
and why. This was a very comprehensive programme of work
which was supported by independent advisers. This process is
now well into the execution phase. Given the remaining work
plans are clear, oversight has been devolved to the relevant
committees as appropriate. Having fulfilled its mandate, the
Committee has been decommissioned.
Audit & Risk Committee:
has in particular been considering
the financial implications of separation, including the
progressive dividend policy adopted for 2022, and the
preparation of the demerger documents for shareholders to
consider before approving the separation of the CH business.
It has also been overseeing the establishment of CH’s financial
controls.
Nominations & Corporate Governance Committee:
has been
overseeing key Board appointments for the transition of the
company to a pure biopharma business. This included
succession planning especially for the CSO, the subsequent
appointment of Dr Tony Wood as our CSO Designate, and the
appointment of Dr Anne Beal and Dr Hal Dietz to the Board as
independent Non-Executive Directors.
The Board asked the Committee to take the opportunity to
re-evaluate and determine the optimal biopharma Board
composition, including skills, diversity, capabilities and
experience. On separation from the middle of this year, it is
expected that two of the members from the current GSK Board
will join the Haleon Board. This will ensure that the new Haleon
Board will have continuity of the history, knowledge and
experiences of this Board as the Haleon Board establishes
itself in its early years.
The Committee recommended the appointment of Sir Dave
Lewis as Haleon Chair Designate in December, after an
extensive search process. This followed the appointment of
Brian McNamara as Haleon CEO Designate in July. Sir Dave
is now responsible for building his full Haleon Board. Mr
McNamara was pleased to introduce his management team to
investors at the CH Capital Markets Day on 28 February 2022.
Science Committee:
continued its focus on our pipeline
progress strategic collaborations and the key priorities in
science and innovation.
Corporate Responsibility Committee:
focused its oversight
on key aspects of our Trust priorities. The main areas of focus
were our safety culture, inclusion and diversity, our charitable
giving and community involvement and ESG performance for
new GSK and the development of the ESG framework for the
independent CH company, Haleon.
Remuneration Committee:
has revisited our remuneration
policy to focus on reinforcing a fundamental change in our
performance culture and to support the delivery of our IU
ambitions and ESG priorities for the biopharma company. The
Committee Chair and I have consulted extensively with our
shareholders on this policy and it will be subject to a binding
vote at this year’s AGM.
Further details of the Board and its committees’ work during
2021 are set out in the following pages.
I look forward to connecting with you at our Annual General
Meeting this year in May and updating you at that time on the
transformation of GSK and progress on the CH demerger.
Thank you for your continued support.
Sir Jonathan Symonds
Chair
28 February 2022
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GSK Annual Report 2021
Independent oversight and rigorous challenge
Non-Executive Directors
–
provide a strong independent element to the Board
–
constructively support and challenge management and
scrutinise their performance in meeting agreed
deliverables
–
shape proposals on strategy and offer specialist advice
to management
–
each has a letter of appointment setting out the terms
and conditions of their directorship
–
devote such time as is necessary to the proper
performance of their duties
–
are expected to attend all meetings as required
Independence statement
The Board considers all of its Non-Executive Directors
who are identified on pages 84 to 86 to be independent
after being assessed against Provision 10 of the Financial
Reporting Council's (FRC) UK Corporate Governance
Code (Code). The review of the continuing independence
and commitment of Lynn Elsenhans, who has served
on the Board for more than nine years, is described on
page 107. The independence and commitment of Vindi
Banga, Dame Vivienne Cox, Dr Jesse Goodman and Urs
Rohner, who will have served on the Board for over six
years during the course of 2022, has been subjected to
a rigorous review.
The NED's role description is available on gsk.com
Senior Independent Director
Vindi Banga
–
acts as a sounding board for the Chair and a trusted
intermediary for other Directors
–
together with the Non-Executive Directors, leads the
annual review of the Chair’s performance, taking into
account views of the Executive Directors
–
discusses the results of the Chair’s effectiveness review
with the Chair
–
leads the search and appointment process and makes
the recommendation to the Board for a new Chair
–
acts as an additional point of contact for shareholders,
maintains an understanding of the issues and concerns
of major shareholders through briefings from the
Company Secretary and Investor Relations.
The Senior Independent Non-Executive Director’s role description is
available on gsk.com
Leadership
Chair
Jonathan Symonds
–
leads and manages the business of the Board
–
provides direction and focus
–
ensures clear structure for effective operation of the
Board and its committees
–
maintains a dialogue with shareholders about the
governance of the company
–
sets the Board agenda and ensures sufficient time is
allocated to promote effective debate to support sound
decision making
–
ensures the Board receives accurate, timely and clear
information
–
meets continuously with each Non-Executive Director to
discuss individual contributions and performance,
together with training and development needs
–
shares peer feedback that is provided as part of the
Board evaluation process
–
meets regularly with all the Non-Executive Directors
independently of the Executive Directors
The Chair’s role description is available on gsk.com
Chief Executive Officer
Emma Walmsley
–
responsible for the management of the Group and its
three businesses
–
develops the Group’s strategic direction for
consideration and approval by the Board
–
implements the agreed strategy
–
is supported by members of the GLT
–
maintains a continual and active dialogue with
shareholders in respect of the company’s performance
The Chief Executive Officer’s role description is available on gsk.com
Company Secretary
Victoria Whyte
–
secretary to the Board and all Board committees
–
supports the Board and Committee Chairs in annual agenda planning
–
ensures information is made available to Board members in a timely fashion
–
supports the Chair in designing and delivering Board inductions
–
coordinates continuing business awareness and training requirements for the Non-Executive Directors
–
undertakes internal Board and committee evaluations at the request of the Chair
–
advises the Directors on Board practice and procedures, and corporate governance matters
–
chairs the Group’s Disclosure Committee
–
operates a Board-approved appointments policy that reflects the Board and external appointment
requirements of the current Code
–
is a point of contact for shareholders on all corporate governance matters
Board roles and responsibilities
GSK Annual Report 2021
93
Strategic report Investor information
Governance and remuneration
Financial statementsEach Board committee has written terms of reference which have been approved by the Board and are reviewed at least annually to
ensure that they comply with the latest legal and regulatory requirements and reflect best practice developments. The current full
terms of reference of each Board committee are available on gsk.com. The number of committee meetings held and committee
members' attendance are described on page 94.
Details of committee members’ skills and experience are included in their biographies under ‘The Board’ on pages 83 to 86. In
accordance with the FRC's Code, the Board has determined that Charles Bancroft has recent and relevant financial experience. It
has also agreed that he has the appropriate qualifications and background to be an audit committee financial expert as defined by
the Sarbanes-Oxley Act of 2002, and has determined that he is independent within the meaning of the Securities Exchange Act of
1934, as amended.
Board committee
Role
Membership comprisesBoard committee
report on page
Science
Supports the Board in its understanding of the key strategic
themes, upon which the company’s R&D strategy is based,
and of any external transactions, by performing in-depth
reviews of the underlying scientific assumptions to give the
Board technical assurance. It also undertakes more in-depth
risk oversight of R&D-related risks
Dr Jesse Goodman (Chair)
Dr Hal Dietz (from January 2022)
Dr Laurie Glimcher
Charles Bancroft (from May 2021 to
February 2022)
Judy Lewent (until May 2021)
105-106
Corporate Responsibility
Considers GSK’s Trust priority and oversight of progress
against the associated Trust commitments which reflect the
most important issues for responsible and sustainable
business growth. It has oversight of the views and interests of
our internal and external stakeholders and reviews issues that
have the potential for serious impact upon GSK’s business
and reputation
Lynn Elsenhans (Chair)
Dr Anne Beal (from May 2021)
Dame Vivienne Cox
Dr Jesse Goodman
104-105
Transformation
& Separation
(Devolved into the committee
architecture and disbanded
in December 2021)
Advises and assists the Board on the transformation and
separation of the company and oversees the associated risks
in separating the Group into Biopharma and Consumer
Healthcare companies
Sir Jonathan Symonds (Chair)
Charles Bancroft
Vindi Banga
Dame Vivienne Cox
Lynn Elsenhans
Urs Rohner
Judy Lewent (until May 2021)
110
Nominations &
Corporate Governance
Reviews the structure, size and composition of the Board,
the appointment of members to Board committees and
the appointment of Corporate Officers and makes
recommendations to the Board as appropriate. It plans and
assesses orderly succession for Executive and Non-Executive
directors and reviews management's Succession Plan to
ensure its adequacy
Is responsible for reporting to the Board, overseeing and
monitoring corporate governance arrangements and for
making recommendations to the Board to ensure the
company’s standards and arrangements are consistent with
existing corporate governance standards and emerging best
practice. It also reviews the company’s conflicts of interest
Sir Jonathan Symonds (Chair)
Charles Bancroft (from May 2021)
Vindi Banga
Lynn Elsenhans
Urs Rohner
Judy Lewent (until May 2021)
107-1 10
Audit & Risk
Reviews the financial reporting process, the integrity of the
company’s financial statements, the external and internal audit
process, the system of internal control and the identification
and management of risks, and the company’s process for
monitoring compliance with laws, regulations and ethical
codes of practice
Initiates audit tenders, the selection and appointment of the
external auditor, setting their remuneration and exercising
oversight of their work
Charles Bancroft (Chair from March 2021)
Vindi Banga
Dr Anne Beal (from July 2021)
Lynn Elsenhans
Dr Laurie Glimcher
Judy Lewent (Chair until March 2021 and
member until May 2021)
111-115
Remuneration
Sets the company’s remuneration policy having regard to
GSK’s workforce remuneration so that GSK is able to recruit,
retain and motivate its executives
The Remuneration policy is regularly reviewed to ensure
that it is consistent with the company’s scale and scope of
operations, supports the business strategy and growth plans,
is aligned to the wider workforce and helps drive the creation
of shareholder value
(The Chair and the CEO are responsible for evaluating and
making recommendations to the Board on the remuneration
of Non-Executive Directors)
Urs Rohner (Chair)
Vindi Banga
Dame Vivienne Cox
119-152
Board committee information
The Board has established the following committees:
94
GSK Annual Report 2021
Board architecture
The corporate governance framework is designed to improve the effectiveness of the Board and to support the GSK Leadership
Team (GLT). It continues to evolve to support the delivery of our strategy and priorities. The alignment of our Board architecture with
the Board’s agenda to support the demerger is illustrated on page 90.
GSK’s internal control and risk management arrangements, described on pages 112 and 46 to 54, are an integral part of our
corporate governance framework.
See page 93 for more about the roles and membership of each Board committee.
Board
Transformation &
Separation Committee*
Read more on page 110
Chief
Executive
Officer
GSK
Leadership
Team
Attendance at scheduled Board and committee meetings during 2021
Board
Nominations
&
Corporate
Governance Science
Audit & Risk
RemunerationCorporate
Responsibility
Transformation
& Separation*
Total number of scheduled
meetings
6 6 6 6 3 4 3
Members Attended Attended Attended Attended Attended Attended Attended
Sir Jonathan Symonds
6 6 3
Emma Walmsley
6
Iain Mackay
6
Dr Hal Barron
6
Charles Bancroft
6
3 (3)
62 (2)
3Vindi Banga
6 6 6 6 3
Dr Anne Beal
3 (3) 2 (2) 3 (3)
Dame Vivienne Cox
6 6 4 3
Lynn Elsenhans
6 6 6 4 3
Dr Laurie Glimcher
6 6 3
Dr Jesse Goodman
6 3 4
Urs Rohner
6 6 6 3
Judy Lewent
3 (3) 3 (3) 3 (3) 3 (3) 1 (1) 2 (2)
Number of ad-hoc meetings
15
7 4 7 6 1
For Charles Bancroft, Dr Anne Beal and Judy Lewent, the numbers in brackets denote the number of meetings which these individuals were eligible to
attend. Dr Beal joined the Board and the Corporate Responsibility Committee on 6 May 2021 and the Audit & Risk Committee on 23 July 2021. Charles
Bancroft joined the Science and Nominations & Corporate Governance committees on 6 May 2021. Judy Lewent retired from the Board following the
AGM on 5 May 2021.
In addition to the ad-hoc meetings included in the table above, the Chairs' Committee, that was established at the end of 2020, met on 15 occasions to
consider various items of business during 2021.
* The Transformation & Separation Committee was devolved into the committee architecture and disbanded in December 2021
Science Committee
Read more on page 105
Corporate Responsibility
Committee
Read more on page 104
Remuneration Committee
Read more on page 119
Nominations & Corporate
Governance Committee
Read more on page 107
Audit & Risk Committee
Read more on page 111
The Board is pleased to report that in 2021 it was in full compliance with the provisions of the FRC's Code, with the exception of Code provision 38. This
requires alignment of pension rates for executive directors with those available to the local workforce. From 1 January 2023 any current Executive Directors
still in role will have their pension rates aligned to the wider workforce local to them. This will then replicate the pension arrangements for any new Executive
Directors appointed to GSK. This transition was set out in the 2019 and 2020 Annual Reports. In addition, provision 38 requires that only base salary should
be pensionable; however, US pension arrangements for employees allow basic salary and bonus to be pensionable. Following Dr Barron’s transition to a
Non-Executive Director with effect from 1 August 2022 this requirement will be met.
The Board is also pleased to report that it has consistently applied the principles of the FRC's Code as set out in the pages of this and the Remuneration
reports. A copy of the Code is available on the FRC’s website, www.frc.org.uk.
GSK Annual Report 2021
95
Strategic report Investor information
Governance and remuneration
Financial statementsAreas of focus in 2021
Further
strengthening
GSK’s
fundamentals
The Board’s oversight of the fundamentals of the commercial execution, cost base, capital allocation, pipeline and culture
included:
–
receiving regular progress updates and providing input into the company’s Vaccines mRNA strategy plan
–
receiving and discussing commercial strategy performance reports from Pharmaceuticals, Vaccines and ViiV Healthcare businesses
–
reviewing and approving the objectives and ambitions for the company and patients that were announced at the Investor Update in
June
–
approving GSK's progressive new dividend policy
–
approving the Board’s 2021-23 priorities
–
approving business development transactions and strategic partnerships with third parties, including Vir Biotechnology, CureVac, iTeos
and Alector
–
receiving updates on R&D strategy, progress and the company's pipeline
–
receiving quarterly reports from the CEO, CFO and CSO
–
scrutinising the Group’s financial performance
–
setting the company’s new purpose and simplified culture
–
oversight of projects and collaborations with third parties, to develop vaccines and treatments for COVID-19
–
reviewing the risks and impacts of COVID-19 on the Group’s business and performance
–
approving the terms of the global settlement and licensing agreement with Gilead
Separation
of Consumer
Healthcare
The Board’s preparation for the demerger as a value-based process included:
–
regularly discussing and scrutinising transformation plans for Consumer Healthcare business
–
receiving and discussing commercial strategy performance reports from Consumer Healthcare business
–
discussing plans for Consumer Healthcare up to and beyond separation as Haleon at the annual Board and GLT strategy day
–
approving the appointment of the Haleon Chair and CEO designates and planning for the Haleon Board composition
–
reviewing and rejecting unsolicited proposals for the Consumer Healthcare business
New GSK
The Board’s oversight of the creation of GSK as a pure biopharma business and delivering a step change in performance
included:
–
regularly discussing and scrutinising transformation plans for new GSK
–
discussing plans for the company up to and beyond separation as new GSK a pure biopharma company at the annual Board and GLT
strategy day
–
reviewing and approving the objectives and ambitions for the company and patients that were announced at the Investor Update
–
receiving updates on R&D strategy, progress and the company's pipeline
–
succession planning for the new GSK Board, including approval of the appointments of a new Non-Executive Director and Corporate
Responsibility Committee Chair successor and a new Non-Executive Director and designated Scientific & Medical Expert
Maintaining
ESG leadership
The Board’s oversight of Trust and the ESG agenda included:
–
approving the Trust section of the Annual Report
–
approving the Task Force on Climate-related Financial Disclosures in the Annual Report
–
delegating specific responsibility to the Corporate Responsibility Committee for oversight of Human Rights in the company’s operations
Regular
governance
oversight
The Board’s focus on a routine programme of good governance activities included:
–
reviewing the quarterly financial results, dividend proposal, earnings guidance, investor materials and results announcements and
receiving reports from the external auditor
–
approving the Annual Report and Form 20-F
–
setting the annual budget and plan, and the forward-looking three-year forecast
–
conducting an annual review of the Board’s enterprise risk responsibility framework and enterprise-wide risks
–
considering observations and agreeing actions from the Board’s external evaluation
–
reviewing and continuing to evolve the Board’s governance architecture
–
evaluating the CEO’s 2020 performance, and setting her 2021 objectives
–
reviewing the annual talent and succession plan
–
receiving reports from Board committees and the Workforce Engagement Director
–
discussing the employee
PULSE
survey results
–
receiving reports on corporate governance and regulatory developments and the Company Secretary’s report
–
approving the company's modern slavery statement and gender pay gap positioning
–
reviewing stakeholder perception research
The Board discharges its responsibilities through an annual programme of meetings. Papers and presentations are given to the Board
(and its committees) to focus its oversight of strengthening the fundamental elements of the business and its growth-based performance
ambitions, the transformation and separation of GSK to create two world-leading companies and our ESG leadership priorities in pursuit
of the company’s strategy.
This information helps the Board facilitate effective decision making and input, or aid the Board’s oversight and awareness of business
performance or routine good governance practices operated by the company. Further details of a selection of principal decisions taken
by the Board (and its committees) and how the interests of relevant stakeholders were taken into account in arriving at their decisions are
set out on pages 96 to 98.
Items of business considered critical to GSK’s long-term success through the achievement of the key priorities are highlighted below.
Board activity
96
GSK Annual Report 2021
The Board and its committees have been highly focused on their key priorities and ensuring GSK's fundamentals continue to be
enhanced.
Board members’ decision making on these significant matters included the consideration of the interests of GSK’s key stakeholders
and how decisions could potentially affect them. The papers considered by the Board and its committees sought to highlight the
relevant stakeholder impacts of and perspective on these matters – whether positive or negative.
Selected examples of some of the principal decisions taken by the Board in 2021, and how the Board considered relevant
stakeholders’ perspectives are described below:
Progress area Principal decision How Board/Committee regarded stakeholder interests
Stakeholder groups, and other
section 172 duties considered
Commercial
execution
China:
The Audit & Risk Committee
recommended incremental changes
to the commercial model in China to
the Board for approval
Further details are available on
page 111
The Committee reviewed GSK China’s implementation
of the healthcare professionals (HCP) speaker
engagements and sales force incentive (SFI) policy
changes to date. It noted tangible improvements
observed in our people and customer engagement
In this context, the Committee considered further
incremental changes to our HCP engagement and SFI
programme in China. This included a plan for an
increase in the number of city-level Healthcare
Organisations (HCOs) to increase our reach. Further
improvement of HCP coverage across the country
enables our innovative Specialty Care products to
ultimately reach more patients. To continue to
safeguard key stakeholder interests including patients,
the Committee reviewed a risk assessment, the
training approach and the proposed implementation
of controls over the new potential HCOs before
recommending this change
Stakeholders:
HCPs and medical experts,
employees, investors,
governments and regulators,
patients and consumers
Other s172 duties:
Long-term results, our workforce,
business relationships and
reputation
Cost base
Transformation programme:
The Board concluded its oversight
of the savings made from the
transformation programme to
achieve a cost base competitive
with its peers
The Board agreed to the acceleration of this
programme to generate additional savings that could be
invested in the R&D pipeline for the potential benefit of
patients and to deliver shareholder returns
Stakeholders:
Investors, patients and
employees
Other s172 duties:
Long-term business
performance, our workforce and
our business relationships
Capital allocation
Dividend policy change:
The Board reviewed and approved
the implementation of a new
progressive dividend policy for
implementation from 2022
Further details are available on
page 111
The Board, with support from the Audit & Risk
Committee, carefully considered this matter before
concluding to move to a progressive dividend policy from
2022. In consideration of its duties, the Directors
examined the importance of predictable returns,
particularly in uncertain times
As part of its deliberations, the Board carefully balanced
the impact of and trade-offs between reducing the
dividend against the importance of setting up new GSK
with the right capital structure and the resources to
invest, grow and improve shareholder returns over the
longer term
Ultimately, the Board determined that setting a
progressive dividend policy in this way would support the
investment needed to deliver growth, unlock further
shareholder value and develop an even stronger pipeline
of innovative products capable of transforming the lives
of our patients
Stakeholders:
Investors, patients and our
people
Other s172 duties:
Our long-term results, workforce
and business relationships and
reputation and fairness between
our shareholders
Pipeline
Business development,
collaborations
and deals:
The Science Committee considered
the scientific merits of these
opportunities prior to the Board’s
review and approval
Further details are available on
page 106
The Science Committee and Board reviewed many
business development opportunities during the year.
Those leading to concluded transactions included:
–
A collaboration with iTeos Therapeutics to enable
next generation immune-oncology combinations
–
Expansion of the collaboration with Vir
Biotechnology to advance new therapeutics for
influenza and other respiratory viruses and
–
Collaboration with Alector to co-develop anti-
bodies for neurodegenerative diseases
These deals were considered in the context of their
potential to help GSK deliver transformational
medicines to patients
Stakeholders:
Patients, employees and
investors
Other s172 duties:
Our long-term results, workforce
and business relationships
Board progress in 2021
GSK Annual Report 2021
97
Strategic report Investor information
Governance and remuneration
Financial statementsBoard progress in 2021
continued
Progress area Principal decision How Board/Committee regarded stakeholder interests
Stakeholder groups, and other section
172 duties considered
New growth
ambitions
Investor Update:
The Board approved the June Investor
Update (IU) objectives and ambitions
with a focus on GSK's growth outlook
and for maximising shareholder value
creation including:
–
competitive growth and margin
outlook
–
competitive sustainable returns and
value creation and
–
new ambitions for shareholders and
society
Further details are available on page 111
The Board drew on comprehensive investor feedback
and other key stakeholder research and outreach to
help inform and shape the agreed ambitions shared at
the IU event for new GSK, our patients and
shareholders, and impacting the health of more than
2.5 billion people over the next ten years. The Audit &
Risk Committee also reviewed the proposals
The details of how stakeholder interests were then
taken into account by the Remuneration Committee
when incorporating key IU ambitions into the updated
2022 Remuneration policy for GSK
are described in the ‘Remuneration policy review’
principal decision below
Stakeholders:
Patients and consumers, our people
and investors, governments and
regulators, non-governmental
organisations and multilateral
organisations
Other s172 duties:
Long-term business performance,
our workforce, business
relationships, the community and
our environment, our reputation and
fairness between our shareholders
Separation of
Consumer
Healthcare
Rejection of unsolicited proposals
for CH business:
–
The Board had ensured that the CH
business was well-positioned to
sustainably grow ahead of its
categories in the years to come and
had a highly skilled management
team to lead it
–
It was confident that the CH
business could sustainably deliver
organic sales growth in the range of
4-6% (CER) over the medium term
Having completed this foundational work, the Board
was well-positioned to consider the unsolicited,
conditional and non-binding proposals received to
acquire the CH business
The proposals were rejected as they were not in the
best interests of shareholders since they
fundamentally undervalued the business and its
future prospects
Stakeholders:
Patients and consumers, our people,
investors, governments and
regulators, non-governmental
organisations and multilateral
organisations
Other s172 duties:
Long-term business performance,
our workforce, our business
relationships, the community and our
environment, our reputation and
fairness between our shareholders
Demerger of CH:
The Board approved:
–
the retention of a stake in the
Consumer Healthcare company,
Haleon, post demerger
–
Haleon's opening capital structure
and
–
the separation of CH to create
Haleon by mid-2022
Further details are available on page 110
The Board, supported by the Transformation &
Separation Committee, considered the best way to
release maximum shareholder value, and for the two
companies be set on firm foundations to be able to
most effectively serve their patients and customers
respectively
This included the most appropriate capital
structures required for the two companies to be
competitive, how to distribute shares in Haleon to
GSK’s shareholders, whether to retain a stake
in Haleon, and on which exchanges Haleon should
list and why
Stakeholders:
Patients and consumers, our people
and investors, governments and
regulators, non-governmental
organisations and multilateral
organisations
Other s172 duties:
Long-term business performance,
our workforce, our business
relationships, the community and our
environment, our reputation, and
fairness between our shareholders
Remuneration
Remuneration policy review:
The Remuneration Committee approved
a new 2022 Remuneration policy and
measures for the biopharma company,
which is subject to a binding
shareholder vote at our
2022 Annual General Meeting.
It incorporates new long- and
short-term incentives including:
–
Sales and adjusted operating profit
growth measures aligned to the IU
ambitions and
–
ESG measures reflecting the
company’s work in this regard
Prior to developing the new 2022 Remuneration
policy (the new policy), on behalf of the
Remuneration Committee, the Remuneration
Committee Chair and the Chair:
–
considered investor feedback on the key
ambitions set out at the IU event and engaged
with its major investors, and proxy advisers on the
proposed changes
–
consulted with the Corporate Responsibility
Committee on GSK’s ESG commitments and
Trust priorities
–
listened to the views of an ESG expert, outlined in
the ‘ESG leadership’ principal decisions below,
concerning views of stakeholders on the linkage
of ESG to remuneration incentives and
–
met with the Chief People Officer and the HR
leads for each area of the business to hear their
views on remuneration arrangements at GSK and
wider workforce pay alignment opportunities for
new GSK
They also consulted with investors and proxy advisers
on the new policy proposals. Following engagement,
the Committee then carefully considered the feedback
before finalising the design of the new policy
Further details are available on pages 143 to 152
Stakeholders:
Our people, investors, patients and
consumers, governments and
regulators and proxy advisers
Other s172 duties:
Long-term results, our workforce the
community and our environment and
our reputation
98
GSK Annual Report 2021
Board progress in 2021
continued
Progress area Principal decision How Board/Committee regarded stakeholder interests
Stakeholder groups, and other section
172 duties considered
ESG leadership
Leading ESG expert view and
insights on GSK:
Following a wide-ranging and
comprehensive briefing and debate
with a recognised ESG expert,
the Corporate Responsibility
Committee agreed a programme
of actions to further improve our
ESG communications and IR
engagement by:
–
providing further evidence,
metrics and data to investors of
how the company’s culture is
being transformed
–
more proactively targeting our
long-term investor base and
–
increasing the availability of our
Board committee Chairs to help
strengthen understanding of their
committees’ approach and work
Further details are available on
page 105
The ESG expert:
–
provided an overview of ESG investor
expectations
–
described major trends in ESG and the causal
drivers
–
covered GSK and sector specific issues,
including culture, net zero and intangibles and
–
shared developments around ESG links to
remuneration
The Committee considered the positive and negative
historical stakeholder perceptions together with
GSK’s focus on purpose, mission and culture
The company’s new environmental sustainability goals
had been announced the previous year. The
company’s approach could be further enhanced by
strengthening the alignment to remuneration
incentives with delivery of ESG ambitions. The
expert’s insights were considered as part of the
development by the Remuneration Committee of the
ESG remuneration measures explained in the
Remuneration Report
Stakeholders:
Investors, patients, employees,
governments and regulators,
non-governmental organisations
and multilateral organisations
Other s172 duties:
Long-term results, our business
relationships, the community and our
environment, our reputation and
fairness between our shareholders
New GSK
Board succession planning:
The Nominations & Corporate
Governance Committee agreed:
–
a set of key guiding principles for
the new GSK Board and
–
an optimal Board skills matrix
This supported the development of
a roadmap for future appointments
over the medium term to help deliver
on our stated ambitions for patients
and shareholders
Further details are available on
page 107 and 108
The Committee considered the optimal future
composition of the new GSK Board for the future
To appropriately reflect stakeholder interests, the
Board wished to be constituted so as to:
–
be diverse in the broadest sense
–
have appropriate operational depth across the
life science value chain and from a general
commercial perspective
–
have experience of major customer markets,
and
–
needed the skills and insights of members who
could continue to ensure the company’s
leadership position in ESG
Stakeholders:
Patients and consumers, our people
and investors
Other s172 duties:
Our long-term business
performance, workforce and
business relationships and
reputation
Settle significant
litigation
Gilead – Dolutegravir global
settlement
The Board approved the terms of
the global settlement and licensing
agreement in which Gilead would:
–
make an upfront payment of
$1.25 billion to ViiV Healthcare
and
–
pay a 3% royalty on all future US
sales of Biktarvy and in respect
of the bictegravir component of
any other bictegravir-containing
products sold in the US
The decision to settle this global litigation was
taken after careful consideration in the context of
bringing certainty for investors and to support
additional investment in the business for the future
and thereby benefiting patients and investors
Further details are available on page 58
Stakeholders:
Investors, patients, governments and
regulators
Other s172 duties:
Long-term results, our business
relationships and our reputation
GSK Annual Report 2021
99
Strategic report Investor information
Governance and remuneration
Financial statementsBoard’s approach to continuous engagement
How we engage with our main stakeholder groups – including
patients, shareholders, consumers, customers and employees
– across the company is summarised on pages 44 and 45 of
our strategic report.
How the Board considered the interests of our stakeholders in
its discussions and decision making in 2021 is set out in the:
–
Section 172 statement on page 116, and the sections it
references in this Annual Report
–
principal decisions the Board and its committees made,
on pages 96 to 98
Our stakeholders rightly have high expectations of us. Our
dynamic operating environment presents many challenges and
opportunities. The Board aims to make sure that remaining
commercially successful is balanced and aligned with meeting
our stakeholders’ expectations, upholding our reputation,
maintaining our licence to operate and building trust. The Board
engages with many stakeholders, to ensure it identifies and
responds to their expectations effectively.
The influence and importance of different stakeholder groups
can vary, depending on the matter being considered. Certain
stakeholders’ interests can be in conflict, meaning the Board
needs to make balanced judgements.
Stakeholder engagement and feedback helps us identify
emerging issues. It also enables the Board to make decisions in
the context of what is relevant and important to each of them.
Our principal Board committees, and the GLT, undertake
engagement on the Board’s behalf in accordance with their
remit. This means that they can build a detailed understanding
of how our actions or plans are/or may impact stakeholders.
These insights are shared with the Board, as appropriate.
In particular, the Board receives a substantial amount of
information about stakeholders’ perspectives from the work
of the Corporate Responsibility Committee, which is discussed
on pages 104 and 105.
Board members regularly receive:
–
the CEO’s Board report
–
a specific external stakeholders report. This provides
strategic insights based on an analysis of key developments,
achievements and risks impacting our reputation and the
perceptions of external stakeholders
–
a monthly investor relations report which summarises investor
perceptions
–
regular corporate governance and litigation and regulatory
updates
The Board also learns of stakeholder views through:
Engagement and feedback events such as:
the quarterly
investor results calls, the annual general meeting, employee
survey reports, and through the Workforce Engagement
Director’s reports and experts presenting at Board or
committee meetings. In particular, during 2021, the Investor
Update and the Chair and SID’s meeting with Investor Forum
members provided additional sources of investor feedback.
Other opportunities:
to gain wider stakeholder views are
provided during the annual strategy meeting with the GLT, as
part of the annual budget and planning process, and in
reviewing specific aspects of the company’s policies or
strategy.
In addition, Board members are encouraged to meet individually
with employees, shareholders and other key stakeholders
during their induction, and then on an ongoing basis. They are
encouraged to report to the Board on such experiences where
relevant and material.
Our people
We have well-established and strong engagement mechanisms
with our colleagues, which are described on pages 11 and 45.
Two key governance channels help communicate what our
people are thinking to the boardroom:
–
feedback from our global, as well as smaller, more targeted
PULSE employee surveys
–
the work of our Workforce Engagement Director, Dame
Vivienne Cox, who regularly gathers and explains colleagues’
views to the Board, as she outlines below
The Chair and other Non-Executive Directors also regularly
meet our people around the Group and report back to the
Board. As COVID-19 restrictions permitted during the year,
they were pleased to meet with our employees in person,
individually and in small groups, as well as continuing to meet
virtually.
The Chair, Workforce Engagement Director and Corporate
Responsibility Committee Chair designate met with leaders of
our employee resource groups (ERGs), for example, as part of a
continuing dialogue about progress on our inclusion and
diversity agenda, as well as on other issues that mattered to
ERG members and employees.
2021 has been a significant year of change for our people. The
Future Ready transformation programme has intensified and
increased anticipation around the demerger of Consumer
Healthcare and the shape of GSK. Ahead of this, PULSE
surveys with smaller groups of employees have meant that the
Board and GLT could check sentiment more quickly and
frequently, and could provide valuable insights on the impact of
major initiatives, events or communications.
100
GSK Annual Report 2021
This year, the Board and GLT spent more time in listening
sessions with leaders and small groups of employees who have
front-line roles across the company. This has helped to better
understand the future of and build people’s confidence in GSK
– as well as testing and listening to feedback on the new
purpose, strategy and culture. In 2021 Emma held more than 25
small group sessions with the workforce. The GLT cumulatively
held more than 40 sessions specifically focused on new GSK.
This provided rich feedback, which has helped shape internal
communications and achieve record engagement levels, with
37,000 employees joining two live events.
Post-event surveys show good progress is being made in
explaining new GSK and building confidence, with less positive
sentiment around how employees have been feeling. The Board
is acutely aware that the pandemic has increased fatigue and
reduced resilience for many of our people. This has reinforced
the importance of prioritising and caring for our people and
providing the support they need to be successful. The Board
monitors this not only through employee engagement, but also
with quarterly monitoring of how many employees are taking up
support, how many are absent, and how many are leaving the
company. The Board was pleased that the GLT chose to
recognise every employee with a week’s thank you pay award
in recognition of resilience and strong delivery in extraordinary
circumstances.
Board’s approach to continuous engagement
continued
This is my third year as Workforce Engagement Director. In
this time, I have appreciated the chance to meet with different
people across the company and to listen carefully to their
views and perspectives. During the year, the engagements I
have attended have continued to be virtual; however, I am very
pleased that this has not prevented people from being very
open and transparent in their discussions with me.
Purpose, strategy and culture
As I established the programme of visits at the start of 2021,
I was conscious that it would be a year of significant change.
The transformation programme to restructure the Group in
advance of separation was launched in 2020. It has continued
throughout 2021 and, with it, there has naturally been some
uncertainty for our people. Therefore, I was keen to use my
role to understand the impact of these changes on the
organisation. Additionally, as the separation has been getting
closer, it has raised questions in the minds of our people about
the future shape of new GSK and the Consumer Healthcare
business as a new listed company. In particular, I wanted to
understand how the work done by the Board and the GLT to
define a new purpose, strategy and embed a new simplified
culture, which is discussed elsewhere in the Annual Report,
was being experienced.
Probably the most consistent message I have heard this year
is the value people attach to working for a company with a
strong sense of purpose and a clear strategy. Additionally,
the people I have met are supportive of the new culture. They
appreciate the simplicity and the clarity that it brings.
I have continued, with Jon, our Chair, to engage with our
diversity Employee Resource Groups (ERGs), specifically
on the impact of the announcement of the company’s public
aspirations for improving ethnicity and gender representation
in the workforce and leadership positions. Overall, their
responses were positive while continuing to encourage the
Board and GLT to intensify their efforts to support and
promote diverse talent.
Other engagement programme highlights
I joined a Site Directors’ and Site Quality Leaders’ meeting
comprising a group of employees who had recently been
appointed to these roles. My meeting with them was part of a
longer induction programme they undertake. I took part in the
session where they discussed the impact of the new culture
on their roles. They stressed the importance of ensuring
continuous improvement at their sites.
In the mid-point of 2021, I met with HR leaders and I was
impressed by their energy and commitment, through to and
beyond separation. It was clear that their focus on People,
Culture, Leadership and Capability would be key to supporting
an environment where people can thrive, and additionally how
important the new simplified HR systems and operating model
would be to ensuring quality support for all our people.
The ‘Ahead Together’ session was an ambitious and well-
received two-day digital event which brought together 1,500
employees from around the world. The objective was to share
thinking and progress on the launch of two new companies
and exchange ideas about the opportunities that lie ahead.
Finally, I spent time with a group of high potential Commercial
employees from the Greater China and Intercontinental region
who were completing a virtual development programme. We
discussed their key learnings, which were the importance of
developing resilience and building trust.
After each meeting with an employee group, I share my
thoughts and observations with the leaders and the Board on
a non-attributable basis. Perhaps the most valuable aspect is
that on an ongoing basis, those views and perspectives can
be factored into the Board and GLT discussions and decision
making.
Dame Vivienne Cox
Workforce Engagement Director
28 February 2022
Workforce Engagement Director
GSK Annual Report 2021
101
Strategic report Investor information
Governance and remuneration
Financial statementsOur shareholders
The Board seeks to directly engage with private retail and
institutional shareholders in several ways. These include regular
communications, the Annual General Meeting and our annual
Governance Meeting, and through the work of our Investor
Relations team, the Chair, Sir Jonathan Symonds and our
Company Secretary, Victoria Whyte.
During the year, our CEO, Emma Walmsley, and CFO, Iain
Mackay, gave quarterly results presentations to institutional
investors, analysts and the media by webcast teleconference.
They are also regularly joined by the CSO, the Chief
Commercial Officer, CEO, ViiV Healthcare, President Global
Vaccines and the CEO, GSK Consumer Healthcare. They are
available to provide more detailed insights into their areas of
responsibility.
Through regular meetings, Emma and Iain have an ongoing
and active dialogue with institutional shareholders about our
performance, plans and objectives. In 2021 the CEO held 56
individual meetings with major shareholders and hosted 32
group meetings with actual and potential major shareholders.
The CFO held 84 individual meetings and 46 group meetings.
The Chair has always maintained an active dialogue with
shareholders too – including fund and portfolio managers –
as well as seeing governance professionals. During 2021 the
Chair held 43 meetings with a range of investors, who make up
nearly 40% of the company’s share register. This enables him to
have a current understanding of investor views, insights and
perspectives about the company. He also covers with investors,
Board succession planning arrangements in his capacity as
Chair of the Nominations & Corporate Governance Committee.
The Chair, CEO and the rest of the Board had a particular focus
in 2021 on communicating our plans about the demerger to
shareholders and the future ambitions for GSK as a biopharma
business. As part of this extensive outreach, in June the CEO
and other members of the GLT hosted a virtual Investor Update
to provide a clear view of the strategy for GSK and its outlook
for growth and ambitions.
In October at an Investor Forum-hosted event, and in December
at the annual Governance Meeting, the Chair provided an
update on how the Board and its committees have aligned
their work to drive the demerger and establish key governance
workstreams to support delivering it and to focus GSK’s future
as a biopharma business.
Investor materials for these events are available on gsk.com.
Board’s approach to continuous engagement
continued
Annual Governance Meeting
This year’s event was virtual with institutional shareholders, key
investment industry bodies and proxy advisory firms. The Chair
was joined by our Senior Independent Director, Workforce
Engagement Director, Committee Chairs and GSK’s external
audit partner.
We shared with investors the priorities and focus of the Board
and its committees and progress made in 2021. This included a
continued focus on strengthening the fundamentals of the
business, maintaining ESG leadership, strong oversight of
progress towards separation to create a world-leading
Consumer Healthcare company and the new growth outlooks
and ambitions set for GSK to deliver a step-change in
performance from 2022.
The Remuneration Committee Chair shared details of the
Committee’s review of executive remuneration arrangements for
GSK ahead of separation. This included an updated GSK
policy, focused on reinforcing the delivery of the public
performance ambitions set out in the IU in June 2021 and
delivery of our public ESG commitments. This will be submitted
to a binding shareholder vote at the 2022 AGM.
The Workforce Engagement Director discussed her programme
of engagements to gather and help the Board further
understand our people’s perspectives on our new purpose,
strategy and the new simplified culture and the CH demerger.
The meeting was well received and shareholder feedback was
shared subsequently with the rest of the Board.
Annual General Meeting
Due to restrictions on public gatherings in light of the COVID-19
situation at the time, shareholders were unable to physically
attend the 2021 AGM held at our registered office in Brentford.
Therefore, our priority was to seek to provide live electronic
access to the AGM for as many shareholders as possible. Our
aim was to promote a similar type of meaningful engagement
with the Board as would occur at a conventional AGM.
Pleasingly, 142 shareholders joined the meeting electronically to
watch or listen to updates from our Chair and the CEO, to ask
questions, and vote. All our proposed resolutions were
approved by shareholders, with majorities ranging from 93%
to 99%.
It is intended that our AGM in May 2022 will be held at the
Sofitel London Heathrow Hotel and will use a hybrid format to
allow our shareholders the flexibility to attend, ask questions and
vote either in person or electronically. See further details on
page 291.
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GSK Annual Report 2021
Board-led purpose and culture
The Board’s role is to promote GSK’s sustainable success,
drive long-term growth for shareholders and value for
stakeholders. Our strategic report on pages 1 to 81
demonstrates how we work to achieve these goals. Our
Corporate Governance report on pages 83 to 118 explains
how our governance arrangements support our oversight of the
strategic transformation into two separate businesses, as well
as our new ambitions for patients and shareholders. This work
will be supported by our renewed company culture.
The Board is responsible for setting the Group’s overall
purpose and culture. This is fundamental to conducting our
business to the highest standards, promoting long-term
success and unlocking, protecting and maximising value for
shareholders.
In the four years Emma Walmsley has been CEO, the Board has
worked to change our culture. While always being guided by
our purpose and values, our culture is moving to one that works
more effectively towards our long-term strategic priorities:
Innovation, Performance, Trust. The Board saw the momentum
and ambition around the two new businesses in 2021 as a
unique opportunity to unify our people behind one purpose,
one strategy and one culture.
Our new purpose is to unite science, talent and technology to
get ahead of disease. We have a clear ambition to make an
even more meaningful impact on human health and create
better, more sustainable returns. We want to do this in an
environment that allows outstanding people to thrive.
For the Board, ‘getting ahead’ means preventing disease as well
as treating it. It means innovating by combining ideas,
capabilities and know-how inside and outside GSK. Our focus
for R&D is to deliver new vaccines and medicines using the
science of the immune system, human genetics and advanced
technologies. And we do this making a deep commitment to our
stakeholders to operate responsibly.
Essential to these plans is embedding a new, simplified culture,
one in which we:
–
are ambitious for patients, by delivering what matters better
and faster
–
are accountable for impact, by having clear ownership and
the support to succeed
–
do the right thing, by working with integrity and care and
understanding that people count on us
The Board’s discussions during the year focused on the new
purpose and culture centred on:
–
the rationale for this change
–
a review of employee engagement and feedback when
trialling this change
–
the next steps the Board and GLT needed to take to make
this change real for our people
To more clearly identify where we are making progress – and
where we need to make changes – the Board and GLT have
changed how we track and measure this culture change. We are
now using more insights, measuring more frequently, being more
responsive and making this information easier to access. This
will help drive progress in the short-term and make significant
change over the long-term. For further details see page 11.
The Board was also briefed on the proposed new mission,
strategy and culture for Haleon. Its culture will be focused on
three behaviours:
–
Go beyond
–
Do what matters most
–
Keep it human
These are described in more detail on page 43 and were
launched formally by the Haleon Chair and CEO Designates at
their Capital Markets Day on 28 February 2022.
The Board will also support GSK's new culture by appointing
and promoting the right people, upholding and incentivising the
right behaviours with strong governance controls and thorough
processes, and training and developing employees.
The Board recognises that the ‘tone from the top’ drives a
company’s culture. The Board and GLT must be role models
and lead by example, using their words, actions and behaviours
to set the template for our people. Like all our people, members
of the Board take the following key training and awareness
modules:
–
Living our values and expectations, which explores our values,
expectations and culture and how they apply to our
operations and ways of working
–
Anti-bribery and corruption
–
Inclusion and diversity
For more detail about our new, single definition of culture, and
how we invest in and reward our people, see pages 11 and 37.
The Board also remains committed to getting ahead of issues
that matter for the sustainability of our company, be it pricing
and access, the environment, or stronger diversity and inclusion.
More progress in these areas is set out on pages 34 to 40 of
our strategic report and in our ESG Performance Report,
available on gsk.com.
Our Code of Conduct embodies our values, so the Board
reviews and refreshes it regularly. It is available on gsk.com.
Our corporate standards and employee policies are aligned
with our values. They include our long-standing Speak Up
system, which enables our people to raise matters confidentially
or anonymously without fear of reprisal. The Board, through the
Audit & Risk Committee, reviews Speak Up reports provided by
our Legal and Compliance team. Our Speak Up channels and
reports are managed by an independent third party, with cases
then investigated by Legal and Compliance.
GSK Annual Report 2021
103
Strategic report Investor information
Governance and remuneration
Financial statementsBoard performance
The Board evaluates its performance, and that of its
committees, every year and is facilitated externally at least once
every three years. External evaluations were facilitated in 2019
and 2020 by Jan Hall of No 4, a business advisory company.
In 2021, the Board and Committee evaluation process was a
composite of three key assessments. First, Korn Ferry
conducted interviews with each Board Director to elicit their
views on the ideal future composition of the Board. Directors
were provided in advance with information on peer company
Board composition and committees as an input to these
discussions. The conversations with Board Directors covered a
range of topics including:
–
The key challenges and opportunities for GSK over the next
five years (eg science, M&A, China, areas of management
strength and support)
–
The culture of GSK
–
Which skills and experience to prioritise in recruiting new
Non-Executive Directors to the Board. The imperatives and
desirable attributes were considered against the strategic
opportunities that lie ahead and
–
The workings of Board committees and how they obtained
external input
The findings formed the basis for the transition plan and
optimal composition of the new GSK Board. The Nominations &
Corporate Governance Committee report on page 107 explains
how the results of this work are being taken forward. The next
step followed the annual Board and GLT strategy meeting, when
Non-Executive Directors formed three groups to discuss their
thoughts on the day’s discussions. They agreed their key insights
and priorities. These were then debated by the Board the next
day. The conclusions reached were incorporated into the Board’s
priorities for action in 2022. Finally, Non-Executive Directors
completed a short questionnaire on the performance of the
Board and its committees during the year. The responses were
collated and summarised before being considered by the Board.
The Board then agreed updated priorities for the year ahead
which encapsulated the actions identified at each stage of the
evaluation process. In addition, it was agreed to use the annual
Strategy meeting of the Board and GLT in the Autumn of 2022
to reset and recalibrate the Board for the future as new GSK.
Board committees
The review of the Board committees involved questionnaires
being completed by committee members. Each committee was
considered to operate effectively. To enhance their performance
further, the following improvement points were agreed:
–
Corporate Responsibility:
to continue to bring direct
external stakeholder perspectives into the Committee’s
discussions to provoke quality debate in respect of the
company’s Trust priority
–
Audit & Risk:
to continue to balance the Committee’s work
between current issues and longer term perspectives. The
Committee would also continue to seek more focused
materials to enhance its oversight further
–
Remuneration:
to bring more external perspectives on
changing remuneration practice and trends to the Committee’s
attention to ensure it remained contemporary in its thinking
–
Nominations & Corporate Governance:
to focus on delivery
of the transition plan to create the optimal composition for the
new GSK Board
–
Science:
to continue to support the CSO and his leadership
team whilst providing its perspectives and opinions on R&D’s
work
Chair
The SID sought feedback from each of the Directors on the
performance of the Board and Chair. The unanimous view was
that the Board is functioning very effectively and has been
continually strengthened; and the Chair has provided excellent
leadership throughout an important and eventful year. Board
culture was very inclusive and purposeful in focusing on the
really important issues of strategy, performance and talent.
Progress on 2020 Board evaluation
Progress against the conclusions of the 2020 Board evaluation review is set out below.
Areas of focus for 2021
Progress/achievements
Consideration had and would continue to be given to stop any unnecessary
tasks to free more time to focus on the priorities with the pre-condition that
creating shareholder value was of prime importance
Board priorities were agreed and adhered to in structuring Board discussions.
Key priorities were the key driver in examining performance and transactions.
This would remain a key focus.
Consideration would also be given to making the best use of the Board’s
time during virtual meetings and incorporating opportunities for ‘unstructured
discussions’ where possible
There was increased use of break-out sessions to focus on and bring different
perspectives to particular issues. In October, to facilitate greater in person
interaction despite ongoing COVID-19 restrictions, the Board, committee and
annual strategy meetings were held at dual sites in the UK and US. The Chair
led the meeting in the UK for UK/European-based Directors and the CEO led
the meeting for US-based Directors. In addition, specific time was set aside
for GLT members to meet with Board members without a set objective or
agenda. These discussions were greatly appreciated by all and a welcome
opportunity to connect.
The Science Committee would look to further deepen its understanding of
how R&D’s resources were allocated
The Board and Science Committee meeting agendas were designed to
facilitate these deeper dives in line with Board’s agreed key priorities.
See page 106
There was a desire to further enhance root cause analysis that was
undertaken when incidents or issues occurred. This was to ensure they
could be avoided in the future and as part of the Group’s approach to
further improving performance
This enhanced approach was the foundation of the global safety review.
104
GSK Annual Report 2021
Board committee reports
Corporate Responsibility Committee
report
Lynn Elsenhans
Corporate Responsibility Committee
I am pleased to present this report, which will be my sixth and
final one as Chair of the Corporate Responsibility Committee
(the Committee).
Role of the Committee
The Committee oversees GSK’s Trust priority and the
company’s progress against our Trust commitments, which
reflect the most important areas for responsible and sustainable
business growth. Our Trust priority covers management’s work
across ESG factors, and it is integral to GSK’s overall strategy.
The Committee has oversight of the views and interests of our
internal and external stakeholders and reviews issues that could
seriously impact GSK’s business and reputation.
In doing so, the Committee has continued to oversee:
–
progress on our Trust commitments through regular reports
from GLT members and senior managers
–
GSK’s approach to managing the risks and opportunities
associated with ESG factors that help create value for
shareholders and society
–
management understanding of key issues and stakeholder
perspectives by listening directly to key independent expert
voices and
–
the principal risks most relevant to its area of expertise and
responsibility, namely: product quality, non-promotional
engagement, supply continuity, environmental sustainability
and health and safety
Key activities in 2021
Safety culture:
The Committee reviewed progress on the
delivery of a global safety improvement plan across GSK’s
businesses developed after a comprehensive and far-reaching
external evaluation of our safety culture. In reviewing the actions
for embedding and sustaining the plan’s safety improvements
into the future, the Committee has encouraged a strong focus
on:
–
education and training to further build capabilities; while
–
ensuring there is clear accountability from leaders for safety
through heightened awareness and application of GSK’s
simplified culture to “do the right thing with integrity and care
because people count on us”
Inclusion & diversity (I&D):
The Committee continued to
assess the progress of GSK’s I&D strategy and commitments.
This has included in particular, implementation of changes to
HR processes and monitoring arrangements needed to support
the delivery of the aspirational diversity targets announced in
last year’s Annual Report. The Committee considered key
requirements of strengthening succession planning
arrangements for diverse talent and the application of the
broad concept of ‘equity’ in the workplace to further evolve
the I&D strategy. I&D is an incredibly important part of the
culture at GSK and the Committee reviews and supports the
comprehensive annual I&D training and awareness session
undertaken by the Board and all our people.
Charitable giving:
GSK has had a tremendous and
longstanding commitment to charitable giving and community
involvement. The Committee reviewed this existing approach
and how GSK compares to its peers. It considered how to
leverage this approach to align to GSK’s core purpose, strategy
and culture and encouraged its impact to be measured in terms
of its contribution to the commitment announced at the Investor
Update in June, to positively impact the health of over 2.5 billion
people over the next ten years.
ESG performance for new GSK:
The Committee reviewed
management plans for the six areas of ESG focus for new GSK,
outlined to investors by the company in June 2021. Working
with the Audit & Risk and Remuneration Committees, the
Committee reviewed management’s proposals for specific
metrics to measure progress on these six areas and the
recommendation of the creation of a single ESG performance
rating assessment as a KPI for GSK after the demerger. It also
reviewed an approach for the risk management and governance
oversight arrangements to measure and report ESG
performance. The Committee was pleased to support these
changes to help retain and develop further GSK’s ESG
leadership position.
Consumer Healthcare (CH):
In preparation for the demerger,
the Committee has reviewed and discussed with CH
management their progress in developing a distinctive and
holistic responsible business and ESG framework that would
support its purpose, strategy and culture on becoming a listed
company with a focus on the key responsible business issues
for the new company. In doing so, the Committee scrutinised
this framework and the proposed targets, including
environmental sustainability targets, which have incorporated
key insights and expectations gathered from investors, analysts
and other external stakeholders.
Stakeholder insights and benchmarking
The Committee pays close attention to the evolving views and
expectations of the company’s broad range of key stakeholders.
It receives a regular report on stakeholder insights at each
meeting to ensure it considers the issues that may have a
bearing on GSK’s reputation and the delivery of our responsible
business agenda. Employee insights and feedback were
discussed in relation to the progression of the company’s
modern employer agenda.
GSK Annual Report 2021
105
Strategic report Investor information
Governance and remuneration
Financial statementsIn keeping with a desire to continually bring external
perspectives into the Committee room, in 2021 the Committee
benefited from direct engagement and insights about
expectations of our sector and the company specifically in two
areas. Firstly, was receiving an expert's insights on investor
views on ESG trends and expectations, the outcomes of which
are reported on page 98. Secondly, was gathering expert views
on the rising expectations of governments and investors for
businesses to understand Human Rights impacts and risks.
The Committee monitors investor expectations on ESG
reporting and disclosure on an ongoing basis. GSK continues
to align to best practice in reporting, in accordance with the
Sustainability Accounting Standards Board (see 2021 ESG
Performance Report) and the Task Force on Climate-related
Financial Disclosures (see page 49).
In addition, the Committee monitors the company’s ESG
performance in various indices and in relation to our peers. In
this respect, we were particularly pleased that GSK was ranked
first in the Dow Jones Sustainability Index in the pharmaceutical
industry group, had improved our Carbon CDP rating from B to
A-, and was rated in the top 3% of Sustainalytics’
pharmaceuticals sub group. These and other external
benchmarks help to evidence GSK’s acknowledged leadership
in ESG, and this continues to be a key driver in the goal to
deliver health impact and shareholder returns.
Committee aims for 2022
The Committee will continue to scrutinise and monitor progress
on GSK’s material Trust topics and relevant enterprise risks. As
the company demerges, it will focus on oversight for how GSK
is embedding its new approach to ESG performance
measurement.
Corporate Responsibility Committee Chair succession
I was delighted to welcome Dr Anne Beal, who has brought
extensive healthcare experience to the Board and our
Committee as a physician and public health expert, in May
2021. Since then, Anne and I have been working on a smooth
transition and handover before she succeeds me as Committee
Chair at the conclusion of the AGM in May. I will continue to
serve as a Committee member to provide continuity and
support, until I retire and step down from the Board at the
conclusion of the demerger later this year. It has been my
privilege to serve as a member of the Board, to chair this
Committee and help shape and oversee, in particular, the
development and embedding of a framework of a focused set of
commitments to support the company’s Trust priority and our
approach as a responsible business. Listening carefully to all
the views of our stakeholders has helped to inform the positive
steps we have taken in reinforcing our position as a leader in
ESG.
Lynn Elsenhans
Corporate Responsibility Committee Chair
28 February 2022
Science Committee report
Dr Jesse Goodman
Science Committee
I am pleased to present my fifth report of the Science
Committee’s (the Committee) activities.
Key activities in 2021
Since the Committee’s inception in 2017, we have continued
to refine our focus to provide greater value to the Board’s
deliberations. In particular, the Committee has focused on
ensuring the validity of the key scientific assumptions which
drive the company’s R&D strategy, as well as providing
technical assurance, particularly in relation to potential
transactions.
Pipeline progress
At the start of the year the Committee closely reviewed the
2021 objectives for the biopharma business, including those
relating to pipeline progression. Delivering a pipeline to help
patients is at the heart of what GSK does and the Committee
monitors its progression closely, both in terms of strategy and
performance. The Committee has held a number of discussions
with Dr Hal Barron, our CSO, and with R&D leaders throughout
the year and has been encouraged with the progress made as
we approach separation.
Since the separation was announced in 2018, R&D’s strategy
has delivered a strong pipeline of assets with the potential to
bring transformational vaccines and medicines to patients.
Some of the most notable approvals in the last year include:
–
Jemperli
(dostarlimab) – for the treatment of endometrial
cancer, the most common female reproductive cancer. This is
another major milestone for GSK’s oncology pipeline and has
the potential to transform the lives of women who previously
had limited treatment options.
–
Cabenuva
(cabotegravir, rilpivirine) – the first long-acting
injectable treatment for HIV.
Cabenuva
has the potential to
transform HIV care for patients by reducing treatment dosing
days from 365 to 12 per year. In addition,
Apretude
received
FDA approval in December 2021 as the first long-acting
injectable option for HIV prevention.
In November 2021, the company announced positive phase III
data for daprodustat, a potential new oral treatment for patients
with anaemia of chronic kidney disease.
COVID-19
Regarding our pipeline of COVID-19 solutions,
Xevudy
(sotrovimab), a monoclonal antibody developed in collaboration
with Vir Biotechnology, was approved in Europe and received
Emergency Use Authorisation in the US as a treatment for
patients with COVID-19. Studies show that
Xevudy
also retains
activity against the Omicron variant. In terms of vaccines, GSK
has announced positive phase III results for the plant-based
COVID-19 vaccine candidate being developed with Medicago.
This vaccine, Covifenz, was approved in Canada in February
2022. In February 2022, we also announced the intention to
seek regulatory authorisation for the COVID-19 vaccine being
developed with Sanofi, based on data from both booster
and phase III efficacy trials.
Our Board committee reports
continued
106
GSK Annual Report 2021
In February 2021, we also reported a collaboration with
CureVac to jointly develop next generation mRNA vaccines for
COVID-19 with the potential to address emerging variants.
Scientific deep-dives
Innovation remains a key priority for GSK. Therefore, the
Committee has continued to meet with the CSO and our
talented R&D leadership to undertake deep-dives into some of
the exciting and complex areas of science that are of strategic
importance to GSK, including:
–
Immunology
–
Oncology with a focus on Synthetic Lethality
–
Vaccines mRNA Strategy
The science of the immune system is a key pillar of our R&D
strategy. It will be leveraged to develop novel therapeutics
as well as potentially revolutionise drug discovery and
development. GSK’s partnership with 23andMe provides the
company with exclusive insights in this field which represents
an enormous opportunity for R&D to build on a strong existing
portfolio. The Committee was pleased to see how immunology
has already been embedded across GSK R&D, including within
oncology, vaccines, ViiV and infectious diseases.
Business development
In addition to oversight of the company’s organic R&D
innovation, the Committee has continued to review potential
business development transactions. The Committee receives
regular previews of potential business development
opportunities being explored and undertakes in-depth technical
reviews of transactions prior to their presentation to the Board.
These transactions have added new programmes which aim to
differentiate GSK’s pipeline from competitors and support
organic development within the company.
Key transactions reviewed by the Committee during the
year include:
iTeos:
The collaboration with iTeos to co-develop an anti-TIGIT
monoclonal antibody. With this collaboration GSK is well-
positioned to produce next-generation immuno-oncology
therapies, especially those targeting the CD226 axis.
Alector:
The collaboration to develop two potential first-in-class
monoclonal antibodies for a range of neurodegenerative
diseases including Parkinson’s disease and Alzheimer’s
disease.
Arrowhead Pharmaceuticals:
The exclusive licence
agreement with Arrowhead Pharmaceuticals, under which GSK
will develop and commercialise Arrowhead’s investigational
RNAi therapeutic being developed as a treatment for patients
with chronic liver disease.
Halozyme Therapeutics:
The global collaboration and license
agreement between ViiV Healthcare and Halozyme, granting
exclusive access to Halozyme’s ENHANZE drug delivery
technology to enable development of ultra long-acting
medicines for HIV.
Shionogi:
The exclusive license agreement between ViiV
Healthcare and Shionogi to develop a third-generation HIV
integrase inhibitor with potential for use in ultra long-acting
HIV regimens.
Enhanced R&D governance
The Committee has been particularly impressed with
developments in R&D governance since Dr Barron was
appointed in 2018. During 2021, Vaccines and Pharma R&D
were fully united into a single organisation. This has enabled
R&D to be more effective, not just in terms of efficiencies but
also in the sharing of technical and scientific expertise.
The benefits of these governance enhancements have already
become apparent with improvements made in both cycle times
across clinical development and the probability of success from
pivotal studies.
Three and a half years ago, management set out a new
approach to R&D. Under Dr Barron’s leadership our pipeline in
2021 stands out as having advanced notably. During 2022, the
Committee will emphasise the need to continue this momentum
up to and beyond separation.
Board and Committee changes
We welcomed Dr Hal Dietz to the Committee on 1 January
2022. His experience in the field of human genetics will add
significant value to the Committee’s discussions. His
appointment also means that the Committee is very well-
rounded in the areas of expertise required to evaluate GSK’s
strategy, pipeline and potential business development targets.
Judy Lewent left the Committee upon her retirement from
the Board after the 2021 AGM. Charles Bancroft joined the
Committee in May 2021 until February 2022 following the
appointment of Dr Dietz.
The Committee participated in the CSO succession planning
and was fully supportive of Tony Wood's appointment. We are
pleased that Dr Barron will join the Committee in August when
he transitions to a Non-Executive Director.
Dr Jesse Goodman
Science Committee Chair
28 February 2022
Our Board committee reports
continued
GSK Annual Report 2021
107
Strategic report Investor information
Governance and remuneration
Financial statementsNominations & Corporate Governance
Committee report
Jonathan Symonds
Nominations & Corporate Governance Committee
I am pleased to present my third report as Chair of the
Nominations & Corporate Governance Committee (the
Committee).
Key activities in 2021
The Committee played an important role in delivering our key
priorities to transform GSK and separate the CH business. The
Committee met 13 times during the year and this report sets out
our work during 2021.
Key priorities
Status
Succession planning for the CSO and his
R&D Leadership Team
CSO succession candidate
identified and subsequently
appointed CSO Designate
Appoint a Chair of the Corporate
Responsibility Committee to succeed
Lynn Elsenhans
Dr Anne Beal joined the Board
in May 2021
Appoint a third Scientific & Medical Expert
(SME)
Dr Hal Dietz joined the Board
in January 2022
Design target GSK Board composition
and recruit high calibre Non-Executives to
complete the new GSK biopharma Board
Target GSK Board composition
agreed and search for new
Non-Executive Directors for
GSK in progress
Appoint the Haleon CEO and assemble
an appropriately seasoned management
team
Appoint a Chair for Haleon and support
the composition of the Haleon Board
Brian McNamara appointed as
Haleon CEO Designate in July
2021. Haleon Management
Team announced in December
2021
Sir Dave Lewis appointed
Haleon Chair Designate in
December 2021. Selection of
the remaining Haleon Board in
progress
Shaping the GSK Board for the future
Management succession planning
The Committee, with all Non-Executive Directors present,
continuously assess the succession plans for management and
the other Executive Directors to ensure we have appropriate
succession plans and a diverse pipeline of potential successors
in place.
During 2021, given the importance of the CSO and leadership
of R&D, the Committee, in collaboration with the CEO, and as
appropriate the CSO, intensified our planning to identify a
potential CSO succession candidate. The Committee was
supported by the Chief People Officer (CPO) and the Science
Committee. The Committee followed a comprehensive process
before making a recommendation as described below. This is
replicated in assessing succession candidates.
The Committee and the Science Committee reviewed a diverse
long list of internal and external potential successor candidates
from which a short list of candidates was compiled. These were
interviewed by Science Committee members, the Chair, CEO,
CPO and CSO. The Committee was joined by all the Non-
Executive Directors to review the final candidates. Following this
extensive process, the Non-Executive Directors agreed to
identify Dr Tony Wood as the CSO’s successor.
The CPO, CEO, CSO and Dr Wood then established a
transition plan which was approved by the Committee to ensure
a smooth transition should it become necessary.
In January 2022, the Board activated the succession plan
following Dr Barron’s decision to accept the position of CEO
and Co-Chair of Altos Labs from August 2022. Since Dr Wood
has been a key partner to Dr Barron in delivering GSK’s R&D
approach, and has wide experience and expertise across
science data and new technologies, he is perfectly placed to
build on Dr Barron’s outstanding progress and to deliver value
from the pipeline. The Board therefore agreed to appoint Dr
Tony Wood as CSO Designate and he will succeed Dr Barron
as CSO and become a member of the GLT on 1 August 2022.
Further details of his background can be found on page 5 and
in the company's announcement issued on 19 January 2022
which is available on gsk.com.
The Committee also recommended as part of the CSO
transition plan that Dr Barron be appointed a Non-Independent
Non-Executive Director and member of the Science Committee
with effect from 1 August 2022, initially for a three-year term.
This would support the CSO transition process.
Corporate Responsibility Committee Chair
In my 2020 report, I described the search for Lynn’s successor
as Chair of the Corporate Responsibility Committee (CRC).
This resulted in Dr Anne Beal’s appointment to the Board on
6 May. Anne has brought extensive healthcare experience as a
physician and entrepreneur, combined with a passion for patient
advocacy. Further details of her experience and the rationale for
her appointment are included in the company’s announcement
on 6 April 2021 which is available on gsk.com. A transition
process is underway to enable Anne to succeed Lynn as CRC
Chair at the close of the 2022 AGM. Despite serving for over
nine years, Lynn’s experience as a CEO and from sitting on
other boards means that she continues to demonstrate all the
characteristics of independence expected by the Board in
carrying out her role on the Board.
Third Scientific Medical Expert (SME)
I am pleased to confirm that the search for a third SME was
successfully concluded. We continued to fine-tune the
selection criteria as the process evolved and considered the
following:
–
An outlook on the future direction of R&D, innovation and the
treatment and management of human health
–
Experience of people leadership and management at ‘scale’,
either in an academic or industry setting
–
Interested in, and having a deep understanding of, a breadth
of scientific and therapeutic areas, particularly in immunology
as well as genomics and genetics. Having perspectives on
the ability to harness digital technologies (including Artificial
Intelligence) to enhance the research and development of
new medicines and
–
Able to deliver complex science to a broad audience. Highly
collaborative and a willingness to engage proactively on
topics beyond their own immediate realm of expertise
Our Board committee reports
continued
108
GSK Annual Report 2021
Our Board committee reports
continued
The Committee was pleased to recommend the appointment
of Dr Hal Dietz to the Board with effect from 1 January 2022.
Dr Dietz brings his extensive experience in the field of human
genetics, which is central to GSK’s approach to R&D and will
add further strength to the Science Committee and Board
discussions. Further details of Hal’s experience and the rationale
for his appointment are included in the company’s announcement
on 27 October 2021, which is available on gsk.com.
Transition to a new GSK Board
In planning the structure of the new GSK Board as an
independent biopharma company, the Committee
commissioned Korn Ferry to meet with each Board member to
gather their views on the optimal Board design for the future.
Further details on this process are given on page 103. A skills
matrix was developed which mapped current Board members’
skills and capabilities and the succession planning needs for
the Board. This was discussed with all Non-Executive Directors
and the key capabilities were further refined and a final target
skills matrix was agreed. The Committee then agreed the briefs
to initiate the search for three new Non-Executive Directors to
be appointed to the Board in the next 12 to 18 months. The
Committee is following its search process to recruit for these
roles. Long lists of candidates for both roles have been
considered.
Haleon Board appointments
The Committee appointed a sub-Committee comprising,
the Chair, Vindi Banga, Dame Vivienne Cox, Dr Beal and
Mr Rohner, to progress Haleon Board appointments. It then
reported progress at each scheduled Committee meeting.
Final decisions were reached by the Committee with all
Non-Executive Directors invited to participate.
Haleon CEO and CFO:
The Committee conducted an
extensive global search and selection process to appoint the
Haleon CEO and CFO designates. This work followed the
Committee’s search process. In particular, the CEO role profile
contained the key selection criteria and responsibilities the
successful candidate would need to fulfil most especially after
the demerger. These emphasised the importance of
establishing the new Haleon Board to deliver the growth
strategy and to drive significant shareholder value. This would
require a relentless focus on innovation, promoting a high
performance and inclusive culture whilst also operating to the
exacting standards of corporate governance.
Following interviews by Board members with internal and
external candidates, the Board was pleased to endorse the
Committee’s recommendation to appoint Brian McNamara as
Haleon CEO Designate. The Board noted in particular Brian’s
strong track record of success in building the CH business and
his considerable experience of FMCG and consumer health.
This meant that he was uniquely suited and the right choice to
unlock the growth potential of Haleon as an independent listed
company. Further details of Brian’s experience and the
rationale for his appointment are included in the company’s
announcement on 22 July 2021, which is available on gsk.com.
The Committee reviewed Brian’s proposed leadership team for
Haleon (in particular the proposed CFO and Chief People
Officer) which was announced in December 2021. Following
extensive internal and external searches for each role,
shortlisted candidates were interviewed by the relevant panel of
Non-Executive Directors against the agreed role criteria. The
Committee then approved the final appointees. The Haleon
management team was then introduced to investors at the CH
Capital Markets Day on 28 February 2022.
Haleon Chair:
The Committee followed its search process to
select the Haleon Chair. This search focused on candidates
with the following knowledge, experience and commitment:
–
Significant listed Board experience with an understanding of
investors, analysts, banks, regulators and governments
–
A high degree of financial acumen and successful business
track record in creating shareholder value and growing
businesses
–
A strong emphasis on coaching skills and the ability to create
a high-performance environment
–
Deep experience of consumer facing businesses, with a high
degree of customer-centricity. International experience,
preferably in the US and China
–
Strong strategic skills and a track record of innovative
thinking, coaching and development
–
Be well respected and have high credibility with all
stakeholders, including investors, capital market participants,
regulators and governments
–
Have high integrity, strong values and be driven by a strong
sense of purpose
–
Understand the role of a Chair of a FTSE 100
–
Possession of humility and a subdued ego and a strong
emotional commitment and passion for the CH business
–
Be committed to diversity in all its forms, resilient and open-
minded with strong judgement as well as a natural team builder
The Committee agreed that Sir Dave Lewis, a highly
experienced and respected global business leader in consumer
goods and retail, was the most suitable candidate to lead the
Haleon Board. It was noted that at the time of his selection he
was deemed to meet the independence requirements of the
Code. The Committee’s recommendation was subsequently
endorsed by the full Board. Further details of Sir Dave’s
experience and the rationale for his appointment are included in
the company’s announcement on 20 December 2021, which is
available on gsk.com.
Sir Dave is now progressing the search for high calibre non-
executive directors to build the Haleon Board. To ensure
continuity, it is expected that two Non-Executive members of
the GSK Board will transfer to the Haleon Board on completion
of the demerger. The company’s CH joint venture partner
(Pfizer) has the right to appoint up to two Non-Executive
Directors. The new Haleon Board will be announced publicly
later in the year as part of demerger arrangements.
GSK Annual Report 2021
109
Strategic report Investor information
Governance and remuneration
Financial statementsWays of working
The Committee seeks to follow best practice in all the
appointments it recommends, agreeing the criteria for each role,
the most appropriate interview panel, before then considering a
comprehensive and diverse long list of candidates. Shortlisted
candidates are interviewed and assessed against the chosen
criteria. Due diligence is then undertaken before the Committee
makes its final recommendation. Executive search firms are
appointed in accordance with the company’s procurement
policy based on their expertise relative to each role. The
Committee has agreed that only search firms who were
signatories to the Voluntary Code of Conduct of Executive
Search Firms on gender diversity and best practice would
be engaged.
The Committee worked with a number of executive search firms
in 2021 who provided additional consultancy services to the
company as outlined below:
–
Korn Ferry: general recruitment, executive search and
assessment services, coaching and other HR-related services
–
Egon Zehnder: executive search, assessment and coaching
services to specific senior executives
–
Heidrick & Struggles: executive search services
–
Spencer Stuart: executive search and assessment services
The Committee reviewed the potential for conflicts of interest
and judged that there were appropriate safeguards against
such conflicts.
Our Board committee reports
continued
Board Committee Chair and GLT membership changes
During the year and up to the date of this report, the Committee approved the following changes to the membership of our Board
committees and GLT.
Director Membership
Appointment date Retirement date
Charles Bancroft Chair of Audit & Risk Committee Chair
Member of Nominations & Corporate Governance, and Science committees
9 March 2021
6 May 2021
8 February 2022
(stepped down
from Science
Committee after
Dr Hal Dietz joined
the Committee)
Dr Anne Beal
Member of Corporate Responsibility and
Audit & Risk committees
6 May 2021
23 July 2021
Dr Hal Dietz
Member of Science Committee
1 January 2022
Judy Lewent
Chair of Audit & Risk Committee Chair
Member of Audit & Risk, Nominations & Corporate Governance, Remuneration,
Science and Transformation & Separation committees
9 March 2021
5 May 2021
Lynn Elsenhans
Chair of Corporate Responsibility Committee
Member of Audit & Risk, Corporate Responsibility and Nominations & Corporate
Governance committees
4 May 2022
After CH
Demerger
Dr Anne Beal
Chair of Corporate Responsibility Committee
4 May 2022
Shobie Ramakrishnan
Chief Digital and Technology Officer and member of GLT 16 December 2021
Board composition, tenure and diversity
The Board seeks to balance its composition and tenure and
that of its Committees, and to refresh them over time. This
enables the Board to benefit from the experience of longer-
serving Directors and the fresh perspectives and insights from
newer appointees. Our Non-Executive Directors are drawn from
a wide range of industries and backgrounds, including the
pharmaceuticals industry and R&D, vaccines, consumer
products and healthcare, medical research and academia,
insurance and financial services. Collectively they have a
wealth of experience of complex organisations with global
reach. Many of our Board members also have experience of
longer-cycle industries, which is of great assistance in
understanding our sector.
We are committed to the diversity of our Boardroom, just as
GSK is committed to equal opportunities for all employees
at all levels of our organisation. The Board and management
seek to encourage a diverse and inclusive culture throughout
the company. An effective Board needs a range and balance
of skills, experience, knowledge, ethnicity, gender, social-
economic backgrounds and independence, with individuals
who are prepared to challenge each other and work
collaboratively. This mix needs to be complemented by a
diversity of personal attributes, including character, intellect,
judgement, honesty and courage.
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GSK Annual Report 2021
Board and GLT diversity targets
The Committee is responsible for developing measurable
objectives and monitoring progress towards their achievement
to assist the implementation of the Board’s diversity policy,
including gender and ethnic diversity. Our progress against
these targets is set out below. For consistency, the diversity
metrics as at 1 January 2022 are shown in line with our gender
diversity submission to the FTSE Women Leaders Review
(the Review).
Progress achieved
Diversity objectives
Status Performance
At least 33% of Board positions
held by women
Exceed
objective
38.4%
At least 33% of GLT positions
held by women
Met objective
35.7%
At least 33% of combined GLT
and direct report positions held
by women
Exceed
objective
42.5%
At least one Board Director is
ethnically diverse
Exceed
objective
Two Directors
The Committee is particularly intent on increasing gender and,
especially, ethnically diverse representation on the Board and
GLT, and further developing the pipeline of direct reports to the
GLT from ethnically diverse backgrounds.
The Committee is supportive of the new gender diversity targets
in the Review published in late February 2022, including 40%
women on boards by 2025. It has been pleased that for many
years the Board’s gender representation target has been
comfortably exceeded and normally over 40% of Board positions
have been held by women. We are in a transitional period as the
company separates and the CH business is demerged. The
Committee is working to transition to the target Board profile for
the new biopharma company. As a result, the composition and
diversity of the Board during this transition will inevitably be
subject to fluctuation. I look forward to confirming completion of
this work in next year’s report and reporting our progress against
the Review's increased gender diversity targets.
The representation of women and ethnically diverse leaders is
covered on page 37, as part of the diversity of GSK’s global
workforce. Progress against our inclusion and diversity
commitments, including gender and ethnicity, is illustrated in
our ESG Performance Report on gsk.com.
Sir Jonathan Symonds
Nominations & Corporate Governance Committee Chair
28 February 2022
Our Board committee reports
continued
Transformation & Separation
Committee report
Jonathan Symonds
Transformation & Separation Committee
I am pleased to present my second and final report as Chair of
the Transformation & Separation Committee (the Committee)
given that it has now fulfilled its purpose and mandate.
The Committee was established in May 2020 charged with two
principal functions:
–
Exercising oversight of the Future Ready transformation
programme
, particularly delivery of the targeted cost savings
and separation of the company’s infrastructure prior to the
delivery team moving from project design into implementation
and
–
Considering the optimal form of separation
. This also
included the implications of separation and the most
appropriate listing location for Haleon
The Committee was pleased that the Future Ready
transformation programme was completed to schedule by the
end of 2021 and exceeded the cost savings identified to be
derived from this programme.
During 2021, the Committee undertook a programme of work to
understand and consider the key fundamentals of separation.
This was not just the technical requirements. It considered how
to best unlock, release and maximise long-term shareholder
value. This work was supported by guidance and advice from
external experts as appropriate. The Committee began by
considering how we should separate and the principal value to
be achieve from each option available. Discussions then
progressed to the capital structures required for the resulting
two companies to be competitive as independent entities.
Following a decision to demerge the CH business it was
important to determine how to distribute shares in Haleon to our
shareholders, and on which exchanges Haleon should list and
why. The Committee also considered whether to retain a stake
in Haleon and how big a stake to retain.
This was a very intensive and detailed programme of work as
the Committee addressed these major questions and the
impact for all our stakeholders. It then reported to the Board
accordingly on its conclusions and recommendations.
This process is now well into the execution phase. Oversight
of the remaining work more appropriately rests with the other
specialist Board committees and has been devolved to them
as appropriate, or will be reviewed and overseen directly by
the Board.
Having fulfilled its mandate, it was agreed that the Committee
be decommissioned.
I would like to thank Board colleagues for their commitment and
diligence in supporting the Committee’s work in this respect.
Sir Jonathan Symonds
Transformation & Separation Committee Chair
28 February 2022
GSK Annual Report 2021
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Strategic report Investor information
Governance and remuneration
Financial statementsAudit & Risk Committee report
Charles Bancroft
Audit & Risk Committee
I am pleased to present this report, which is my first as Chair of
the Audit & Risk Committee (the Committee).
I joined the Committee back in May 2020. I succeeded Judy
Lewent as Chair in March 2021 after a comprehensive
transition. I have been drawing on my business background,
including the ten years I served as CFO of the major
pharmaceutical company, Bristol Myers Squibb. In doing so,
I have always viewed people, processes, systems and
importantly, culture as the critical foundation for successfully
managing financial reporting, audit and compliance risks. In my
time serving on this Committee and through my observations
more generally as a Board member, I am confident that GSK
controls score highly in all these areas. I would therefore like to
share my initial impressions of these key aspects.
Our culture and people
GSK has a strong compliance culture with a consistent tone
and engagement from the top. This is regularly considered and
emphasised in Committee discussions, and we have a zero-
tolerance approach to any unethical behaviour. Our risk
management and internal control framework is mature and well
embedded in the organisation as demonstrated on pages 46
and 112 of the Annual Report. This enables the Committee to
evaluate and oversee how GSK manages principal and
emerging risks.
The Committee also routinely exercises oversights of
improvements to our compliance culture. Everything we do at
GSK is underpinned by having great people with the right skill
sets. Indeed, our corporate governance framework requires
good people to make quality decisions and do the right thing.
As Committee Chair, I have unfettered access to the senior
leadership and key members of their teams. Regularly
throughout the year, I met individually with key Committee
attendees from management, including the CFO, General
Counsel, Chief Compliance Officer, Head of Audit &
Assurance, the Group Financial Controller, the Company
Secretary, and external auditor. Additionally, the Committee
members have an opportunity to speak at the end of each
meeting with the external auditor without management being
present. Crucially, we also have the ability to speak with key
members of management in private sessions or alone as
required.
Our Board committee reports
continued
Our processes and systems
These are fundamental for appropriate financial reporting,
controls and managing risks. We are well positioned in this
respect, as the company’s main accounting and reporting
systems are centralised into two global instances of SAP. We
also have a well-established One Finance model with
centralised transactional and controller activities embedded in
GSK’s four regional hubs. This frees up our in-market finance
people to focus on the core business operations and decision
making. The Committee continues to exercise regular oversight
and monitoring activities over these critical financial systems.
The integrity of our financial statements, including the Annual
Report and quarterly results announcements, is an enduring key
focus of the Committee. Since joining the Board and
Committee, I have been impressed with the clarity and rigour
around these processes. The Committee’s position has always
been to aim for clear and transparent financial disclosure in all of
GSK's financial reporting.
As the previous Committee Chair highlighted in her report last
year, we have continued to ensure that the company’s financial
reporting and controls framework remains robust and did not
require any fundamental changes. This has been important
despite the ongoing impact of COVID-19 on the company’s ways
of working. In addition, the external auditor regularly tests our
financial systems and controls and challenges management, and
reports their results to the Committee. This includes any areas of
deficiencies that the external auditor has identified and progress
in remediation of issues, all of which are discussed and evaluated.
Key activities in 2021
Key decisions:
As usual, it has been a busy year for the
Committee. Not only working through its regular programme of
activities, but making important decisions in support of the
Board’s progression of its key priorities. These have included
reviewing, in support of the Board:
–
further incremental changes to the company’s commercial
model in China
–
the company’s new growth ambitions before they were
shared at the Investor Update in June 2021 and
–
the move to a progressive dividend policy from 2022
The matters considered and their outcomes are reported on
pages 96 and 97.
Preparation for the demerger
The Committee is also a key CH governance delivery
workstream. We are now increasingly reviewing the technical
aspects of delivery of the demerger. The Committee is
specifically accountable for reviewing and recommending
to the Board approval of key transaction documents and
related matters.
112
GSK Annual Report 2021
The Board is ultimately responsible for the decision to
demerge, both in respect of the timing and final terms of the
demerger. It will make the recommendation of the transaction to
shareholders through the publication of the GSK Shareholder
Circular. The Committee’s role is to scrutinise these documents
prior to the Board’s review. This process for both the
Committee and the Board will continue to intensify in the first
half of this year as the formal point of separation approaches.
The Committee has been assisting the CH management in
establishing a robust internal control and risk management
framework ready for separation. The overarching principle has
been to replicate GSK’s current internal governance controls
and finance systems and, where necessary, adapt the existing
framework and processes. The Committee is pleased that the
CH business is currently well advanced in setting up the
governance, processes and organisations to be managing all
processes in a ‘business as usual’ environment in Q2 2022.
Internal control framework
Our Board recognises its obligation to present a fair, balanced
and understandable assessment of GSK’s current position and
prospects. Reflecting this responsibility, it is accountable for
evaluating and approving the effectiveness of GSK’s internal
controls, including financial, operational and compliance
controls, and risk management processes.
We ensure the reliability of our financial reporting, and
compliance with laws and regulations, through our internal
control framework. This is a comprehensive enterprise-wide risk
management model which supports the Board’s continuous
identification, evaluation and management of the Group’s
principal risks, as required by the FRC’s Code. The framework
is designed to manage the risk of us not achieving our business
objectives.
A fit-for-purpose framework – complemented by our corporate
values, culture, expectations and Speak Up processes –
ensures that the risks associated with our business activities are
actively and effectively controlled in line with our agreed risk
appetite. We believe GSK’s framework provides reasonable, but
not absolute, assurance against material misstatement or loss.
The Board mandates the Group’s Risk Oversight & Compliance
Council (ROCC) of senior leaders to assist the Committee
in overseeing risk management and internal control activities.
It also provides the business with a framework for risk
management and upward escalation of significant risks. Risk
Management and Compliance Boards (RMCBs) across the
Group promote the ‘tone from the top’ and establish our risk
culture, as well as ensuring effective oversight of internal
controls and risk management processes.
Each principal risk has an assigned risk owner, drawn from
senior management, who is accountable for managing his/her
principal risk with oversight by a GLT Member, including setting
and implementing risk mitigation plans. Risk owners report
quarterly on their respective risk management approach and
progress at the ROCC and the appropriate Board Committee.
Our Compliance function assists the ROCC and RMCBs.
Compliance is responsible for advancing enterprise-wide risk
management and for developing risk-based and ethically sound
working practices. It also actively promotes ethical behaviours
by enabling all employees to operate in line with our values and
comply with applicable laws and regulations.
Our Audit & Assurance (A&A) function provides independent
assurance to senior management and the Board on the
effectiveness of risk management Group-wide, in line with an
agreed assurance plan. This helps senior management and the
Board to meet their oversight and advisory responsibilities in
fulfilling GSK’s strategic objectives and building trust with
patients and other stakeholders. A&A has a dual reporting line
to our CFO and the Committee.
The Committee receives regular reports from business units,
principal risk owners, Compliance and A&A on areas of
significant risk to the Group and on related internal controls.
These reports assess the internal control environment within
each principal risk area, including enhancements to strengthen
controls. Following consideration of these reports, the
Committee reports annually to the Board on the effectiveness
of GSK’s internal controls.
In 2021, through the authority delegated to the Committee, the
Board conducted a robust assessment of the Group’s principal
risks. This assessment, which was in line with the FRC’s 2018
Code, included consideration of the nature and extent of risk the
Board is willing to take in achieving GSK’s strategic objectives.
The Board, via the Committee, also oversaw the effectiveness
of our internal control environment and risk management
processes across the Group for the whole year, up to the
approval date of this Annual Report.
A review of the Group’s risk management approach is further
discussed in the ‘Risk management’ section of the strategic
report on pages 46 to 54.
Our management of each principal risk is explained in ‘Principal
risks and uncertainties’ on pages 275 to 287. The Group’s
viability is discussed in the Group risk management section of
the strategic report on page 53.
Our Board committee reports
continued
GSK Annual Report 2021
113
Strategic report Investor information
Governance and remuneration
Financial statementsSignificant issues relating to the financial statements
In considering GSK’s quarterly financial results announcements and the financial results in the 2021 Annual Report, the Committee
reviewed the significant issues and management judgements in determining those results. It reviewed management papers setting
out the key areas of risk, actions taken to quantify the effects of the relevant issues, and judgements made by management on the
appropriate accounting required to address those issues in the financial statements.
The significant issues considered in relation to the financial statements for the year ended 31 December 2021 are set out in the
following table, with a summary of the financial outcomes where appropriate. The Committee and the external auditor have discussed
the significant issues addressed by the Committee during the year and the areas of particular audit focus, as described in the
Independent Auditor’s Report on pages 156 to 167.
Significant issues considered by the Committee
in relation to the financial statements How the issue was addressed by the Committee
Going concern basis for the preparation
of the financial statements
The Committee considered the outcome of management’s half-yearly and year end reviews of current and
forecast net debt positions and the various financing facilities and options available to the Group.
The Committee also considered management’s review of the current and longer-term impacts of the COVID-19
pandemic, at the outbreak of the pandemic and at the year end. Following consideration of these assessments,
which included stress testing and viability scenarios, sources of liquidity and funding, forecasts and estimates, the
Committee confirmed that the application of the going concern basis for the preparation of the financial
statements continued to be appropriate.
Revenue recognition, including returns
and rebates (RAR) accruals
The Committee reviewed management’s approach to the timing of recognition of revenue and accruals for
customer returns and rebates. The US Pharmaceuticals and Vaccines accrual for returns and rebates was £5.0
billion at 31 December 2021 and the Committee reviewed the basis on which the accrual had been made and
concurred with management’s judgements on the amounts involved. A fuller description of the process operated
in the US Pharmaceuticals and Vaccines business in determining the level of accrual necessary is set out in
‘Critical accounting policies’ on page 80.
Provisions for legal matters, including
investigations into the Group’s
commercial practices
The Committee received detailed reports on actual and potential litigation from both internal and external legal
counsel, together with a number of detailed updates on investigations into the Group’s commercial practices.
Management outlined the levels of provision and corresponding disclosure considered necessary in respect of
potential adverse litigation outcomes and also those areas where it was not yet possible to determine if a
provision was necessary, or its amount. At 31 December 2021, the provision for legal matters was £0.2 billion,
as set out in Note 31 to the financial statements, ‘Other provisions’.
Provisions for uncertain tax positions
The Committee considered current tax disputes and areas of potential risk and concurred with management’s
judgement on the levels of tax contingencies required. At 31 December 2021, a tax payable liability of £0.7
billion, including provisions for uncertain tax positions, was recognised on the Group’s balance sheet.
Impairments of intangible assets
The Committee reviewed management’s process for reviewing and testing goodwill and other intangible assets
for potential impairment. The Committee accepted management’s judgements on the intangible assets that
required writing down and the resulting impairment of £455 million in 2021. See Note 20 to the financial
statements, ‘Other intangible assets’ for more details.
Valuation of contingent consideration
in relation to ViiV Healthcare
The Committee considered management’s judgement that it was necessary to increase the liability to pay
contingent consideration as a result of increases in sales forecasts as well as the unwind of the discount and
updated exchange rate assumptions. After cash payments of approximately £0.8 billion in the year, at 31
December 2021, the Group’s Balance sheet included a contingent consideration liability of £5.6 billion in relation
to ViiV Healthcare. The settlement with Gilead resulted in a re-measurement of the existing liabilities for the
contingent consideration at the year end and is included in the closing balance.
ViiV Healthcare put option
The Committee reviewed and agreed the accounting for the Pfizer put option and concurred with management’s
judgement on the valuation of the put option of £1.0 billion at 31 December 2021. The settlement with Gilead
resulted in a re-measurement of the Pfizer put option at the year end and is included in the closing balance.
Our Board committee reports
continued
114
GSK Annual Report 2021
Our Board committee reports
continued
Auditor’s reappointment
External auditor
External auditor appointment
Last tender May – December 2016
Transition year
2017
First shareholder approval of current auditor May 2018
First audited Annual Report and 20-F Year ending 31 December 2018
Next audit tender required by regulations
2026
There were no contractual or similar obligations restricting the
Group’s choice of external auditor. The Committee considers
that during 2020 the company complied with the mandatory
audit processes and audit committee responsibility provisions
of the Competition and Markets Authority Statutory Audit
Services Order 2014.
Effectiveness and quality of external audit process
The Committee is committed to ensuring that GSK receives a
high-quality and effective external audit. In evaluating Deloitte’s
performance during 2020, prior to making a recommendation
on its reappointment in early 2021, the Committee reviewed the
effectiveness of its performance against the criteria which it
agreed with management at the beginning of 2020. The
detailed criteria used for judging the effectiveness of Deloitte as
external auditor (which are based on audit approach and
strategy, high-quality independent audit, effective partnership
and value for money) and its overriding responsibility to deliver a
smooth, thorough and efficiently-executed audit for 2021 are
available on gsk.com. In undertaking its review, the Committee
considered:
–
the overall quality of the audit
–
the independence of Deloitte
–
whether Deloitte exhibited an appropriate level of challenge
and scepticism in its work
Deloitte’s length of tenure was not taken into account when
assessing its independence and objectivity, as it was only
recently appointed as GSK’s auditor. However, the Committee
did consider how effectively it had assumed its role as auditor.
The Committee also considered feedback on the 2021 external
audit, through a survey of Committee members and the financial
management team at corporate and business unit level. The
survey covered the:
–
effectiveness of the auditor’s challenge
–
integrity of Deloitte
–
transparency of its reporting to management and the
Committee
–
clarity of the auditor’s communication and ways of working
–
alignment of the 2021 audit to the Group’s investment in
Systems, Applications and Products (SAP)
–
quality of the audit team’s leadership
–
skills and experience of the audit team
The Committee Chair regularly meets independently with the
audit partners. The Committee also meets the auditor at the
end of each meeting to discuss progress, as appropriate.
Having reviewed the above feedback, and noted any areas of
improvement to be implemented by the audit team for 2022,
the Committee was satisfied with the:
–
effectiveness of the auditor and the external audit process
and
–
auditor’s independence, qualifications, objectivity, expertise
and resources
The Committee therefore agreed to recommend the
reappointment of Deloitte to the Board at the forthcoming AGM.
In making its recommendation, the Committee was free from the
influence of any third party.
Non-audit services
Our management operates on the presumption that other
accountancy firms will provide non-audit services to GSK.
However, where the external auditor’s skills and experience
make it the only suitable supplier of non-audit support – such
as for audit-related matters, tax, and other services – it may be
used, in the best interests of the company. In line with GSK’s
non-audit services policy, the Committee must ensure that
auditor objectivity and independence is safeguarded by
reviewing and pre-approving the external auditor’s provision of
such services. The company policy complies with the FRC’s
2019 Revised Ethical Standard and the Sarbanes-Oxley Act
of 2002. It observes the following core policy features on
engaging the external auditor for non-audit services:
GSK non-audit services policy, key features:
Process:
All non-audit services over £50,000 are put to competitive
tender with other financial services providers, in line with the
Group’s procurement process, unless the skills and experience
of the external auditor make it the only suitable supplier.
Safeguards:
Adequate safeguards are established so that the objectivity
and independence of the Group audit are not threatened or
compromised.
Fee cap:
The total fee payable for non-audit services should not
exceed 50% of the annual audit fee, except in special
circumstances where there would be a clear advantage in
the auditor undertaking the additional work.
Prohibitions:
GSK’s policy includes a ‘whitelist’ of permitted non-audit
services in line with the relevant regulations. Any service not
on this list is prohibited.
Pre-approval:
All non-audit services require pre-approval as set out in the
table below to ensure services approved are consistent with
GSK’s non-audit policy for permissible services. This process
ensures all services fall within the scope of services permitted
and pre-approved by the Committee and does not represent
a delegation of authority for pre-approval.
Value
More than £50,000
Between £25,000 and
£50,000
Under £25,000
Pre-approver
Committee Chair and CFO
Group Financial Controller
Designate of the Group
Financial Controller
The fees paid to the company's auditor and its associates are
set out overleaf. Further details are given in Note 8 to the
financial statements, ‘Operating profit’ on page 184.
GSK Annual Report 2021
115
Strategic report Investor information
Governance and remuneration
Financial statementsOur Board committee reports
continued
During the year, fees for audit related and other assurance
services of £4.0 million have increased by £2.4 million
compared to 2020. This increase is due to work associated
with Deloitte’s reporting accountant role in preparing for the
demerger of the Consumer Healthcare business. Including
audit fees in respect of the GSK pension schemes of £0.2
million, fees for audit related and other assurance services
represent 15.2% of the annual audit service fee (2020: 6.3%).
Excluding the demerger work, fees for audit related and other
assurance services would have represented 2.2% of the
annual audit fee.
The Committee considered that hiring Deloitte to undertake the
reporting accountant role for the demerger was in the best
interests of shareholders because:
–
Deloitte possessed the type of expertise, experience, size and
international scope required to handle a major demerger of
this scale and complexity
–
the company benefited specifically from Deloitte’s in-depth
knowledge and understanding of our CH business and their
processes and compliance environment and
–
management time, that would otherwise have been devoted
to educating another firm on the company’s business and
operations, could instead be spent on delivering the
demerger and creation of Haleon.
The Committee considered the level of non-audit services
incurred as part of its annual review of Deloitte’s independence
set out on page 114 and was satisfied that the auditor continued
to be independent and exercise objectivity throughout 2021.
0
10
2030
Audit and assurance services
Other services, including tax, regulatory, compliance and treasury-related
services
Services relating to the Consumer Healthcare demerger preparation
Note 8 to the Financial statements provides further details of fees payable to
the company's auditor.
Audit and other services comparison (£m)
26.2
26.6
2019
29.1
1.5
2021
30.3
1.4
27.7
2020
28.3
1.8
4.2
Fair, balanced and understandable assessment
The need for an annual report to be fair, balanced and
understandable is one of the key compliance requirements for a
company’s financial statements. To ensure that GSK’s Annual
Report meets this requirement, we have a well-established and
documented process governing the coordination and review of
Group-wide contributions to the publication. This runs in parallel
with the process followed by the external auditor. The
Committee received a summary of management’s approach to
GSK’s 2021 Annual Report to ensure it met the requirements of
the FRC’s Code. This enabled the Committee, and the Board,
to confirm that GSK’s 2021 Annual Report as a whole is fair,
balanced and understandable and provides the necessary
information for shareholders to assess the company’s position
and performance, business model and strategy.
Code of Conduct and reporting lines
We have a number of well-established policies (including a
Code of Conduct), which are available on gsk.com, together
with details of our confidential Speak Up lines for reporting and
investigating unlawful conduct.
Charles Bancroft
Audit & Risk Committee Chair
28 February 2022
116
GSK Annual Report 2021
Section 172 statement
Company directors are required by law to promote the success
of their organisation for the benefit of both shareholders and
their wider stakeholders, including employees, suppliers and the
community.
This statement aligns to such requirements, as set out in
Section 172 and Section 414CZA of the Companies Act 2006
(the Act). It indicates how, during the year, our Directors
addressed the matters set out in Section 172(1) (a) to (f) of the
Act when performing their duties. To avoid duplication, it
incorporates information from other areas of the Annual Report.
The Board considers that the statement focuses on those risks
and opportunities that are strategically important to GSK, and
consistent with the Group’s size and complexity.
This allows it to build trust and fully understand the potential
impacts of the decisions it makes on all our stakeholders. Our
engagement with GSK’s main stakeholder groups, including our
patients, shareholders, consumers, customers and employees
at all levels and across the organisation, are summarised on
pages 44 and 45 of our strategic report.
The company’s governance architecture and processes are
summarised on pages 94 to 103 of our Corporate Governance
report. This summary explores how the Board considers all
relevant matters in making its principal decisions to contribute
to the delivery of GSK’s long-term priorities of Innovation,
Performance and Trust.
More information on the issues, factors and stakeholders that
the Board considers relevant to complying with Section 172(1)
(a) to (f) of the Act can be found in the locations outlined below.
The Board has had regard to the following matters:
(a) Long-term results
The likely consequences of any decision in the
long-term
Strategic report:
Our business model (page 1)
Chair’s statement (page 3)
CEO’s statement (page 5)
Key performance indicators (page 12)
Risk management (page 46)
Viability statement (page 53)
Corporate Governance report:
Chair's governance statement (page 89)
Board activity (page 95)
Board progress in 2021 (page 96)
The Board’s approach to continuous
engagement (page 99)
Board-led purpose and culture (page 102)
Audit & Risk Committee report (page 111)
(b) Our workforce
The interests of the Group’s employees
Strategic report:
Our business model (page 1)
Our culture (page 11)
Being a modern employer (page 37)
Stakeholder engagement (page 44)
Corporate Governance report:
Board activity (page 95)
Board progress in 2021 (page 96)
The Board’s approach to continuous
engagement (page 99)
Board-led purpose and culture (page 102)
Audit & Risk Committee report (page 111)
Nominations & Corporate Governance
Committee report (page 107)
Remuneration report:
Remuneration Committee Chair’s
statement (page 120)
Directors’ pay in a wider setting (page 132)
gsk.com:
Gender pay gap report
(c) Our business relationships
The importance of developing the Group’s business
relationships with suppliers, customers and others
Strategic report:
Our business model (page 1)
Our external environment (page 13)
Stakeholder engagement (page 44)
Innovation (page 17)
Performance (page 29)
Reliable supply (page 38)
Working with third parties (page 38)
Risk management (page 46)
Corporate Governance report:
Board activity (page 95)
Board progress in 2021 (page 96)
The Board’s approach to continuous
engagement (page 99)
Audit & Risk Committee report (page 111)
Corporate Responsibility Committee report
(page 104)
(d) The community and our environment
The impact of the Group’s operations on the
community and our environment
Strategic report:
Trust section including:
Environment (page 39)
Environment, Health and Safety, and
Environmental Sustainability risks (page 48)
Climate-related financial disclosure (page 49)
Corporate Governance report:
Corporate Responsibility Committee report
(page 104)
gsk.com:
ESG Performance Report
(e) Our reputation
Our desire to maintain our reputation for high
standards of business conduct
Strategic report:
Our culture (page 11)
Trust (page 34)
Ethics and values (page 38)
Human rights (page 38)
Reporting and investigating concerns (page 38)
Anti-bribery and corruption risk (pages 47 and 279)
Non-financial information statement (page 54)
Our approach to tax (page 60)
Corporate Governance report:
Corporate Responsibility Committee
report (page 104)
gsk.com:
Modern slavery statement
(f) Fairness between our shareholders
Our aim to act fairly as between members of the
Group
Corporate Governance report:
Chair's governance statement (page 89)
The Board’s approach to continuous
engagement (page 99)
Transformation & Separation Committee
report (page 110)
Investor information (page 257)
GSK Annual Report 2021
117
Strategic report Investor information
Governance and remuneration
Financial statementsOur Directors’ powers are determined by UK legislation and
our Articles of Association, which contain rules about the
appointment and replacement of Directors. They provide that
Directors may be appointed by an ordinary resolution of the
members or by a resolution of the Board, provided that, if
appointed by the Board, the Director retires at the next Annual
General Meeting following their appointment.
Our Articles also provide that all Directors are required to seek
re-election annually at the Annual General Meeting in
accordance with the FRC's Code.
A Director will cease to be a Director if he or she:
–
becomes bankrupt
–
ceases to be a Director by virtue of the Companies Act or
the Articles
–
suffers mental or physical ill health and the Board resolves
that he or she shall cease to be a Director
–
has missed Directors’ meetings for a continuous period of
six months without permission and the Board resolves that
he or she shall cease to be a Director
–
is prohibited from being a Director by law
–
resigns, or offers to resign and the Board accepts that offer
–
is required to resign by the Board
Directors’ conflicts of interest
All Directors have a duty under the Companies Act 2006 to
avoid a situation in which they have, or could have, a direct or
indirect conflict of interest or possible conflict with the
company. Our Articles provide a general power for the Board
to authorise such conflicts.
The Board reviews any new potential or actual conflict, which is
recorded by the Company Secretary. Directors are not counted
in the quorum for the authorisation of their own actual or
potential conflicts. The Nominations & Corporate Governance
Committee reviews the Register of Conflicts on an annual basis
which the Board subsequently approves.
On a continuing basis, the Directors are responsible for
informing the Company Secretary of any such new actual or
potential conflicts that may arise or if there are any changes in
circumstances that may affect an authorisation previously given.
Even when provided with authorisation, a Director is not
absolved from his or her statutory duty to promote the success
of the company. If an actual conflict arises post-authorisation,
the Board may choose to exclude the Director from receipt of
the relevant information and participation in the debate, or
suspend the Director from the Board, or, as a last resort, require
the Director to resign.
The Nominations & Corporate Governance Committee
reviewed the register of potential conflict authorisations (the
Register of Conflicts) in January 2022. The Committee reported
to the Board that the conflicts had been appropriately
authorised and that the process for authorisation continued to
operate effectively. The Committee then recommended the
approval of the Register of Conflicts to the Board which it
subsequently approved. Except as described in Note 39 to the
financial statements, ‘Related party transactions’, during or at
the end of the financial year no Director or Person Closely
Associated had any material interest in any contract of
significance with a Group company.
Our Articles prohibit a Director from voting on any resolution
concerning his or her appointment or the terms or termination
of his or her appointment.
Independent advice
The company has an agreed procedure for Directors to take
independent legal and/or financial advice at the company’s
expense where they deem it necessary.
Indemnification of Directors
Qualifying third party indemnity provisions (as defined in the
Companies Act 2006) are in force for the benefit of Directors
and former Directors who held office during 2021 and up to the
approval and signature of the Annual Report.
Change of control and essential contracts
We do not have contracts or other arrangements which
individually are fundamental to the ability of the business to
operate effectively. Neither is the company party to any material
agreements that would take effect, be altered, or terminate upon
a change of control following a takeover bid. We do not have
agreements with any Director that would provide compensation
for loss of office or employment resulting from a takeover,
except that provisions of the company’s share plans may cause
options and awards granted under such plans to vest on a
takeover.
Details of the termination provisions in the Executive Directors’
service contracts are given in the full version of the company’s
2020 Remuneration policy which is available at www.gsk.com
in the Investors section.
Directors’ report
118
GSK Annual Report 2021
Content of the Directors’ report
For the purposes of the UK Companies Act 2006, the
Directors’ report of GlaxoSmithKline plc for the year ended
31 December 2021 comprises:
Directors’ report
Section
Pages
Corporate governance report
82 to 118
Employee engagement
100
Directors’ statements of responsibilities
154 to 155
Investor information
257 to 310
The strategic report sets out those matters required to be
disclosed in the Directors’ report which are considered to
be of strategic importance:
Strategic report
Section
Pages
Risk management objectives and policies
46 to 54
and 275
to 287
Likely future developments of the company
1 to 81
Research and development activities
17 to 28
Business relationships
38
Diversity
37
Provision of information to and consultations with employees
11 and 37
Carbon emissions
39
Section 172 statement
44 to 45
and 116
Directors’ Report
continued
The following information is also incorporated into the Directors’
report:
Location in Annual Report
Interest capitalised Financial statements,
Notes
17
and
20Publication of unaudited financial information
Group financial review, page 55
Details of any long-term incentive schemes Remuneration report
Waiver of emoluments by a Director Not applicable
Waiver of future emoluments by a Director Not applicable
Non pre-emptive issues of equity for cash Not applicable
Non pre-emptive issues of equity for cash
by any unlisted major subsidiary undertaking
Not applicable
Parent company participation in a placing
by a listed subsidiary
Not applicable
Provision of services by a controlling
shareholder
Not applicable
Shareholder waiver of dividends Financial statements,
Notes 16
and
44
Shareholder waiver of future dividends Financial statements,
Notes 16
and
44
Agreements with controlling shareholders Not applicable
The Directors’ report
–
has been drawn up and presented in accordance with and in
reliance upon English company law and the liabilities of the
Directors in connection with that Report shall be subject to
the limitations and restrictions provided by such law.
–
was approved by the Board of Directors on 28 February
2022 and signed on its behalf by:
Sir Jonathan Symonds
Chair
28 February 2022
GSK Annual Report 2021
119
Strategic report Investor information
Governance and remuneration
Financial statementsRemuneration
In this section
Committee Chair’s annual statement 120
Annual report on remuneration 125
2022 Remuneration policy summary 143
2022 Remuneration policy report 144
GSK Annual Report 2021
119
Strategic report Investor information
Governance and remuneration
Financial statements120
GSK Annual Report 2021
Remuneration report
Committee Chair’s annual statement
Dear Shareholder,
On behalf of the Remuneration Committee (the Committee), I
am pleased to present our Remuneration report for 2021. This
includes my annual statement explaining the Committee’s work
this year, our annual report on remuneration for 2021, our
updated 2022 Remuneration policy report explaining the
change proposed to align our compensation arrangements for
new GSK, and details of how we propose to operate the policy
this year.
Review of 2021 IPT outcomes
I would like to set the decisions taken by the Committee over
the course of 2021 in context against our overall performance.
Innovation:
In terms of innovation, we made significant
progress in 2021 in further strengthening our R&D biopharma
pipeline. It comprises 64 Vaccines and Specialty Medicines,
with exciting new developments in HIV and COVID-19
solutions.
Performance:
Overall, 2021 was a year of strong sales
performance and strategic progress for GSK. We saw Group
sales growth of 5% CER driven by growth across
Pharmaceuticals, Vaccines and Consumer Healthcare
(excluding brands divested/under review). Total earnings
declined by 9% CER reflecting the profit on disposal of the
Horlicks business in 2020. However, we achieved Adjusted
EPS growth (including COVID-19 solutions) of 9% (CER)
ahead of updated guidance. The pipeline for 2022 remains
robust, with continued progress in pharma and vaccines.
Trust:
The company continues to build its ESG leadership
position and during the year was ranked first again in the
Access to Medicines Index for the eighth time in a row. GSK
was also first in the pharmaceutical industry group of the Dow
Jones Sustainability Index, received gold recognition in S&P’s
Sustainability Yearbook and an A- in CDP Climate Change.
2021 remuneration outcomes
This performance delivery resulted in higher total remuneration
in respect of 2021 for Emma Walmsley our CEO, Dr Hal Barron
our CSO, and Iain Mackay our CFO than in 2020. This was due
to an increase in variable performance related pay from the
annual bonus through achievement of the adjusted Group PBIT
financial measure. In addition, the CFO’s remuneration increase
also reflected the vesting of his first PSP award since joining the
company in 2019.
The key decisions made by the Committee were as follows:
–
Bonus
– The outcomes for the CEO, CFO and CSO were
each determined by reference to performance against the
agreed financial measure of adjusted Group PBIT, and the
Committee’s assessment of their individual performance.
Financial performance resulted in a bonus payment at 104%
of the financial target. The Committee’s assessment of each
Executive’s performance against the personal objectives set
for them at the start of the year is set out on page 129. The
Committee believes the bonus outcomes appropriately reflect
the overall underlying performance achieved in 2021. Full
details are provided on page 128.
–
Vesting of LTI awards
– Only 58% of the 2019 Performance
Share Plan (PSP) award vested. The pre-agreed measures
for this award were: R&D new product performance; adjusted
free cash flow; and relative TSR, each of which was equally
weighted. Performance was measured over the three years
to 31 December 2021. 74% of the R&D new product
measure vested. This reflected delivery in strengthening the
pipeline and the successful commercialisation of newly
launched products. The continued strong focus on cash
management and generation resulted in full delivery of the
adjusted free cash flow measure. Disappointingly, the
company’s relative TSR performance over the last three years
has again resulted in this part of the award lapsing in full. The
vested shares will be deferred for two years. See page 130.
–
Base salary
– Following a review of Executive Directors’
performance, the Committee agreed that they should receive
an annual increase of 2% for 2021 in line with increases
provided to the wider workforce in the UK and US. The
Committee also agreed to award Dr Barron an increase of
8% from 1 August 2021 to reflect the creation of One R&D.
This new organisation brought together the scientists and
governance across Pharmaceuticals and Vaccines to ensure
that together they can focus on and invest in what matters
across the Group as a whole. (See page 126 for further
details).
The 2021 bonus and all awards in relation to 2021 were made
in accordance with our Remuneration policy and in determining
the outcomes, the Committee carefully considered each
Executive Director’s performance but did not deem it necessary
to exercise discretion or address any anomaly in the
performance outcomes. This review included an assessment of
performance against all the relevant measures and in the wider
context, especially the company’s Culture and Trust priority.
GSK did not access any COVID-19 Government support or job
retention schemes during 2021 or 2020. The dividend policy
was maintained during the year and the company delivered its
upgraded financial guidance for the year.
GSK’s remuneration policy
I would like to set out why the Committee is seeking to update
our Remuneration policy at this time.
The past four years have seen a period of significant
transformation for GSK, the results of which are becoming
evident as we seek to fundamentally address long standing
issues and prolonged Total Shareholder Return under-
performance. The Committee agreed it was therefore essential
to review our Remuneration policy ahead of the usual three-year
cycle to define the biopharma business’ new approach to
remuneration.
GSK Annual Report 2021
121
Strategic report Investor information
Governance and remuneration
Financial statementsThe policy review has sought to ensure our remuneration
arrangements only reward the delivery of our bold new
performance ambitions. The key focus of the Investor Update
(IU) ambitions over the next five years is to deliver sales growth
of more than 5% CAGR and adjusted operating profit growth of
more than 10% CAGR from 2021. These ambitions exclude
contributions from early stage assets, future business
development and COVID-19 solutions. We have significantly
changed our performance pay out curves to this end to focus
expectations to over delivery. Going forward, achievement of
these ambitions should deliver top quartile performance for our
sector.
Following a comprehensive review, the Committee concluded
that the main policy framework remained fit for purpose. Given
that driving long term performance through consistent year on
year short term improvement was the main aim, changing the
Annual Bonus plan to support and deliver this was determined
to be the key imperative.
After careful consideration the Committee concluded that the
changes required to the operation of the Annual Bonus were to:
–
raise the target performance level to align to delivery at or
above the IU ambitions;
–
reduce the reward previously available for lower than “on
target” performance;
–
change the financial bonus measure from adjusted group
PBIT to sales growth and adjusted operating profit growth in
line with the key IU ambitions;
–
strengthen and focus strategic and operational measures
for the Executive Directors to a few stretch and personal
objectives aligned to quantifiable IU ambitions, reflecting
personal areas of accountability. These would also reinforce
our culture and Trust priority; and
–
given how fundamental ESG is to our DNA and success, it is
important to recognise this through a specific performance
condition to incentivise incremental year on year
improvements against our public ambitions.
We have significantly reduced the pay opportunity for less than
“on target” performance. The Committee therefore agreed it
was important to incentivise and reward truly exceptional
performance, on the occasions it is achieved, to reinforce the
step change in performance culture. As a result, one key policy
change to the Annual Bonus is proposed.
The current bonus maximum of up to 200% of salary, paid 50%
in cash and 50% in shares deferred for three years, will be
maintained.
The change we are proposing is an additional opportunity for
material outperformance of our IU ambitions of up to a further
100% of salary. This means that the maximum potential annual
bonus opportunity will be 300% of salary. However, this
additional element could only be achieved if our public
ambitions for more than 5% sales growth and more than 10%
adjusted operating profit growth were significantly exceeded
bringing significant shareholder value.
To support increased alignment with shareholders, we are
proposing that any bonus earned in excess of 200% of salary
(ie the maximum under the current Remuneration policy) up to
300% of salary (the proposed maximum) would be delivered
fully in shares deferred for three years. Half of any bonus earned
up to 200% of salary will continue to be deferred into shares for
three years. This means that in the event management’s
performance was such that the IU ambitions were significantly
exceeded and the increased maximum bonus was earned, only
100% of base salary would be delivered in cash with the
balance being deferred into GSK shares for three years.
In developing the new remuneration policy, we engaged
extensively with shareholders to gain their views and feedback
for which the Committee is very grateful. As a result of this we
made some adjustments to our approach to quantum and clarity
of the performance measurement that feature in the final
proposed policy. We are pleased that this process has allowed
us to develop a remuneration structure that works for both the
company and our shareholders as we enter a new phase for the
business post demerger.
It is important to note that to achieve the new maximum, annual
sales growth and adjusted operating profit growth would each
be required to be at least 5 percentage points above their
respective targets. It is acknowledged that such performance is
not expected to be a frequent occurrence. However, if achieved
the Committee believe it should be appropriately rewarded
given the additional value that would be delivered to investors,
patients and our people.
In the event the Annual Bonus financial measures are not
achieved the Committee would consider the appropriateness of
the other measures paying out.
In terms of competitiveness, for our CEO, Emma Walmsley, if
the maximum opportunity was earned as a result of delivering
the exceptional performance required to reach this, her overall
compensation package would be in the bottom quartile versus
our global pharmaceutical comparator group. This assumes
peers in this group only achieve target bonus. This group
includes companies listed in the UK and Europe.
Post demerger, as a FTSE 20 company, new GSK will
pursue an ambitious growth strategy focused purely on
biopharmaceuticals. It will compete for talent in the highly
competitive global pharmaceutical and biopharmaceutical
sector where remuneration levels can significantly exceed those
seen in the UK. The proposed change to Annual Bonus has
been designed to strike a pragmatic balance between
shareholder expectations for a UK listed business and the
commercial imperative and duty that the Committee has to
ensure the company can secure and retain the best talent. The
additional proposed Annual Bonus opportunity will only be
awarded for exceptional outperformance which will underpin
delivery of significant growth and shareholder value.
Our remuneration arrangements with the enhanced Annual
Bonus opportunity still remain overwhelmingly weighted to
delivery of long-term performance. The Committee is therefore
confident that this change to the Annual Bonus is in the best
long-term interests of the company and our shareholders.
122
GSK Annual Report 2021
Remuneration policy implementation for 2022
Annual Bonus and LTI performance measures
We are proposing to implement changes to our Annual Bonus
and LTI measures going forward to align them with our IU
ambitions and Trust priority. These metrics will give greater
linkage between our long- and short-term measures. They also
ensure we have a focus on both top line and bottom line growth
which are critical to achieving our IU ambitions as well as
ensuring we have a sharp focus on our strategic priorities
including pipeline, culture and ESG.
For 2022, the:
–
Annual Bonus measures will be:
annual Total Sales growth
(30%); annual Adjusted Operating Profit growth (30%);
strategic and operational (30%); ESG - Human Capital
Management: Inclusion & Diversity (I&D) (10%).
–
LTI measures will be:
Relative TSR (30%), Total Sales
growth over 3 years (20%); Adjusted Operating Profit growth
over 3 years (20%); Pipeline Progress (20%); and ESG:
Environment Composite Scorecard (10%).
The Committee will agree a few key stretch strategic and
operational objectives for each Executive Director. They will
focus particularly on individual areas of accountability to
underpin delivery of the fundamentals of our strategy in support
our ultimate financial success. For example, the CEO and CSO
will each have clear pipeline delivery objectives. Each
executive’s objectives will also require demonstration of our
Culture and Trust priority. The Committee will also ensure that
the measures are quantifiable, suitably stretching and align to
the delivery of our public ambitions. We will provide disclosure
of performance against these objectives to reassure
shareholders that they are stretching.
The Corporate Responsibility Committee supported the
Committee in the key considerations for the design,
development and adoption of an aligned approach to our key
ESG commitments fundamental to how we operate. We are
introducing a 10% ESG measure initially into both our short and
long-term plans, to reward delivery of external ambitions for our
Trust priority, specifically in respect of Human Capital
Management: I&D and our Nature Net Positive and Climate
Net Zero ambitions by 2030.
We chose to focus on an element of Human Capital
Management for our first annual bonus ESG measure to
reinforce delivery of our public I&D targets. An Access to
Medicines measure was considered, however, it was agreed
that given our success in this area it would not be a suitably
stretching target. Whereas I&D is an important business
imperative and suitably stretching targets could be set to
warrant additional reward.
Each of the targets set this year are for new GSK, they will not
therefore require adjustment following the demerger. The Board
and the Committee believe that the proposals represent the
right approach to appropriately focus and reward executives to
deliver our public ambitions and secure strong performance for
all our stakeholders.
Salary
The Committee agreed following a review of performance of
Executive Directors that they should receive a 3.0% salary
increase for 2022 aligned with that provided to the wider
workforce in each of their respective geographies.
Following the company’s announcement on 19 January 2022,
Dr Hal Barron will transition from CSO to a non-independent
Non-Executive Director on 31 July 2022. The Committee
determined that given Dr Barron had agreed to remain a
Director he should be treated as a good leaver. He will receive
his existing salary up to 31 July 2022 and a pro-rated bonus for
2022. He will retain his existing long-term incentive awards
which will vest subject to performance and on a pro-rated basis.
From 1 August 2022 he will receive fees as a Non-Executive
Director and, subject to shareholder approval, £200,000 per
annum in respect of the additional responsibilities that he will
undertake for GSK and R&D.
Recoupment
Further to the allegations notified to the Group in February 2021
in respect of Dr Moncef Slaoui, a former Executive Director of
the company, the Committee exercised its discretion and
applied the claw back provisions under the Recoupment Policy
in respect of past stock incentives received by Dr Slaoui. In
December 2021, Dr Slaoui agreed to return to the Group
$3,860,090 in the form of cash under the Recoupment Policy.
Consumer Healthcare Demerger
We are making strong progress towards the separation of the
company into new GSK and Haleon, a new listed Consumer
Healthcare company in mid-2022. The new Haleon Board will
engage with shareholders on the proposed remuneration
arrangements for the new company.
AGM
Finally, I would like to take this opportunity to thank shareholders
for their input and engagement during this Remuneration policy
review, to help shape the new policy presented in this report.
During this consultation we were pleased to be able to engage
with approximately 50% of the company’s shareholder register. I
welcome all shareholders’ feedback on this report ahead of our
AGM. We look forward to receiving your support for our new
Remuneration policy and Annual report on remuneration at our
Annual General Meeting on 4 May 2022.
Urs Rohner
Remuneration Committee Chair
28 February 2022
GSK Annual Report 2021
123
Strategic report Investor information
Governance and remuneration
Financial statements2021 at a glance
2021 Total Remuneration
The following shows the composition of total remuneration paid to Executive Directors in office at 31 December 2021, in
respect of 2021 and 2020.
£0m
£2m
£4m
£6m
2021
US$0m
US$2m
US$4m
US$6m
US$8m
£8m
US$12m
US$10m
Fixed pay – salary, benefits and pension
Emma Walmsley
Performance pay – annual bonus and LTIs earned in respect of the three year performance period ending 31 December 2021
Iain Macka
y
Dr Hal Barron
2020
2021 2020
2021 2020
80%
20%
75%
25%
79%
21%
77%
23%
40%
60%
72%
28%
Pay for performance
Adjusted Group PBIT
Maximum
(105% of target)
Target
Threshold
(95% of target)
2021 Annual bonus: financial performance
104
%
[•]
%
Maximum performance target
Performance achieved
Vested
Lapsed
2019 LTI outcome: performance period ended 31 December 2021
R&D new
product
Relative
TSR
Adjusted
free cash flow
Overall vesting 58%
24.66%
33.33%
0%
Executive Directors’ shareholdings (audited)
0
2x 4x 6x
Dr Hal Barron
Iain Mackay
(1)
Emma Walmsley
8x 10x
SOR
31 December 2021 shareholding
Share ownership vs SOR (multiples of base salary)
3.0x
6.5x
9.9x
5.7
x
0.6
x
3.0x
To align the interests of Executive Directors with those
of shareholders, they are required to build and maintain
significant holdings of shares in GSK over time. Executive
Directors are required to continue to satisfy these Share
Ownership Requirements (SOR) by holding 100% of their
SOR for the first 12 months after leaving GSK and not less
than 50% of their SOR for months 13-24 after leaving GSK.
Executive Directors and GLT SOR % of salary
CEO
650
Other Executive Directors
300
Other GSK Leadership Team members
200
(1)
124
GSK Annual Report 2021
Key change: stronger link between short and long-term performance
–
Annual Bonus and LTI performance measures are directly
aligned to the Investor Update (IU) ambitions
–
The measures are complementary by design to ensure
in-year performance delivers long-term sustained results
–
Annual Bonus and LTI performance calibration has been
toughened meaning reduced reward for below target
performance and maximum reward only for exceptional
performance
–
Maximum annual bonus opportunity increased to 300%
of salary (from 200% of salary) to enable recognition of
exceptional outperformance when achieved
–
Target payout under the annual bonus of 100% of salary
will align with our IU ambitions (ie. no increase for
delivering our core ambitions)
–
Any reward for the incremental exceptional performance
opportunity to be delivered fully in shares deferred for
three years so as to align to shareholder experience, and
–
Annual Bonus and LTI measures and their alignment
with the IU ambitions will be cascaded down to the GLT
and wider organisation
2022 at a glance
How our incentive measures align to our strategy
Performance measures Alignment to strategy
AB
Weighting
LTI
Weighting
Relative total
shareholder return
AB
LTI
Alignment with shareholders as participants are only rewarded for strong
shareholder returns
–
30%
Total sales growth
AB
LTI
Top line growth to deliver against our IU ambition of more than 5% sales growth
30% 20%
Adjusted operating
profit growth
AB
LTI
Bottom line growth to deliver against our IU ambition of more than
10% profit growth
30% 20%
Pipeline
AB
LTI
Increases the emphasis on Innovation and rewards the acceleration and
strengthening of our pipeline
–
20%
ESG ambitions
AB
LTI
Focus on our key ESG ambitions, including our Human Capital Management:
I&D priorities and Nature Net Positive and Climate Net Zero 2030 ambitions
10% 10%
Strategic and
operational
AB
Focus on key areas of individual accountability to underpin delivery of our
strategy and public ambitions
30%
–
Key
AB
Annual bonus
LTI
Long-term incentives
2022 Executive Director Remuneration
Emma Walmsley Iain Mackay
Fixed remuneration
Salary £1,259,855 £915,335
Pension
(% of salary)
Will reduce to align with wider workforce by 1 January 2023
Annual bonus
(% of salary)
Maximum opportunity:
200%, with half of any bonus paid in shares
deferred for three years
Incremental Exceptional Performance:
up to an additional 100% of
salary paid in shares all deferred for three years
LTI
(% of salary)
575% 400%
Share ownership requirement
(% of salary)
650% 300%
Dr Hal Barron will transition to a Non-Executive Director with effect from 1 August 2022.
GSK Annual Report 2021
125
Strategic report Investor information
Governance and remuneration
Financial statements2021 Total remuneration (audited)
Emma Walmsley
Iain Mackay Dr Hal Barron
(2)
2021
£000
2020
£000
2021
£000
2020
£000
2021
$000
2020
$000
Fixed pay
Salary
1,223 1,199
889
1,883871
1,786
Benefits
134 141 242 155 145
58
Pension
245 245 1,247
178 175
651Total fixed pay
1,602
1,585
1,3091,201
2,6793,091
Pay for performance
Annual bonus
(1)
2,275 1,169
1,573
3,483810
1,741
Vesting of LTI awards:
PSP
(3)
4,326 4,277 2,408
–
6,387 6,371
Total pay for performance
(4)
6,601
5,446
3,981810
9,8548,128
Total remuneration
£8,203
£7,031
£5,290
£2,011$12,533
$11,219
Notes:
(1)
(2)
Pharmaceuticals and Vaccines together to focus on and invest in what matters most across the Group.
(3)
Directors, the amount attributable to share price appreciation over the performance period was for the CEO £149,246, the CFO £83,092 and the CSO $411,869. The Committee
did not exercise any discretion in relation to the vesting of the awards or share price changes.
(4)
there has been no recovery of sums paid (clawback) or reduction of outstanding awards or vesting levels (malus) applied during 2021 in respect of any of the current Executive
Directors.
2021 Total remuneration (audited)
Fixed pay
Salary
Benefits
Pension
Read more on pages
126 and 127
Pay for performance
Total
remuneration
could b
Read more below
Annual bonus
–
Maximum opportunity:
200%
–
Measures:
70% Adjusted Group PBIT
30% Individual objectives
–
Three year deferral of 50%
into GSK shares
Read more on pages 128 and 129
Vested LTI Awards
–
Vested at 58%
–
2019 PSP awards
–
Measures:
R&D new product
AFCF
Relative TSR
Read more on page 130
Annual report on remuneration
126
GSK Annual Report 2021
Salary
The table below sets out the base salaries of the Executive
Directors over the last two years compared to increases for the
UK and US workforce.
% change
and 2021
effective date
Base salary
2021 2020
Emma Walmsley
£1,223,160 £1,199,176
Iain Mackay
2% from 1 January
£888,675 £871,250
Dr Hal Barron
$1,821,781 $1,786,060
Dr Hal Barron
(1)
8% from 1 August
$1,967,523
–
UK & US employees
2% from 1 April
– –
(1) Base salary increased by 8% from 1 August 2021 to reflect the creation of the
One R&D organisation. This has brought scientists and governance across
Pharmaceuticals and Vaccines together to focus on and invest in what matters
most across the Group.
Details of salary levels for 2022 are provided on page 136.
Benefits
The UK remuneration reporting regulations require the company
to add into each Executive Director’s Total benefits calculation
all items which are deemed by tax authorities to be a taxable
benefit for them.
These comprise:
–
Employee benefits
in line with the policy for other
employees, which may vary by location and role; and
–
Business related services
provided to employees to assist
or enable them to carry out their role, which a tax authority
has deemed to be a taxable “benefit” to the individual.
Because these are business expenses, the company meets
the tax which arises on them and therefore the items are
shown grossed up for tax. These can be split into three areas:
–
Business travel: includes travel costs for the Executive
Director and as appropriate for their spouse/partner
associated with accompanying the Executive Director on
GSK business which are deemed to be taxable benefits
for the Executive Director.
–
Accommodation whilst on business travel.
–
Other benefits.
The table below provides an analysis of Total benefits (grossed
up for tax) received by the Executive Directors in 2021 and
2020.
The following sections provide details of each element of 2021 ‘Total remuneration’, including how the Committee implemented
the approved Remuneration policy during the year.
Fixed pay (audited)
Annual report on remuneration
continued
2021 Total remuneration (audited)
continued
2021 Benefits
£000
2020 Benefits
£000
Emma Walmsley
Benefits available to employees
71
62
Business related services
(1)
Business travel
22
36
Other benefits
41
43
Total benefits
134
141
Iain Mackay
Benefits available to employees
131
149
Business related services
(1)
Business travel
9
5
Other benefits
(2)
102
1
Total benefits
242
155
Dr Hal Barron
$000 $000
Benefits available to employees
83
58
Business related services
(1)
Business travel
(3)
63
–
Accommodation whilst on business travel
(4)
(2)
–
Other benefits
1
–
Total benefits
145
58
Notes:
(1) Business related services which tax regulations deem to be a taxable benefit in
the UK and/or the US.
(2) Iain Mackay’s Other benefits have increased year on year. This is mainly due to
membership of a global business organisation which supports his work as CFO
and is not recognised by UK HM Revenue & Customs so is therefore deemed to
be a taxable benefit. This was not incurred in 2020.
(3) Increased travel costs compared with 2020 following changes to COVID-19
restrictions.
(4) One-off refund of accommodation costs relating to prior year.
GSK Annual Report 2021
127
Strategic report Investor information
Governance and remuneration
Financial statementsPensions
Please see details of changes to pensions policy on page 145 of the future policy table and its implementation on page 136.
In addition, the Committee previously determined that all current and future UK and US Executive Directors will have their pension
arrangements aligned to the wider UK and US workforce, as appropriate, by 1 January 2023.
Executive Director
Member since Pension arrangements in 2021
Emma Walmsley
Iain Mackay
2010
2019
Pension contributions of 20% of base salary and matching contributions on the first £13,333 of salary, with a cash
supplement of 20% of base salary in lieu of pension on salary in excess of £13,333
(1) (2)
.
Dr Hal Barron
2018
The CSO is a member of the 401(k) plan open to all US employees and the Executive Supplemental Savings Plan
(ESSP), a savings scheme open to US executives to accrue benefits above the 401(k) plan limits.
He receives 38% of base salary, less a contribution to the 401(k) and ESSP equivalent to 5% of total base salary
and bonus (net of the bonus deferred under the DABP). In addition, in line with the wider US workforce, from 1
January 2021, a combined contribution rate under the 401(k) and ESSP plans of 11% (7% core contribution plus
a match of up to 4%) of total base salary and bonus (net of the bonus deferred under the DABP).
(1)
accordance with the terms of the plan.
(2)
The following table shows the breakdown of the pension values set out on page 125. The pension remuneration figures have been
calculated in accordance with the methodology set out in The Large and Medium-sized Companies and Group (Accounts and
Reports) (Amendment) Regulations 2008 (Remuneration regulations).
Pension remuneration values
Emma Walmsley Iain Mackay Dr Hal Barron
2021
£000
2020
£000
2021
£000
2020
£000
2021
$000
2020
$000
UK defined contribution
3 5 3 5 – –
US defined benefit
– – – –
350
1,059
Employer cash contributions
242 240
175 170
301
188
Total pension remuneration value
245 245 1,247
178 175
651Further details regarding the 2021 pension values for Dr Hal Barron are set out in the table below. The pensions figures disclosed
for Dr Hal Barron, who is a member of the US style defined benefit plans, are in accordance with paragraph 10.e.ii of Schedule 8 of
the Remuneration regulations.
The table shows the accrued benefit (ie the annual pension accrued to date). In accordance with the Remuneration regulations, the
pension remuneration in 2021 was calculated as the increase in the accrued benefit, adjusted for inflation and multiplied by 20 to
reflect the fact that the benefit will be received for a number of years. The normal retirement age under the Cash Balance Pension
Plan is age 65. There is no additional benefit for retiring early.
Dr Hal Barron pension values
Accrued pension
Pension remuneration
value for 2021
$000
31 December 2021
$000
31 December 2020
$000
US – Funded
2 2
(6)
US – Unfunded
187
158
356
Total 189 160
350
Annual report on remuneration
continued
Fixed pay (audited)
continued
128
GSK Annual Report 2021
2021 performance against targets
For 2021, the performance measures and weightings were as follows:
Weighting
2021 Adjusted Group PBIT performance
Performance measure
Executive Directors 2021 target
Outcome
Positioning
against target
Adjusted Group PBIT
70%
£8,254m £8,562m
104%
Individual objectives
30%
Threshold and maximum performance targets were set at 95% and 105% of target respectively.
The Adjusted Group PBIT target and outcome for the purposes of the Annual bonus calculation differ from Adjusted Group PBIT
disclosed elsewhere in this Annual Report, primarily because both the target and outcome numbers are calculated by applying
GSK’s budget exchange rates and not actual exchange rates.
The following table shows actual bonuses earned compared to the bonus opportunity for 2021:
2021 bonus opportunity 2021 bonus outcome
Bonus
Target
(% of salary)
Maximum
(% of salary)
2021
Base salary
Financial
performance
(% of salary)
Individual
objectives
(% of salary)
Total 2021
bonus
(% of salary)
Total 2021
bonus
000
Emma Walmsley
£1,223,160
60
186
£2,275
Iain Mackay
100
200 £888,675
126
51
177
£1,573Dr Hal Barron
$1,967,523
51
177
$3,483Details of the mandatory deferral by Executive Directors into the Deferred Annual Bonus Plan of 50% of annual bonus earned are set
out on page 140.
The table below provides more detail on delivery against Adjusted Group PBIT:
Financial performance
–
Overall an encouraging performance exceeding updated guidance despite the uncertainties of the COVID-19 pandemic.
–
Delivered full-year reported Group sales of £34 billion (stable AER, +5% CER) with strong commercial execution driving CER growth
across Pharmaceuticals, Vaccines and Consumer Healthcare (excluding brands divested/under review) including COVID-19 solutions
sales of £1.4 billion.
–
Adjusted Group PBIT of £8,839 million above target driven by higher sales and effective cost control. Outcome adjusted to exclude the
commercial benefit from COVID-19 solutions.
–
Adjusted EPS of 113.2p (-2% AER, +9% CER), ahead of guidance including COVID-19 solutions, delivery driven by higher sales and
effective cost control.
70%
Adjusted Group PBIT
30%
Individual
objectives
Annual bonus
Annual bonus
Pay for performance (audited)
Annual report on remuneration
continued
GSK Annual Report 2021
129
Strategic report Investor information
Governance and remuneration
Financial statementsThe following table summarises performance against the scorecard of individual objectives agreed by the Committee for each
Executive Director, in addition to their contribution to the financial performance for 2021:
Individual objectives
Achievements
Emma Walmsley
The Committee determined that the CEO clearly exceeded or met her individual objectives. 2021 was a highly successful year of focus and
acceleration against GSK’s long-term IPT priorities, and the company exceeded its financial targets. GSK is on track for separation to unlock the
potential of two new growth companies in a landmark year for the company in 2022:
Strengthen pipeline and
build GSK’s reputation
for Innovation
–
Continued progress in strengthening and advancing Pharmaceuticals and Vaccines pipeline, with 43 potential new
medicines and 21 vaccine candidates in development
–
COVID-19 solutions focussed on prevention and treatment, including
Xevudy
(sotrovimab) launched for treatment, with positive data against Omicron
Drive growth and return
on investment
–
Delivered EPS ahead of initial and updated guidance, with sales growth driven by commercial execution excellence.
Pharmaceuticals sales £17.7 billion, Vaccines £6.8 billion and Consumer Healthcare £9.6 billion
Demonstrate continued
commercial execution
excellence
–
Transformed Specialty Medicine commercial capabilities and effectiveness across key markets
–
Exceptional supply chain reliability through continued COVID-19 disruption, and continued network strengthening and
simplification
Deliver separation
programme milestones
–
All demerger milestones on track.
–
New ambitions set out for new GSK to deliver a step change in growth and performance, and health impact at scale
Demonstrate strong
Environmental, Social and
Governance (ESG) credentials
and build trust in future delivery
–
Sustained leading ESG performance, with delivery against all Global Health, Environment and Inclusion and Diversity
commitments. Maintained sector-leading rankings in key ESG indices, as well as progress to deliver on climate and
nature commitments
Demonstrate strong culture
and leadership
–
Culture and talent to deliver success for both new companies, and strong progress to build a stronger, more diverse
workforce (40% senior female representation; on track for 2025 gender and race & ethnicity aspirations)
–
Continued development and succession planning for leadership team roles, with internal candidates appointed Chief
Scientific Officer Designate and Chief Digital and Technology Officer
Iain Mackay
The Committee determined that the CFO successfully met his individual objectives:
Demonstrate financial
leadership
–
Strong financial leadership, with key role in delivery of Investor Update setting out competitive growth profile for new GSK
–
Delivered full year reported Group sales of £34.1 billion (stable at AER, +5% CER)
Demonstrate financial
oversight and cost discipline
–
Adjusted EPS of 113.2p (-2% AER, +9% CER) ahead of updated guidance, delivery supported by cost discipline and
initial savings from scale transformation programme
Deliver separation
programme milestones
–
Separation preparations on track, including corporate finance and capital market readiness
Demonstrate strong culture
and leadership
–
Strong oversight across Finance and Tech during transformation, including appointment of new Head of Investor Relations
and Chief Digital and Technology Officer
Dr Hal Barron
The Committee determined that the CSO successfully met his individual objectives:
Strengthen pipeline and
build GSK’s reputation
for Innovation
–
Continued R&D momentum both in R&D delivery and strengthening of pipeline, with pipeline progress targets exceeded.
12 approvals, 8 Phase III starts and 6 Phase II starts. 43 potential new medicines and 21 vaccine candidates in
development. Business development to augment the pipeline, including: Vir, iTeos, Alector and Halozyme
Drive growth and return
on investment
–
Continued progress to improve R&D productivity and success rates, including achieving US FDA emergency use
authorisation for
Xevudy
in 13 months from deal signing with Vir in pre-clinical phase. This medicine has proven effective against multiple COVID-19 variants, including Omicron
–
Creation of One R&D organisation, bringing scientists and governance across Pharmaceuticals and Vaccines together to
focus on and invest in what matters most
Demonstrate strong culture
and leadership
–
Continuing focus on top talent in key roles in R&D (80%, with 31% of new talent in key roles external hires). Robust
succession planning, including appointment of new Global Head of Vaccines R&D and Global Head of Oncology
Development
Malus and clawback policy
For details of our existing policy on malus and clawback, please
refer to the company’s 2020 Remuneration policy report on
page 144 of the 2019 Annual Report, available on gsk.com.
The Committee reviews and discloses whether it (or the
Recoupment Committee) has exercised malus or clawback.
Disclosure is only made when the matter has been the subject
of public reports of misconduct, where it has been fully
resolved, where it is legally permissible to disclose and where
it can be made without unduly prejudicing the company and
therefore shareholders.
In line with these disclosure guidelines, the Committee has
exercised one instance of clawback during 2021. For further
details on this recoupment by the Committee please see
page 122.
Annual report on remuneration
continued
Pay for performance (audited)
continued
130
GSK Annual Report 2021
Performance measures
and relative weighting
Outcome and vesting level
Performance targets
Outcome
% of
maximum
% of
award
R&D new product
performance
(1/3rd)
R&D new product sales performance measures aggregate three-year sales for new
products launched in the three-year performance period and the preceding two
years, ie2017-21.
Target
% vesting
Maximum
£12.25bn
100%
£11.14bn
75%
£10.58bn
50%
Threshold
£10.02bn
25%
£11.12bn
74
24.66
Adjusted free
cash flow
performance
(1/3rd)
In line with the company’s agreed principles, the AFCF figures included adjustments
for a number of material distorting items, including legal settlements, exchange rate
movements and special pension contributions.
Original
target
Revised
target
(
1)
% vesting
Maximum
£13.91bn £13.20bn 100%
£13.31bn £12.63bn 75%
£12.10bn £11.48bn 50%
Threshold
£11.74bn £11.14bn 25%
(1)
£14.53bn
100
33.33
Relative TSR
performance
(1/3rd)
TSR ranking within comparator group
(
2)
% vesting
Maximum
1st, 2nd, 3rd
100%
4th
70%
5th 40%
Threshold
(
3)
Median 25%
6th to 10th
0%
(2)
Johnson&Johnson, Merck & Co, Novartis, Pfizer, Roche Holdings and Sanofi.
(3)
In a comparator group of ten companies, median falls between two companies.
Ranked 10th 0 0
Total vesting in respect of 2019 awards
58%
57.99%
Other policies
For details of our existing policies on recruitment remuneration, loss of office and termination payments, please refer to the
2020 Remuneration policy report on pages 141 to 150 of the 2019 Annual Report, available on gsk.com. No changes to our loss of
office policy are proposed in the 2022 Remuneration policy.
Value earned from long-term incentives (LTIs)
The following tables set out the performance achieved against the targets set for the company’s LTI plans and also includes
an update on performance of outstanding awards.
In line with the Committee’s agreed principles, for each measure applicable to the LTI awards, actual performance against
the targets is reviewed and adjustments made as appropriate to ensure that the vesting outcome reflects genuine underlying
business performance and that results are being delivered in line with our Culture and Trust business priority.
2019 PSP awards with a performance period ended 31 December 2021
The Committee reviewed the performance of the PSP awards granted to Executive Directors against the targets set. The Adjusted
free cash flow (AFCF) target was revised in line with the disclosure on page 121 of the 2020 Annual Report. It has been further
restated to take account of the revised phasing of the Future Ready programme restructuring cash payments, separation costs and
revised timing of divestments based on detailed programme and separation planning undertaken in 2021. As a result, the target was
increased by £0.21 billion to £11.48 billion.
For 2021, the 2019 PSP was valued based on the closing share price on 16 February 2022 of £15.76 and the closing ADS price of
$43.39. Of the vested amounts for the Executive Directors, the amount attributable to share price appreciation over the performance
period was for the CEO £149,246, the CFO £83,092 and the CSO $411,869. The Committee did not exercise any discretion in
relation to the vesting of the awards or share price changes.
The performance achieved in the three years to 31 December 2021 and the vesting levels are set out in the table below.
Pay for performance (audited)
continued
Annual report on remuneration
continued
GSK Annual Report 2021
131
Strategic report Investor information
Governance and remuneration
Financial statementsUpdate on performance of ongoing LTI awards
The Committee also reviewed the performance of the PSP awards granted to Executive Directors in 2020 and 2021.
The following charts provide an estimate of the vesting levels taking into account performance to 31 December 2021. Actual
vesting levels will only be determined based on performance over the full three-year performance periods. The indications below
should therefore not be regarded as predictions of the final vesting levels. The AFCF threshold and associated vesting scales for
the 2020 and 2021 PSP awards have been adjusted. The net overall impact is an increase of £0.17 billion to £10.09 billion for the
2020 award and an increase £0.40 billion to £8.66 billion for the 2021 award.
These adjustments are to take account of the following items: revised phasing of the Future Ready programme restructuring cash
payments based on detailed programme planning undertaken in 2021, and revised dividends to non-controlling interests (ViiV
Shionogi and Pfizer).
There are no changes to the targets set for the Innovation sales (previously named R&D new product) or the relative TSR
performance measures for the 2020 and 2021 awards.
Maximum
Threshold
2020 PSP award
Estimated vesting level Estimated lapsing level
Innovation
sales
(20%)
Adjusted free
cash flow
(30%)
Relative
TSR
(30%)
Ranked 3rd
or above £9.96bn
122% of
threshold
Pivotal trial
starts
2021 PSP award
Median
£8.66bn
Commercially
sensitive
Commercially
sensitive
Major
regulatory
approval
milestones
Pipeline progress
(20%)
Innovation
sales
(20%)
Adjusted free
cash flow
(30%)
Relative
TSR
(30%)
Ranked 3rd
or above £11.60bn
122% of
threshold
Pivotal trial
starts
Median
£10.09bn
Commercially
sensitive
Commercially
sensitive
Major
regulatory
approval
milestones
Pipeline progress
(20%)
For threshold performance 25% of each award will vest in respect of each performance measure. Individual 2020 LTI award levels
appear on page 121 of the 2020 Annual Report. They are set out below for the 2021 LTI awards.
Vesting %
Year of
grant
Relative TSR
Adjusted free
cash flow
R&D new
product
Business
diversification
Lapsed
%
Total vested
%
2011 0 13 16 11
60 40
2012 0 0 7 7
86
142013 0 0 21
17
6238
2014 0 0 33
67
332015 15 21 33 31
69
2016 0 26 33 41
59
2017
0 33 33 33
67
2018 0 33 33 33
67
2019 0 33 25 42
58
Historical vesting for LTI plans
Annual report on remuneration
continued
Pay for performance (audited)
continued
2021 LTI awards
The 2021 DABP awards (in respect of the deferral of 2020 bonus) and the 2021 PSP awards are shown in the table below.
2021 DABP awards 2021 PSP awards
2020
% of total bonus
deferred
Number of
shares
Face value
of award
(1)
Award level as %
of base salary
Number of
shares
Face value
of award
(2)(3)
Emma Walmsley
45,779 shares
£0.585m 575%
550,757 shares
£7.0m
Iain Mackay
50%
31,725 shares
£0.405m 400%
278,363 shares£3.6m
Dr Hal Barron
24,355 ADS
$0.871m 500%
254,794 ADS
$9.1m
(1)
grant). These are nil-cost options for the UK Executive Directors and restricted shares for the US Executive Director. No performance conditions are attached to the DABP awards,
as they reflect the mandatory 3 year deferrals in respect of the 2020 annual bonus earned.
(2)
before grant). These are conditional shares, based on the performance measures outlined above.
(3)
132
GSK Annual Report 2021
Directors’ pay in a wider setting
Annual report on remuneration
continued
Internal context
In setting executive pay it is important that the Committee and I do so with a good understanding of our wider workforce pay. To
that end on an annual basis I meet with our Human Resources Business Leaders of Global Support Functions, Pharmaceuticals,
ViiV Healthcare, Vaccines and Consumer Healthcare to understand perspectives on pay and GSK’s remuneration package for
the wider workforce. This year was the third such annual meeting I have held. I was pleased to discuss progress on the Group’s
human capital management and I&D agenda to attract and retain diverse talent which lies at the heart of the company’s
fundamental commitment to the equity of its employment and reward practices.
At the meeting, we covered the current Reward environment for employees across the enterprise and notable global competitive
challenges facing the company; namely:
–
Competitive pressures for in-high demand skills in our businesses and the actions taken to attract and retain key talent in
these areas
–
Handling different pay levels across the Group and in different geographies. This included where the company was
experiencing particular pay challenges currently or were anticipated to experience in the future and the mitigatory steps that
were being taken to address these
–
Preparation of a competitive Reward strategy and programmes for the Consumer company for implementation after the
demerger
–
Progress against the company’s publicly disclosed gender and ethnically diverse leader aspirations. We discussed the
country-based reviews and the clear guidance, tools and support provided to markets to ensure pay equity
Finally, Dame Vivienne Cox, our Workforce Engagement Director and member of the Committee, ensures that employee views
and perspectives on pay and reward are reflected in the Committee’s discussions.
Urs Rohner
Remuneration Committee Chair
Remuneration structure for employees during 2021
Element
Wider workforce pay Comparison with Executive Director and GLT pay
Salary
–
The market competitiveness of salaries across the company
is assessed at a local market level. The competitiveness of
roles, which is measured against the external market and
internal peers, is kept under regular review
–
For our Executive Directors and for the GLT, ordinarily
following a performance review, increases in base salaries
are in line with the average of the wider employee
population unless there is a change in scope of the
individual’s role, responsibilities or experience
Pensions
and
benefits
–
The company seeks to provide an appropriate pensions
and benefits package that is aligned to competitive
market practices in those countries in which the
company operates and our employees are based
–
Our Executive Directors and the GLT are eligible to
receive benefits broadly in line with the policy for our other
employees, which may vary by location
–
Pension arrangements are structured in accordance with
where our Executive Director or GLT member is expected
to retire. Current and future UK and US Executive
Directors will have their pension arrangements aligned to
the wider UK and US workforce by 1 January 2023
Annual
bonus
–
With the exception of our sales force, who participate in
separate arrangements, our wider workforce participates
in a plan based on performance against four business
and financial measures (three measures for Consumer
Healthcare). This is structured to reflect the priorities of
the specific business area
–
This plan is designed to reward our employees’ collective
contribution to business achievement. Separate
mechanisms are in place to recognise outstanding
individual performance or to address under-performance
–
Our Executive Directors and the GLT participate in a plan
based on an assessment of a combination of stretching
financial / business and personal objectives
–
Our Executive Directors are required to defer 50% –
and the GLT 25% – of any bonus earned into shares or
ADSs as appropriate for three years
–
Clawback and/or malus provisions apply
LTI plans
–
Our employees at Senior Vice President (SVP) and Vice
President (VP) level participate in the same PSP as our
Executive Directors and the GLT with the same
performance targets and periods
–
Clawback and/or malus provisions apply
–
Our SVP and VP employees, together with Directors and
Managers below the GLT, receive annual Share Value
Plan awards of restricted shares
–
Our Executive Directors and the GLT are granted annual
PSP awards with the same performance targets and
periods
–
Our Executive Directors are required to hold vested
awards for an additional two-year period
–
Clawback and/or malus provisions apply
–
Our Executive Directors and the GLT do not receive Share
Value Plan awards following appointment
GSK Annual Report 2021
133
Strategic report Investor information
Governance and remuneration
Financial statementsCEO pay ratios
Financial year
Methodology
(Lower
Quartile)
P25
(Median)
P50
(Upper
Quartile)
P75
2021
Option A
154:1 108:1 67:1
2020 130:1 96:1 62:1
2019 160:1 119:1 73:1
The pay ratios above are calculated using actual earnings for
the CEO and UK employees. The CEO total single figure
remuneration of £8,203,422 for 2021 and £7,031,871 for
2020 are detailed on page 125 of this Report.
Total remuneration for all UK full-time equivalent employees of
the company on 31 December 2021 has been calculated in line
with the single figure methodology, except for employer pension
contributions for employees with a Defined Benefit pension due
to the cost and complexity of such calculations. Instead, the
Future Service Rate agreed at the most recent actuarial funding
valuation has been used for these employees. Otherwise this
reflects their actual earnings received in 2021 (excluding
business expenses), which were used to produce the percentile
calculation under Option A of the Remuneration regulations.
Business expenses have been excluded as they are reimbursed
to employees and not sufficiently substantial in value to
significantly impact the ratios.
GSK continues to choose Option A because it is the most
robust and statistically accurate way for the company to
calculate the three ratios from the options available in the
Remuneration regulations. The increase in the pay ratio for
2021 is due to a higher level of bonus received compared to
2020, reflecting higher business and individual performance.
Set out in the table below are the base salary, and total pay and
benefits for each of the percentiles.
2021 2020 2020 2020
2019
20212019
20212019
£
P25 P50
P75
Salary
37,251 36,924 34,510 51,492 50,000 47,029 66,561
72,997
70,203Total
pay and
benefits
53,151 54,133 50,467 76,234 73,340 68,200 122,852 113,830 110,638
The Committee believes that the median pay ratio is consistent
with the company’s pay, reward and progression policies.
The base salaries of all employees, including the Executive
Directors, are set with reference to a range of factors including
market practice, experience and performance in role.
Supplemental/Additional ratios
GSK’s CEO pay ratio is likely to vary, potentially significantly, over
time since it will be driven largely by CEO variable pay outcomes.
In line with our reward principles, the CEO has a larger portion of
her pay based on performance than the individuals at P25, P50
and P75. This means that depending on GSK’s performance the
ratio could increase or decrease significantly. The Committee
believes that our senior executives should have a significant
proportion of their pay directly linked to performance.
In light of this we have also provided supplemental ratios,
where LTI compensation has been excluded. We believe
this provides an additional view as LTIs formed a substantial
percentage of the CEO’s total remuneration, which is highly
variable and dependent on business performance. The CEO
2021 total remuneration excluding LTI compensation is
£3,877,617.
Financial Year
Methodology P25 P50
P75
2021
Option A*
73:1 51:1 34:1
2020 51:1 38:1 26:1
2019 65:1 48:1 32:1
* Total remuneration less vesting of long-term incentive awards.
Historic CEO remuneration
Emma Walmsley
£000
2021
2020 2019 2018
2017
Total remuneration
8,203
7,031 8,094 5,887
4,883
(1)
Annual bonus award
(2)
(% of maximum)
93%
49%
79%
93%77%
Vesting of LTI awards (% of maximum)
58%
67% 67%
59% 69%
Sir Andrew Witty
£000
2017
2016 2015 2014 2013
Total remuneration
715
(2)
6,830 6,661 3,902 7,207
Annual bonus award
(2)
(% of maximum)
0%
(2)
97%
100% 42% 88%
Vesting of LTI awards (% of maximum)
0%
(3)
33% 38% 14% 31%
(1)
Emma Walmsley’s total remuneration includes her pay for the period 1 January
to 31 March 2017, before she became CEO.
(2)
Sir Andrew Witty received a pro-rata payment for 2017 in lieu of a variable bonus
opportunity, in accordance with the 2014 Remuneration policy.
(3)
PSP and DABP awards for Sir Andrew Witty granted in 2015 did not vest until April
2018, in accordance with the terms of the Executive financial recoupment policy.
Annual report on remuneration
continued
Directors’ pay in a wider setting
continued
134
GSK Annual Report 2021
Percentage change in remuneration of Directors
2021 percentage change 2020 percentage change
Salary/fee
%
Benefits
%
Bonus
%
Salary/fee
%
Benefits
%
Bonus
%
UK Employees
(1)
2.0 0.0 4.85 2.5 0.0 1.1
Executive Directors
(2,3)
Emma Walmsley
2.0 (5.0) 94.6 8.0 (26.6) (33.4)
Iain Mackay
2.0 56.1 94.2 5.6 11.5 (31.6)
Dr Hal Barron
5.4 150.0 100.1 2.5 (91.2) (34.9)
Non-Executive Directors
(2,4)
Sir Jonathan Symonds
–
50.0
–201.7 0.0
–
Charles Bancroft
(5)
156.1
– – – – –
Vindi Banga
(4.6) (50.0) (50.0)
–
23.6–
Dr Anne Beal
(5)
– – – – – –
Dame Vivienne Cox
(5.6) (50.0) (75.0)
–
55.4–
Lynn Elsenhans
(7.3) (75.0) (73.3)
–
(12.3)–
Dr Laurie Glimcher
(8.3) (61.8) (55.3)
–
(18.2)–
Dr Jesse Goodman
(5.6) (65.2)
– –
(12.5)–
Urs Rohner
(5.6) 175.0 (69.2)
–
16.3–
Judy Lewent
(6)
(73.8)
(25.0) (85.4)
–
(17.6)–
(1)
Directors.
(2)
Non-Executive Directors.
(3)
(4)
(5)
(6)
Directors’ pay in a wider setting
continued
Annual report on remuneration
continued
Participants of the company’s Share Save plan may save up to
£250 a month for three years and at the end of the period have
the option to buy GSK shares at a 20% discount to the share
price at the start of the savings contract. Participants of the
Share Reward plan contribute up to £125 a month to purchase
GSK shares which the company then matches.
For further details see page 140.
Dilution limits
All awards are made under plans which incorporate dilution
limits consistent with the guidelines published by the Investment
Association. These limits are 10% in any rolling ten-year period
for all plans and 5% in any rolling ten-year period for executive
share plans (granted to senior executives). Estimated dilution
from existing awards made over the last ten years up to 31
December 2021 is as follows:
All GSK employee share plans
04
02
0
0806
10
10%
1.56%
Executive share plans
04
02
0
Actual
Limit
5%
1.22%
10%
Relative importance of spend on pay
The table shows total employee pay and the Group’s dividends
paid to shareholders.
Change
%
2021
£m
2020
£m
Total employee pay
(12.2) 9,003
10,249
Dividends paid in the year
0.6 3,999
3,977
The figures in the table above, which reflect payments made
during each year and the impact of movements in exchange
rates, are as set out on pages 185 and 192. However, dividends
declared in respect of 2021 were £4,006 million (2020 –
£3,989 million) an increase of 0.4%.
Total employee pay is based on 91,961 employees, the average
number of people employed during 2021 (2020 – 95,884).
There were no share repurchases made by the company
during 2021 and 2020.
All-employee share plans
UK Executive Directors may participate in HMRC approved
all-employee share plans with the wider UK workforce, ie.
Share Save and Share Reward plans.
GSK Annual Report 2021
135
Strategic report Investor information
Governance and remuneration
Financial statementsAnnual report on remuneration
continued
Directors’ pay in a wider setting
continued
* This index comprises AstraZeneca, Bristol-Myers Squibb, Eli Lilly, Johnson &
Johnson, Merck & Co, Novartis, Pfizer, Roche Holdings and Sanofi.
150
10
0
200
250
GSK
To
tal ReturnFT
SE
100
To
tal Return Index
GSK
Pharma Peers
To
tal Return Index*
30
0
350
31.12.11 31.12.12 31.12.13 31.12.14 31.12.15 31.12.16 31.12.17 31.12.18 31.12.19 31.12.20 31.12.21
40
0
50
4 6 8 14
10
12Global
pharmaceutical
group
European
cross-industry
group
2
L
ow
er
quartile to med
ia
nMed
ia
to upper n
quartile
Emma Walmsley’s
cur
re
nt po
tionsi
(£m)
Remuneration
includes salar
y
and th
e
expected
value
of
ince
nt
ives base
d
o
n
the Committee’s agreed benchmarking methodology.
External context
Comparator groups for pay and relative TSR
The Committee used two pay comparator groups when
considering executive pay for 2021. The Global pharmaceutical
comparator group is also used to measure relative TSR
performance. The primary groups used for each Executive
Director were as follows:
European cross-industry comparator group
Emma Walmsley
Iain Mackay
Roche Holding AG
Novartis
LVM H
Anheuser-Busch Inbev
Unilever
SAP
L’Oreal
Novo Nordisk A/S
Airbus
Linde
Sanofi
AstraZeneca
Diageo
Siemens
Christian Dior
Inditex
BAT
Volkswagen
Deutsche Telekom
Kering
Heineken
BASF
Vinci
Adidas
Bayer
Safran
Reckitt Benckiser
2021 CEO total remuneration positioning
When reviewing the CEO’s remuneration, the Committee has
also referenced pay for the Global pharmaceutical group.
Performance graph
The following graph sets out the performance of the company
relative to the FTSE 100 index and to the pharmaceutical
performance comparator group for the ten-year period to 31
December 2021. These indices were selected for comparison
purposes as they reflect both the primary index of which GSK is
a constituent and the industry in which it operates.
Global pharmaceutical comparator group
Dr Hal Barron
France
Sanofi
Switzerland
Novartis
Roche Holdings
UK
AstraZeneca
US
AbbVie
(1)
Amgen
(1)
Bristol-Myers Squibb
Eli Lilly
Johnson & Johnson
Merck & Co
Pfizer
(1) AbbVie and Amgen are included for remuneration benchmarking, but are not
included in the relative TSR comparator group.
136
GSK Annual Report 2021
Fixed Pay
Salary
The Committee considered the average increases being
awarded to employees below the level of Executive Directors
in the UK and US. After due consideration of performance, it
was agreed that it was appropriate to award increases in line
with the wider workforce to the CEO, CFO and CSO to ensure
the competitiveness of their remuneration could be maintained.
Base salary
2022
% changeWider workforce
(1)
–
3.0
Emma Walmsley
£1,259,855
Iain Mackay
£915,335
Dr Hal Barron
(2)
$2,026,549
(1) Based on the average increase budget for employees below the level of GLT in the
UK and US.
(2) Dr Barron will transition to a Non-Executive Director with effect from 1 August 2022.
Benefits
No significant changes to the provision of benefits are proposed
for 2022. For full details of the policy in relation to benefits,
please refer to the proposed new 2022 Remuneration Policy
report, page 144.
Pension
The table below provides an overview of the pension
arrangements for each ongoing Executive Director in 2022.
The Committee has previously committed to reduce existing
UK Executive Directors’ pensions to align with the wider UK
workforce by 1 January 2023.
Any new UK-based or US-based Executive Director’s pension
will be aligned to the appropriate wider workforce on
appointment.
2022 Pension contribution
Emma Walmsley
Iain Mackay
20% of base salary and matching contributions of 5% on
the first £13,333 of salary in accordance with the terms
of the plan open to all employees, and 20% of base
salary in lieu of pension on salary in excess of £13,333
Dr Hal Barron
(1)
38% of base salary, less a contribution to the 401(k) and
ESSP equivalent to 5% of total base salary and bonus
(net of the bonus deferred under the DABP). In addition,
in line with the wider US workforce, from 1 January
2021, a combined contribution rate under the 401(k)
and ESSP plans of 11% (7% core contribution plus a
match of up to 4%) of total base salary and bonus (net
of the bonus deferred under the DABP).
(1) Dr Barron will transition to a Non-Executive Director with effect from 1 August 2022.
Pay for performance
Annual bonus
The Annual bonus plan has been redesigned to better align with
our IU ambitions and Trust priority. For full details of the proposed
changes to the Annual bonus plan, please refer to ‘2022 at a
glance’ on page 124 and the proposed 2022 Remuneration
Policy report on pages 145 and 146.
Bonus opportunity % of salary
Target Maximum
Exceptional
performance
(1)
Emma Walmsley
100
200 300
Iain Mackay
Dr Hal Barron
(1) Exceptional performance: up to an additional 100% of salary fully paid in shares
deferred for three years.
Weighting of performance measures %
Total sales
growth
Adjusted
operating
profit growth
Strategic and
operational
measures
ESG: Inclusion
& Diversity
Emma Walmsley
30 30 30
10
Iain Mackay
Dr Hal Barron
There will be a reduced payout for below target performance
compared to the current policy. The proposed increase in
payout opportunity for above target performance is to
incentivise exceptional outperformance, in excess of our IU
ambitions and Trust priority goals.
The increasing importance of our Trust business priority and
ESG commitments has led us to propose an Inclusion &
Diversity human capital management measure in the Annual
bonus, based upon our progress towards our aspirational
targets for gender and ethnically diverse representation in senior
roles (see page 37).
Inevitably, targets linked directly to our financial and strategic
plan are commercially sensitive. The Committee does not
consider it appropriate to disclose Annual bonus targets during
the year, as it may result in competitive harm. However, details of
the performance targets will, as usual, be disclosed on a
retrospective basis in the 2022 Annual Report.
Deferred Annual Bonus Plan (DABP) 2022 awards
The table below provides details of the mandatory deferral into
the DABP of 50% of 2021 Annual bonus payments and the
associated awards granted. The shares awarded have no
performance conditions, but must be held for three years,
regardless of continued employment.
Total bonus deferred
into shares %
DABP awards
Shares ADS
Emma Walmsley
72,399
Iain Mackay
50
50,056
Dr Hal Barron
40,617
Implementation of Remuneration policy for 2022
Annual report on remuneration
continued
GSK Annual Report 2021
137
Strategic report Investor information
Governance and remuneration
Financial statementsAnnual report on remuneration
continued
Performance Share Plan (PSP) 2022 awards
The table below provides details of awards granted under
the PSP.
% of salary
Shares
Emma Walmsley
575
461,059
Iain Mackay
400 233,028
Dr Barron did not receive a PSP award given his transition to a
Non-Executive Director on 1 August 2022.
LTI performance measures
We are proposing changes to the measures and weighting for
the 2022 LTI awards to better align to our IU ambitions and our
Trust priority. For further details please refer to the 2022
Remuneration Policy report on page 146. The new proposed
LTI measures and weighting are:
LTI measure
Measure Weighting
Innovation
Pipeline progress
20%Performance
Relative TSR
Total Sales Growth
Adjusted Operating Profit Growth
30%
20%
20%
Trust
ESG: Environment
(1)
10%
(1) A composite scorecard incorporating Scope 1 & 2 Targets for which assessment of
performance against this metric will be determined in line with the World Resources
Institute/World Business Council for Sustainable Development GHG Protocol
methodology for accounting and reporting of our emissions footprint.
Innovation
The
Pipeline progress
measure seeks to reward acceleration
and strengthening of the pipeline. This is based on two equally
weighted elements of our key assets or indications measured
over a three-year performance period.
Points are allocated for successful assets in each sub-measure
based upon their forecast commercial value (peak year sales) at
the end of the performance period.
The sub-measures for the 2022 award will vest as follows:
Pivotal Trial Starts
Focuses mainly on phase III registrational trial starts, but may
also include phase II starts (eg in oncology).
Performance level
Points Payout
Below Threshold
<11 Nil
Threshold 11 25%
13 50%
15 75%
Maximum
17
100%Major Regulatory Approvals
Performance level
Points Payout
Below Threshold
<16 Nil
Threshold 16 25%
18 50%
20 75%
Maximum 22 100%
The Pipeline progress measure is commercially sensitive at the
time of grant. At the end of the performance period we will
provide full disclosure of what has been achieved.
Performance
Relative TSR will continue to be measured against GSK’s
Global pharmaceutical comparator group (see page 135).
The Total Sales growth and Adjusted Operating Profit growth
measures recognise the importance of the commercial
ambitions in our IU and the Committee has set targets that align
with those ambitions.
Trust – business priority
We are proposing a new ESG Environment measure based
upon our Trust priority and goal of having a Nature Net Positive
and Climate Net Zero impact by 2030 (see page 122). The
targets for the ESG Environment measure for the 2022 grant
are based upon a series of Nature goals relating to Water,
Waste & Materials reduction, Biodiversity impact and Climate
goals that incorporate Scope 1 & 2 emission reduction targets,
carbon offsetting and our industrialisation of green
Ventolin
.
Shareholdings versus Share Ownership Requirement
(SOR) (audited)
To align the interests of Executive Directors with those
of shareholders, they are required to build and maintain
significant holdings of shares in GSK over time. Executive
Directors are required to continue to satisfy these Share
Ownership Requirements (SOR) by holding 100% of their SOR
for the first 12 months after leaving GSK and not less than 50%
of their SOR for months 13-24 after leaving GSK.
Value of holdings as % of salary
SOR
% of salary 27 February 2022 31 December 2021
Emma Walmsley
650 1,292 985
Iain Mackay
300 261
64
Dr Hal Barron
300
799
566
Shares subject to performance conditions are excluded from
each Executive Director’s SOR calculation until the end of the
performance period. These vested shares are then included as
part of the Director’s SOR to the extent that the performance
conditions are met. The value of the holdings has been
calculated on a post-tax basis.
For Dr Hal Barron, ADS contributing to his SOR include his
investments under the GSK 401(k) plan and the ESSP.
Emma Walmsley and Dr Barron currently exceed their SOR.
Iain Mackay, who joined the Board in early 2019, is currently
working towards satisfying his SOR.
The company has processes in place to ensure that each
Executive Director’s SOR will continue to be satisfied after
leaving GSK, including the monitoring of nominee accounts.
Each Executive Director also agrees to the terms of the SOR
included within their service contract.
Implementation of Remuneration policy for 2022
continued
138
GSK Annual Report 2021
Remuneration governance
Annual report on remuneration
continued
This is subject to election and subsequent annual re-election.
Subject to mutual agreement, they are each expected to serve a
further three years, and up to nine years from appointment in line
with the provisions of the 2018 Code, subject to annual
re-election.
Committee focus during 2021
Remuneration policy
The Committee sets the broad structure for the Remuneration policy
and determines the remuneration of the Executive Directors, the
Chair and other corporate officers.
Items discussed:
–
Proposed 2022 Remuneration policy
–
Remuneration impact of major Group restructuring and CH
demerger
–
Engagement with shareholders and consideration of feedback
Salary review
The Committee periodically reviews and considers the remuneration
environment for Executive Directors and GLT, approving annual
adjustments as necessary having regard to performance and the
remuneration of the wider workforce.
Items discussed:
–
Review of remuneration environment and wider employee trends
–
Executive Director and GLT benchmarking, competitiveness and
GSK comparator groups
–
GLT and Company Secretary salary review and recommendations
for 2021
–
Executive Director salary review and recommendations for 2022
Annual bonus
The Committee is responsible for setting specific performance
measures for the Annual bonus and for assessments of performance.
Items discussed:
CEO, Executive Directors and GLT 2020 bonus recommendations
and 2021 CEO and Executive Directors’ bonus objectives
LTI plans
The Committee is responsible for approving LTI plan rule changes,
grants, assessments of performance, and the vesting of LTI awards for
the Executive Directors, GLT and below (including interim awards).
Items discussed:
–
LTI performance outcomes and vesting of LTI awards for GLT and
below
–
Confirmation of LTI grants for GLT and below
Governance and other areas of focus
The Committee adheres to a robust remuneration governance
framework, ensuring alignment between internal actions and external
reporting/compliance requirements.
Items discussed:
–
Remuneration considerations and committee programme for 2021
–
Review of Terms of Reference
–
Committee evaluation annual review
–
2020 Remuneration report
–
Confirmation of 2021 Group Budget for remuneration purposes
–
AGM and Remuneration report feedback, the external
remuneration environment and performance target disclosure for
incentive plans
–
2021 Remuneration report disclosures, including CEO pay ratio
–
Annual governance meeting key Committee messages
–
Committee Chair consultation with employee representatives
on setting pay and wider workforce pay practices
Committee role and membership
These details are available on page 93 and are incorporated
by reference to this Report. The Chair, CEO, Chief People
Officer, Head of Reward, Group Financial Controller and the
Company Secretary assisted the Committee during the year.
Adviser to the Committee
PricewaterhouseCoopers LLP (PwC) has been the independent
adviser to the Committee since it was appointed in 2018 for
an initial period of three years after a full commercial tender
exercise was concluded by the company. Prior to the expiry of
this initial period, the Committee reviewed the quality of the
services PwC provided. As a result, it was agreed to extend
PwC’s term further to the end of 2022. This would allow for
a full market review to be undertaken over the summer of 2022,
followed by a full commercial tender if appropriate, prior to
presenting recommendations to the Committee for adviser
support from January 2023. PwC is a member of the
Remuneration Consultants’ Group and, as such, voluntarily
operates under the code of conduct in relation to executive
remuneration consulting in the UK. The code of conduct can
be found at www.remunerationconsultantsgroup.com.
During the year, in addition to providing consultancy services to
the Committee, PwC provided other consulting and assurance
services to the company. In line with the protocols agreed and set
by the Committee Chair under which PwC provided their advice,
the Committee is satisfied that such advice has been objective
and independent. PwC has provided independent commentary
on matters under consideration by the Committee and updates
on market practice and legislative requirements. It also reviewed
the potential for conflicts of interest and judged that there were
appropriate safeguards against such conflicts. PwC’s fees for
advice during the year, which were charged on both a fixed and a
time and materials basis, were £168,200. Willis Towers Watson
provided additional market data to the Committee.
Shareholder votes on remuneration matters
Total votes
cast (billion)
Total votes
for (%)
Total votes
against (%)
Votes
withheld
(million)
Remuneration report
2021 AGM 3.5 93.1 6.9 15.4
Remuneration policy
2020 AGM 11.8 620.1
2.7
88.2Service contracts and letters of appointment
The table below sets out the dates of the Executive Directors’
service contracts, which are available for review at the company’s
registered office and on gsk.com. Each Executive Director’s
service contract contains a 12-month notice period.
Date of contract Effective date Expiry date
Emma Walmsley
29.03.17 01.04.17 30.06.34
Iain Mackay
18.09.18 14.01.19 n/a
Dr Hal Barron
(1)
16.12.17 01.01.18 31.12.24
(1) Dr Barron will transition to a Non-Executive Director (with a letter of appointment) with
effect from 1 August 2022.
The Non-Executive Directors (NED) have letters of appointment,
which are available to view at the company’s registered office.
Each NED is expected to serve on the Board until the end of the
AGM following the third anniversary of their appointment.
GSK Annual Report 2021
139
Strategic report Investor information
Governance and remuneration
Financial statementsChair and other Non-Executive Directors
The company aims to provide the Chair and other Non-
Executive Directors with fees that are competitive with those
paid by other companies of equivalent size and complexity,
subject to the limits contained in its Articles of Association.
Chair’s fees
The Chair is paid a fee of £700,000 per annum, of which he
takes 25% in GSK shares. The Chair’s fees were reviewed on
his appointment and have been reviewed annually since. It was
concluded they remained appropriate.
2021 Non-Executive Directors’ fees
The Non-Executive Directors’ fees that applied during 2021 are
set out in the table below:
Per annum
Standard annual fee
£95,000
Supplemental fees
Chair of the Audit & Risk Committee
£80,000
Senior Independent Director
£50,000
Scientific & Medical Experts
£30,000
Chairs of the Remuneration, Corporate
Responsibility and Science Committees
Workforce Engagement Director
£40,000
Non-Executive Director undertaking intercontinental
travel to meetings
£7,500 per meeting
Implementation of Non-Executive Directors’ policy in 2022
Non-Executive Directors’ standard and supplemental fees were last increased with effect from 1 January 2020.
Following a review, and subject to shareholder approval, it was agreed to authorise the payment of fees from 1 January 2022 to
Science Committee members of up to £200,000 per annum. These would be paid in respect of additional responsibilities
undertaken on behalf of GSK and to support R&D and would reflect the time commitment of such responsibilities.
We do not expect to make any other increases to the fees payable to Non-Executive Directors during the new policy period.
2021 Total fees (audited)
The audited table below sets out the value of fees and benefits received by the Non-Executive Directors in the form of cash and
shares or ADS. Further details of the Non-Executive Directors’ share allocation plan are set out on page 141. Non-Executive
Directors’ fees that are paid in a currency other than Sterling are converted using an average exchange rate that is reviewed from
time to time. The average exchange rates were updated in 2021. Non-Executive Directors’ fees were converted to US Dollars using
an exchange rate of $1.3481 in 2021. Benefits comprise the grossed up cash value of travel and subsistence costs incurred in the
normal course of business, in relation to attendance at Board and Committee meetings. For overseas-based Directors, this
includes travel to meetings in the UK.
Non-Executive Directors’
emoluments (000) (audited)
2021 2020
Fixed fees Fixed fees
Cash Shares/ADS Benefits
Total pay
Cash Shares/ADS Benefits
Total paySir Jonathan Symonds
£
525
£
175
£3
£703
£525 £175 £2 £702
Vindi Banga
£
109
£36
£1
£146
£114 £38 £2 £154
Charles Bancroft
–
$
210
$
5$215
–
$82
–
$82Dr Anne Beal
$
62
$
21
– $
83
– – – –
Dame Vivienne Cox
£
101
£34
£1
£136
£107
£36 £2 £145
Lynn Elsenhans
$
134
$45
$5
$184
$93 $100 $20 $213
Dr Laurie Glimcher
– $
165
$13
–$178
$180 $34 $214
Dr Jesse Goodman
$
164
$55
$23 $242
$174
$58 $23 $255
Urs Rohner
£
101
£34
£11 £4 £147
£146
£107
£36Judy Lewent
(1)
$
48
$16
$9
$73
$183 $61 $12 $256
(1) Retired from the Board on 5 May 2021.
Non-Executive Directors’ fees
Annual report on remuneration
continued
140
GSK Annual Report 2021
Executive Directors’ interests in shares
The interests of the Executive Directors of the company in office during 2021 and their persons closely associated (PCA) are
shown in the table below:
As at 31 December 2021
Unvested share plan interests
Total directors’ interests as at
Beneficial
interests
Not subject to performance
Subject to
performance
27 February 2022
(1)
31 December 2021
(1)
Shares/ADS
(2)
Shares/ADS
(3,7)
Options
(4,7)
Shares/ADS
(5)
Shares
Emma Walmsley
1,521,133
1,195,364 364,520 654,043
176,801
1,495,049Iain Mackay
275,681
71,972
– –
71,972779,782
ADS
Dr Hal Barron
519,723
424,186 224,353 199,833
–
740,680
1)
Total directors’ interests
include beneficial interests and unvested share plan interests not subject to performance. The balance as at 27 February 2022
includes shares/ADS awarded in 2019 under the Performance Share Plan (PSP) and the Deferred Annual Bonus Plan (DABP) which vested in February 2022
less those sold to satisfy tax liabilities on the vested amounts. Executive Directors’ shareholdings versus their SOR are outlined on page 137.
2)
Beneficial interests
include shares/ADS held by the Executive Directors and their PCAs. For Emma Walmsley, this includes 2,385 shares purchased
through the GlaxoSmithKline Share Reward Plan. Iain Mackay does not currently participate in the Share Reward Plan. As a US employee, Dr Hal Barron is
not eligible to participate in the Share Reward Plan which is only open to UK employees. Dr Barron’s beneficial interests include ADS and notional ADS held
by way of his investments in the GSK 401(k) plan and the Executive Supplemental Savings Plan (ESSP). Further details on Dr Barron’s membership of the
plans can be found on page 127.
3)
Unvested shares/ADS not subject to performance
represent PSP shares/ADS which have vested but are subject to an additional two-year holding
period for Emma Walmsley and Dr Barron. Unvested ADS not subject to performance for Dr Barron also represent bonus deferrals (as described in
note 7 below).
4)
Unvested options not subject to performance
represent bonus deferrals under the DABP which are awarded as nil-cost options (as described in
note 7 below).
5)
Unvested shares/ADS subject to performance
represent unvested PSP awards.
6)
Vested but unexercised options:
None of the Directors hold vested but unexercised options.
7)
DABP:
The table below shows bonus deferrals and subsequent reinvestment of dividends under the DABP. The amounts represent the gross shares/ADS
balances prior to the sale of any shares/ADS to satisfy tax liabilities on vesting.
Deferred Annual Bonus Plan (Bonus deferrals)
27 February 2022 31 December 2021 1 January 2021
Shares
Emma Walmsley
178,962
176,801
189,554
Iain Mackay
122,866
71,972
36,655
ADS
Dr Hal Barron
100,301
101,801
72,192
As UK employees, bonus deferrals under the DABP are granted as nil-cost options to Emma Walmsley and Iain Mackay and the following table sets out
details of nil-cost options exercised.
DABP
Date of grant
Number of shares
under option
Date of
exercise
Grant price
Market price
at exercise
Gain on exercise
(000)
Emma Walmsley
Deferral award
01.03.18 68,716 01.03.21 £0.00 £12.11 £832
In respect of nil-cost options awarded in 2018 under the DABP, the bonus which is deferred by the Executive Director was recorded as remuneration (under
Annual bonus) in the Total remuneration table in respect of 2017. Number of shares under option includes the initial award amount together with reinvested
dividends accrued to the date of exercise.
Directors’ interests in shares (audited)
Annual report on remuneration
continued
GSK Annual Report 2021
141
Strategic report Investor information
Governance and remuneration
Financial statementsDirectors and Senior Management
Non-Executive Directors’ interests in shares
The interests of the Non-Executive Directors of the company in office during 2021 and their persons closely associated (PCA) are
shown in the table below:
Share allocation plan for Non-Executive Directors
Total directors’ interests as at
(1)
Number of shares/ADS
27 February 2022
31 December
2021
Beneficial
interests at 31
December 2021
(2)
Dividends
reinvested after
year end
31 December
2021
Elected &
allocated during
the year
(3)
1 January 2021
Shares
Sir Jonathan Symonds
64,467 63,474
35,757 993 11,851
27,7 17
15,865Vindi Banga
106,013
104,473
71,800 1,541 32,673
4,780
27,893Dame Vivienne Cox
10,997 10,548
–
449
10,548 3,345 7,203
Urs Rohner
17, 16 8
16,427
–
741
16,427
3,673
12,754ADS
Charles Bancroft
7,665 7,466
–
199
7,466
6,099 1,367
Dr Anne Beal
509 504
• 5
504 504
–Dr Hal Dietz
– –
– – – – –
Lynn Elsenhans
47, 16 8
44,984
1,000 2,184 43,984 3,849 40,135
Dr Laurie Glimcher
23,664 22,653
–
1,011 22,653 6,039 16,614
Dr Jesse Goodman
10,695 10,223
–
472
10,223 2,136 8,086
Judy Lewent
(4)
– –
– – –
1,928 18,892
1)
Total directors’ interests
include beneficial interests and any shares/ADS received as all or part of their fees under the Non-Executive Directors’
share allocation plan. Dividends received on shares/ADS under the plan during the year and in January 2022 were converted into shares/ADS as at
13 January 2022.
2)
Beneficial interests
includes shares/ADS held by the Non-Executive Directors and their PCAs.
3)
Shares/ADS allocated during the year
under the Non-Executive Directors’ share allocation plan cover five quarters of allocations for the period from
October 2020 to December 2021 due to a change in the timing of allocations during 2021. Shares/ADS allocated also includes dividends reinvested during
the year.
4) Judy Lewent retired from the Board on 5 May 2021, at which time her holding of 20,820 ADS under the Non-Executive Directors’ share allocation plan
was released to her under the terms of the plan. The holding was subject to UK income tax.
Directors’ interests in shares (audited)
continued
Annual report on remuneration
continued
Further information is provided on compensation and interests of Directors and Senior Management as a group (the group).
For this purpose, the group is defined as the Executive and Non-Executive Directors, other members of the GLT and the Company
Secretary. For the financial year 2021, the following table sets out aggregate remuneration for the group for the periods during
which they served in that capacity.
Remuneration for 2021
£
Total compensation paid
29,205,417
Aggregate increase in accrued pension benefits (net of inflation)
39,483
Aggregate payments to defined contribution schemes
1,421,723
During 2021, members of the group were awarded shares and ADS under the company’s various LTI plans, as set out in the table
below. To align the interests of Senior Management with those of shareholders, Executive Directors and GLT members are required
to build and maintain significant holdings of shares in GSK over time. GLT members are required to hold shares to an equivalent
multiple of two times their base salary, and must continue to satisfy these share ownership requirements for a minimum of 12
months after leaving GSK.
Awards
Dividend reinvestment awards
Awarded during 2021
Shares ADS Shares ADS
Performance Share Plan
2,305,483 471,211 351,369 83,884
Deferred Investment Awards
(1,2)
274,510
–
18,759–
Share Value Plan
(2)
16,380
– – –
1) Notional shares and ADS.
2) Executive Directors are not eligible to receive Deferred Investment Awards or participate in the Share Value Plan.
142
GSK Annual Report 2021
At 27 February 2022, the group and their PCAs had the following interests in shares and ADS of the company. Interests awarded
under the various LTI plans are described in Note 44 to the financial statements, ‘Employee share schemes’ on page 245.
Interests at 27 February 2022
Shares ADS
Owned 2,482,185 526,342
Unexercised options
3,440
–
Deferred Annual Bonus Plan
588,815 121,198
Performance Share Plan
7,245,586 959,612
Deferred Investment Awards
(1,2)
348,947
8,563
Share Value Plan
(2)
32,760 11,480
(1)
Notional shares.
(2)
Executive Directors are not eligible to receive Deferred Investment Awards or participate in the Share Value Plan.
Fees in respect of Executive Directors’ external appointments
CEO
Emma Walmsley is an independent non-executive director of Microsoft Corporation. During 2021, she received $325,000, of
which $125,000 was delivered as cash and $200,000 as stock options under the Microsoft Corporation’s Deferred Compensation
Plan for its non-employee directors.
CSO
Dr Hal Barron was a non-executive director of GRAIL Inc (a private company) until 24 August 2021. During 2021, he earned
$30,000 in fees.
Payments to past Directors (audited)
Simon Dingemans left the Board on 8 May 2019 as a voluntary leaver. The vesting of the DABP awards is governed by the
Remuneration policy prevailing at the time Mr Dingemans left the Board. The table below reflects the value of the deferred bonus and
accrued dividends to the point of release.
Date of vesting
Number of
shares vested
2019 DABP 14 February 2022
51,712
Payments for loss of office (audited)
No loss of office payments were made in 2021 or 2020.
How our Remuneration policy continues to reflect Provision 40 of the UK Corporate Governance Code (the Code)
Clarity and Simplicity
The remuneration arrangements for the Executive Directors are set out in a clear and simple way in the Remuneration policy. Prior to
finalising the Remuneration policy, the Committee consulted extensively with our shareholders to ensure transparency and clarity regarding
its implementation. The fixed remuneration elements (salary, benefits and pension) are closely aligned with wider workforce arrangements
and our pay for performance plans (annual bonus and long-term incentive) reward delivery of financial, strategic and ESG objectives in the
short and long-term.
Risk
In line with the Code, we operate both deferral and post-vesting holding periods, in addition to malus and clawback provisions. The
Committee retains discretion to adjust award outcomes (to zero if appropriate) if it considers the payout determined does not appropriately
reflect the overall position and performance of the company.
Predictability and proportionality
Our Remuneration policy defines maximum limits on the total annual bonus and long-term incentive opportunities, and payouts under these
elements are linked to fulfilment of performance conditions that support the company’s publicly stated ambitions. Through its
implementation, maximum reward under our short and long-term plans are only achievable for material outperformance against our stated
ambitions.
Alignment to culture
GSK’s purpose, values and strategy are directly reflected in the performance conditions set under the annual bonus and long-term
incentive. In particular, we are introducing an ESG measure in both our short and long-term plans given our external ambitions for our Trust
priority, and our Nature Net Positive and Climate Net Zero ambition by 2030. Our Share Ownership Requirements strengthen the focus on
our strategic aims, and ensure alignment with the interests and experiences of shareholders, both during and after employment.
The Remuneration policy has operated as intended in terms of company performance and quantum during 2021.
Annual report on remuneration
continued
Directors and Senior Management
continued
GSK Annual Report 2021
143
Strategic report Investor information
Governance and remuneration
Financial statementsOur current Remuneration policy (policy) was approved by our
shareholders at our Annual General Meeting on 6 May 2020
when it received a 88.18% vote in favour. Shareholders are being
asked to approve a new policy at our Annual General Meeting on
4 May 2022 which is intended to apply for the next three years.
During 2021, the Committee considered the policy to define the
biopharma business’ new approach to remuneration. The
decision-making process that the Committee followed for its
determination, review and implementation of the proposed new
policy is set out in the Committee Chair’s statement on pages
120 to 124.
The Committee’s review of the policy sought to ensure that it
continues to:
–
Align with the company’s business priorities, culture, wider
workforce pay policies and emerging best practice
–
Support the bold performance ambitions announced to
investors in June 2021 and company’s key ESG commitments
–
Create long-term shareholder value, and
–
Drive the success of the company for the benefit of
shareholders, patients, our people and other key stakeholders
In addition, changes to the policy have been made to ensure its
implementation will support the delivery of business strategy
whilst delivering a clear, understandable and appropriately
competitive package to attract, retain and motivate executive
talent.
The Committee developed the new policy for Executive and
Non-Executive Directors in the context of its oversight of wider
workforce pay, however, it did not consult directly with employees
on the new policy. It consulted with our largest shareholders in
respect of the proposed changes and took shareholders’
feedback into account when finalising the new policy.
The table below provides an overview of the main changes that
are proposed in respect of the new policy. The full policy that
shareholders are asked to approve is set out on pages 144 to 152.
2022 Remuneration policy summary
Remuneration policy review
Remuneration element Proposed changes to policy Rationale for the change
Pension
–
The description of the policy has been updated to
reflect that the pension arrangements of any current UK
and US Executive Directors will be aligned to the new
Executive Directors’ arrangements from 1 January 2023
–
The US contribution rates have been updated
–
This reflects the commitment given in the
2020 Remuneration Report that the pension
arrangements of US Executive Directors
would also be aligned to those of the new
Executive Directors from January 2023
–
The US references have been updated to
reflect the latest contribution rates for the
US wider workforce which came into effect
in January 2021
Annual bonus
–
The maximum bonus opportunity for Executive Directors
will be 300% of salary. For target performance, the
bonus payout will be 100% of salary
–
For bonus up to an equivalent of 200% of salary,
Executive Directors are required to defer 50% of any
bonus earned into shares, or ADS as appropriate, for
three years. Any portion of the bonus earned in excess
of 200% of salary must be deferred 100% on the same
basis
–
The additional opportunity of 100% is being
introduced in the annual bonus to
appropriately focus and reward executives
to deliver and exceed our public ambitions
and to secure strong performance for all our
stakeholders
–
The additional opportunity would be
deferred in full to ensure alignment with
shareholders’ interests
Non-Executive
Directors’ fees
–
Authority is sought for a Non-Executive Director who
is a member of the Science Committee to be
remunerated up to £200,000 per annum for
undertaking additional responsibilities on behalf of GSK
and to support R&D
–
The current requirement for Non-Executive Directors
and the Chair to invest 25% of their net basic fees in
shares or ADS of the company is retained, but the
company may choose to replace this for the Chair or
one or more Non-Executive Directors with a minimum
share or ADS ownership requirement of at least one
times their gross annual standard fee until their
retirement from the Board. Shares or ADS previously
acquired through investment of fees would continue to
be held under those arrangements and would be
delivered or released following retirement from the
Board. Such shares or ADS would count towards any
expected minimum ownership requirement
–
To appropriately remunerate Non-Executive
Directors for their work
–
If the company chooses to replace the
current investment requirement, the
minimum ownership requirement would
continue to maintain a meaningful and
prudent level of investment to align Non-
Executive Directors’ interests with
shareholders
–
The ability to replace the current investment
requirement would facilitate greater flexibility
in operation of these arrangements
144
GSK Annual Report 2021
Subject to shareholder approval on 4 May 2022 at GSK’s Annual General Meeting, the Remuneration policy for each remuneration
element will be as outlined in the table below.
Operation
Individual’s role, experience, performance and independently
sourced data for relevant comparator groups considered when
determining salary levels.
Salary increases typically take effect in the first quarter of
each year.
Salaries are normally paid in the currency of the Executive
Director’s home country.
Opportunity
There is no formal maximum limit and, ordinarily, salary increases
will be broadly in line with the average increases for the wider
GSK workforce.
However, increases may be higher to reflect a change in the
scope of the individual’s role, responsibilities or experience.
Salary adjustments may also reflect wider market conditions in
the geography in which the individual operates.
Details of current salary levels are set out in the Annual report
on remuneration.
Performance measures
The overall performance of the individual is a key consideration
when determining salary increases.
Operation
Executive Directors are eligible to receive benefits in line with
the policy for other employees which may vary by location.
These include, but are not limited to, car allowances, healthcare,
life assurance/death in service (where not provided as part of
the individual’s pension arrangements), personal financial advice
and contractual post-retirement benefits. In line with the policy
for other employees, Executive Directors may be eligible to
receive overseas relocation allowances and international
transfer-related benefits when required. Executive Directors
in the UK are also eligible to participate in all-employee share
schemes (e.g. Share Save and Share Reward Plan), under
which they are subject to the same terms as all other
employees.
In order to recognise the high business travel requirements of
the role, Executive Directors are also entitled to car travel and
exceptionally may be accompanied by their spouse/partner on
business trips. Other benefits include expenses incurred in the
ordinary course of business, which are deemed to be taxable
benefits on the individual.
Where an Executive Director is based outside the UK, but is
required to travel to the UK to fulfil the responsibilities of their
role and to attend Board Meetings, they may be subject to tax
on their business travel expenses to and from the UK and on the
provision of any accommodation in the UK. Although in reality it
represents a business expense, the tax treatment requires that
their travel and accommodation expenses are then included as
benefits. Because of the business context, the tax liabilities will
be covered by the company on a grossed-up basis.
Benefit provision is tailored to reflect market practice in the
geography in which the Executive Director is based and
different policies may apply if current or future Executive
Directors are based in a different country.
Opportunity
There is no formal maximum limit as benefits costs can fluctuate
depending on changes in provider cost and individual
circumstances.
Details of current benefits and costs are set out in the Annual
report on remuneration.
Performance measure
None
2022 Remuneration policy report
Future Policy Table
Sa
lary
No change
To provide a core reward for the role. Set at a level appropriate to secure and retain high calibre
individuals needed to deliver the Group’s strategic priorities.
Benefits
No change
Levels are set to recruit and retain high calibre individuals to execute the business strategy.
GSK Annual Report 2021
145
Strategic report Investor information
Governance and remuneration
Financial statementsFuture policy table
continued
Operation
Financial, operational and business targets are set at the start of
the year by the Committee and bonus levels are determined by
the Committee based on performance against those targets.
Strategic and operational measures are set at the start of the
year by the Committee and performance against those
measures is assessed by the Committee.
Executive Directors are required to defer part of any bonus earned
into shares, or ADS as appropriate, for three years. 50% of the
equivalent of the first 200% of salary is deferred, and any portion
in excess of 200% is deferred in full. Deferred bonus shares are
eligible for dividend equivalents up to the date of vesting.
The Committee may adjust the formulaic vesting outcome (either
up or down) to ensure that the overall outcome reflects underlying
business performance over the vesting period. Clawback and/or
malus provisions apply as described on page 147.
Opportunity
The maximum bonus opportunity for Executive Directors is
300% of salary. Below 99% of target performance, the bonus
payout on the financial measures will be nil. For target
performance, the bonus payout will be 100% of salary.
Annual bonus
Change
To incentivise and recognise execution of the business strategy on an annual basis. Rewards the
achievement of stretching annual financial, strategic and operational measures.
Pension arrangements provide a competitive level of retirement
income.
Operation
Pension arrangements are structured in accordance with the
plans operated in the country in which the individual is likely to
retire. Where the individual chooses not to become a member
of the pension plan, cash in lieu of the relevant pension
contribution is paid instead. Executive Directors in the UK are
entitled either to join the defined contribution pension plan or
to receive a cash payment in lieu of pension contribution.
Where an individual is a member of a GSK legacy defined
benefit plan, a defined contribution plan or an alternative
pension plan arrangement and is subsequently appointed
to the Board, he or she may remain a member of that plan.
Opportunity
The policy for all current Executive Directors is:
UK:
–
20% of base salary contribution to defined contribution plan
and further 5% in matched contributions subject to any
relevant cap and in line with implementation principles for
other members of the plan; and
–
20% of base salary as a cash payment in lieu of pension
contribution for the portion above the relevant cap;
or
–
20% of base salary as a cash payment in lieu of pension
contribution.
From 1 January 2023, any current UK Directors who are still in
role will have their pension arrangements aligned to new
Executive Directors’ arrangements as follows.
Any new Executive Directors in the UK will receive from date
of appointment:
–
7% of base salary contribution to defined contribution plan
and further 3% in matched contributions subject to any
relevant cap and in line with implementation principles for
other members of the plan; and
–
7% of base salary as a cash payment in lieu of pension
contribution for the portion above the relevant cap;
or
–
7% of base salary as a cash payment in lieu of pension
contribution.
US
(1)
:
–
Supplemental Cash Balance pension plan, providing annual
contribution of 38% of base salary, less 5% of total base salary
and bonus (net of the bonus deferred under the DABP)
(3)
.
–
GSK 401(k) plan
(1)
and the ESSP
(1)
with core contributions of
7% of salary and bonus
(2)
and matched contributions of 4% of
salary and bonus
(2)
.
From 1 January 2023, any current US Executive Directors who
are still in role will have their pension arrangements aligned to
new Executive Directors’ arrangements as follows.
Any new Executive Directors in the US will receive from date of
appointment:
–
GSK 401(k) plan
(1)
and the ESSP
(1)
with core contributions of
7% of salary and bonus
(2)
and matched contributions of 4% of
salary and bonus
(2)
.
Global:
–
Eligible for appropriate equivalent arrangement not in excess
of the US/UK arrangements.
Performance measures
None.
2022 Remuneration policy report
continued
Pension
Change
Pension arrangements provide a competitive level of retirement income.
(1)
provided under any successor arrangements introduced within the market
(2)
(3)
The 5% offset is equal to the contribution to the 401(k) and ESSP which was moved
from the pension plans, in line with the wider US workforce, from 1 January 2021
146
GSK Annual Report 2021
Performance measures
Based on a combination of financial targets and individual/
strategic and ESG performance objectives, with the majority
of the bonus assessed against the financial measures. The
weighting between different measures will be determined each
year according to business priorities. Further details, including
the measures to be used in the financial year, are provided in the
Annual report on remuneration.
Selection of annual bonus measures
The annual bonus is designed to drive the achievement of
GSK’s annual financial, strategic and operational measures.
For this reason the majority of the annual bonus opportunity is
based on a formal review of performance against stretching
financial targets, with the remainder of the bonus subject to
assessment of individual performance against the key strategic
and operational measures which are aligned to the company’s
key objectives for that financial year and/or assessment of
performance against ESG targets.
The annual bonus financial targets are set by reference to
internal budget and external consensus targets.
Operation
Conditional awards are made annually with vesting dependent
on the achievement of performance conditions over three years
and are subject to an additional two-year holding period. PSP
targets are set by reference to internal budget and external
consensus targets.
Awards are eligible for dividend equivalents up to the date of
vesting and release.
The Committee may adjust the formulaic vesting outcome
(either up or down) to ensure that the overall outcome reflects
underlying business performance over the vesting period.
Clawback and/or malus provisions apply as described on
page 147.
Opportunity
The normal maximum award limits that may be granted under
the PSP to an individual in any one year are set out in the table
below:
% of salary
CEO
600
CFO 400
Other Executive Directors
500
Performance measures
Based on a combination of financial, share price related and
strategic and ESG performance conditions which are aligned to
the company’s strategic plan. For all measures, 25% of awards
will vest at threshold performance. Further details, including
the performance targets attached to the PSP in respect of each
year, and the weightings of the targets for the 2022 PSP awards
are provided in the Annual report on remuneration.
Performance
Share Plan (PSP)
No change
To incentivise and recognise delivery of the longer term business priorities, financial growth and
increases in shareholder value compared to other pharmaceutical companies. In addition, to
provide alignment with shareholder interests, a retention element, to encourage long-term
shareholding and discourage excessive risk taking.
Future policy table
continued
2022 Remuneration policy report
continued
Share Ownership Requirements
No change
To align the interests of Executive Directors with those of
shareholders, they are required to build and maintain
significant holdings of shares in GSK over time. The
requirements for each Executive Director are as follows:
%
%
salary
CEO
650
Other Executive Directors
300
As a minimum, Executive Directors are required to maintain
100% of their share ownership requirements to the end of
the first year following retirement from the company and 50%
to the end of the second year.
Selection of long-term incentive measures
The Committee selects performance measures which focus
Executive Directors’ long-term remuneration on the delivery of
GSK’s key strategic priorities over the longer term. In addition to
setting robust targets, the Committee has implemented a number
of safeguards to ensure the targets are met in a sustainable way
and performance reflects genuine achievement against targets
and therefore represents the delivery of value for shareholders.
For each performance measure, the impact of any acquisition or
divestment will be quantified and adjusted for after the event.
Any major adjustment in the calculation of performance
measures will be disclosed to shareholders on vesting.
The Audit & Risk Committee chair and other members, who are
also members of the Remuneration Committee, provide input on
the Audit & Risk Committee’s review of the Group’s
performance and oversight of any risk factors relevant to
remuneration decisions.
Details of the rationale behind the performance measures
selected and how they are calculated are set out in the Annual
report on remuneration.
GSK Annual Report 2021
147
Strategic report Investor information
Governance and remuneration
Financial statementsIn the event of a ‘triggering event’ (i.e. significant misconduct by
way of violation of regulation, law, a significant GSK policy, such
as the Code of Conduct, or a material misstatement of results,
or serious reputational damage), the company will have the
ability to claw back up to three years’ annual and deferred
bonuses as well as vested and unvested LTIs. In addition, in
respect of PSP awards made from 2020, if a participant is
subject to an investigation, then the vesting of their awards
may be delayed until the outcome of that investigation.
A separate Recoupment Committee has been established to
investigate relevant claims of misconduct. The Recoupment
Committee exercises this authority for the wider employee base.
It comprises of senior executives with relevant oversight and
appropriate experience, including the Senior Vice President,
Chief Compliance Officer, and the Senior Vice President and
Group General Counsel, Legal and Compliance.
In respect of each financial year, the Remuneration Committee
will disclose whether it (or the Recoupment Committee) has
exercised clawback or malus. Disclosure will only be made
when the matter has been subject to public reports of
misconduct, where it has been fully resolved, where it is legally
permissible to disclose and where it can be made without
unduly prejudicing the company and therefore shareholders.
Additionally, where there has been continuity of responsibility
between initiation of an adverse event and its emergence as a
problem, the adverse event should be taken into account in
assessing annual bonus awards and LTI vesting levels in the
year the problem is identified and for future periods. The
Remuneration Committee (or Recoupment Committee) may
make appropriate adjustments to individual annual bonuses as
well as grant and vesting levels of LTI awards to reflect this.
Future policy table
continued
Clawback and malus
No change
2022 Remuneration policy report
continued
The Committee determines the remuneration package of new
Executive Directors on a case-by-case basis depending on
the role, the market from which they will operate and their
experience. Total remuneration levels will be set by reference
to a relevant pay comparator group and, where appropriate,
will allow for future development in the role.
It is expected that new Executive Directors will participate
in short and long-term incentive plans on the same basis as
existing directors. However, in exceptional circumstances,
the Committee reserves the flexibility to set the incentive limit
for a new Executive Director at up to an additional 50% of the
existing limits.
The Committee retains this flexibility in recognition of the high
levels of variable pay in GSK’s global pharmaceutical
competitors. However, the Committee will only use this flexibility
when it is considered to be in the best interests of the company
and its investors.
Pension arrangements for any external recruit as an Executive
Director will be as set out in the Remuneration policy table on
page 145.
Other benefits will be provided in line with the policy for existing
Executive Directors.
Where required to meet business needs, relocation support
will be provided in line with company policy.
For any internal appointments, entitlements under existing
remuneration elements will continue, including pension
entitlements and any outstanding awards. However, where
not already the case, internal appointments will be required
to move to Executive Director contractual terms, including
termination provisions.
The Committee is mindful of the sensitivity relating to
recruitment packages and, in particular, the ‘buying out’ of
rights relating to previous employment. It will therefore seek
to minimise such arrangements. However, in certain
circumstances, to enable the recruitment of exceptional talent,
the Committee may determine that such arrangements are in
the best interests of the company and its shareholders. Such
arrangements will, where possible, be on a like-for-like basis
with the forfeited remuneration terms. Arrangements will
therefore vary depending on the plans and arrangements put
in place by the previous employer and may be in the form of
cash or shares and may or may not be subject to performance
conditions. Explanations will be provided where payments are
made as compensation for previous remuneration forfeited.
The remuneration arrangements for any newly appointed
Executive Director will be disclosed as soon as practicable
after the appointment.
Approach to recruitment remuneration
No change
148
GSK Annual Report 2021
Termination of employment
In the event that an Executive Director’s employment with the company terminates, the following policies and payments will apply.
Element of
Remuneration
Loss of office payment policy
Termination
payment
Termination by notice:
12 months’ annual salary payable on termination by the company (pro-rated where part of the notice period is worked).
No termination payment is made in respect of any part of a notice period that extends beyond the contract expiry date.
A bonus element is not normally included in the termination payment. However, the terms of the contracts seek to balance commercial
imperatives and best practice.
Redundancy:
As above, for termination by notice. In the UK, only statutory redundancy pay will apply. In the US, general severance policy does
not apply.
Retirement, death and ill-health, injury or disability:
No termination payment.
LTI awards
PSP awards are governed by the plan rules as approved by shareholders.
The following provisions will normally apply:
Termination by notice:
Unvested awards will lapse.
Redundancy, retirement, death, ill-health, injury, disability or any other reason:
Generally, awards will continue to vest over the original
timescales subject to performance and pro-rated for time.
In the event of a change of control, PSP awards will vest, taking into account performance to date and normally taking into account the
proportion of the performance period that has elapsed. Alternatively, the awards may be exchanged for new awards.
Annual bonus
Termination by notice by individual:
If an individual serves notice and the termination date falls before 31 December, the bonus is forfeited.
Termination by notice by the company, redundancy, retirement, death, ill-health, injury or disability:
If the termination date falls during the
financial year, eligible for pro-rated on-target bonus (if employed on 31 December, bonus payable based on actual results).
Mandatorily
deferred
bonus under
the DABP
DABP deferred bonus awards in respect of mandatorily deferred bonus amounts are governed by the plan rules as approved by shareholders.
The following provisions will normally apply:
Termination for gross misconduct:
Generally, unvested awards will lapse
Any other reason:
Generally, awards will vest in full on the original vesting date.
In the event of a change of control, awards will vest or may be exchanged for new awards.
Pensions
Pension scheme contributions by the individual and the company, and any pension scheme benefit accruals, generally cease at the termination
date in accordance with pension scheme rules. Access to pension scheme benefits is governed by the pension scheme rules and country
legislation.
Benefits
Generally, benefits will continue to apply until the termination date. The Committee may make payments in connection with an existing legal
obligation or in respect of any claim related to the cessation of employment. This may include fees for outplacement assistance, legal and/or
professional advice.
Termination by notice by the company and retirement (US executives):
In line with the policy applicable to US senior executives, they may
become eligible, at a future date, to receive continuing medical and dental insurance after termination/retirement.
The company does not have a policy of fixed term contracts.
Generally, contracts for new appointments will expire in line with
the applicable policy on retirement age, which since 2009 has
been 65.
Contracts for existing Executive Directors will expire on the
dates shown on page 138.
Notice period on termination by the employing company or the
Executive Director is 12 calendar months.
The ability to impose a 12-month non-compete period (and a
non-solicitation restriction) on an Executive Director is
considered important by the company to have the ability to
protect the Group’s intellectual property and staff. In light of this,
the Committee believes that it would not be appropriate to
provide for mitigation in the contracts.
Termination by mutual agreement
In certain circumstances, it can be in the best interests of the company for the Board to manage proactively succession planning and the development of
the senior talent pipeline. In such circumstances, the Board may therefore agree that an Executive’s departure will be by mutual agreement. In order for this
to apply, the Committee will need to be satisfied that the Executive has demonstrated performance in line with expectations and where required they should
have contributed to an orderly succession. In the case of an Executive Director, they would then be treated as a ‘good leaver’ for the purposes of GSK’s
long-term incentive plans. If the termination date falls during the financial year, they would be eligible for a pro-rated on-target bonus and if they are
employed on 31 December, the bonus payable would be based on actual results.
Loss of office payment policy
No change
Future policy table
continued
2022 Remuneration policy report
continued
GSK Annual Report 2021
149
Strategic report Investor information
Governance and remuneration
Financial statementsThe Committee does not anticipate the exercise of discretion
provided by the PSP and DABP plan rules in respect of
termination payments in a manner which would benefit an
Executive Director. However, there may be unforeseen
circumstances where this is in the best interests of the company
and its shareholders. Where it is necessary to exercise
discretion, explanations will be provided.
Where an Executive Director leaves the company, the
Committee will carry out an assessment of the individual’s
performance and conduct over the time in role. If it is
determined that the individual’s performance or conduct was
contrary to the legitimate expectations of the company, the
Committee reserves the right to apply appropriate mechanisms
such as clawback or reduction or lapsing of outstanding
incentive awards (malus), to ensure that any termination
payments are in the best interests of the company and its
shareholders (see page 147).
When setting remuneration for the Executive Directors,
the Committee considers the company’s strategic priorities,
prevailing market conditions for global talent, the competitive
environment (through comparison with the remuneration of
executives at companies of similar size, complexity and
international reach) and the positioning and relativities of pay
and employment conditions across the broader GSK workforce.
In particular, the Committee considers the range of base
salary rises for the workforces of those parts of GSK where
the Executive Directors are employed. This is considered to
be the most relevant comparison as these populations reflect
most closely the economic environments encountered by the
individuals.
The same principles apply to the Remuneration policy for
Executive Directors and other employees although
the remuneration offered to Executive Directors under this
policy has a stronger emphasis on performance-related pay
than that offered to other employees of the Group.
–
Salary and benefits (including pension) are tailored to the
local market.
–
The annual bonus plan applies to the wider employee
population and is based on business performance.
–
A combination of performance-related and restricted share
plans apply to the wider employee population.
–
All-employee share plans are available to employees in the
UK, including the HM Revenue & Customs approved UK
Share Save and Share Reward Plans.
While employees are not directly consulted in respect of the
Remuneration policy, Urs Rohner, the Committee Chair,
meets with senior HR representatives from across the business
to review employee feedback. Dame Vivienne Cox, an
Independent Non-Executive Director, engages with employees
on various topics, including remuneration, in her role as
Workforce Engagement Director. Board members engage
with employees around during Board meetings where they are
encouraged to share their views on the company, management
and remuneration.
In the wider organisation, we have aligned our performance
and reward systems with our Innovation, Performance and Trust
priorities and a culture anchored in purpose and performance.
Our performance system evaluates employees on both ‘what’
they need to do and ‘how’ they do it. Also, for our most senior
people we disincentivise unethical working practices using a
clawback mechanism that allows us to recover performance-
related pay.
Loss of office payment policy
continued
Differences between remuneration policy for Executive Directors
and other employees
2022 Remuneration policy report
continued
150
GSK Annual Report 2021
The charts opposite provide illustrations of the future total
remuneration for each of the Executive Directors in respect of
the remuneration opportunity granted to each of them in 2022
under the proposed 2022 Remuneration policy. A range of
potential outcomes is provided for each Executive Director and
the underlying assumptions are set out below.
All scenarios:
–
2022 base salary has been used.
–
2021 benefits figures have been used, ie. based on actual
amounts received in 2021.
–
Pensions for Emma Walmsley and Iain Mackay are based
upon their 2022 salaries.
–
The amounts shown under value of PSP awards are based
upon the relevant multiples for 2022. They do not include
amounts in respect of dividends reinvested and do not factor
in changes in share price over the vesting period (except as
described below).
Fixed:
–
Includes base salary, pension and benefits. Excludes Pay for
performance, ie. no Annual bonus would be paid and PSP
awards would not vest.
Expected:
–
Includes Fixed pay.
–
For the Annual bonus, it is assumed that target performance
is achieved.
–
For PSP awards, amounts reflect 50% vesting levels.
Maximum:
–
It is assumed that the Annual bonus would be payable at the
maximum level (i.e. 300%) and that the awards under the PSP
would vest in full.
Maximum with 50% share price increase:
–
All elements are the same as Maximum but assuming a 50%
increase in share price.
Scenarios for future total remuneration
PSP
Annual bonus
Fixed pay
50% share price increase
Emma Walmsley (£000)
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Expected
Maximum
0
Fixed
£1.65m
19%
57%
£6.53m
£12.67m
£16.29m
18,000
56%
Maximum with
share price
increase
45%
Iain Mackay (£000)
2,000
4,000
6,000
8,000
10,000
Fixed
Expected
Maximum
0
£1.34m
£4.09m
£7.75m
47%
£9.58m
Maximum with
share price
increase
38%
2022 Remuneration policy report
continued
100%
25%
13%
30%
23%
10%
22%
100%
33%
17%
22%
36%
14%
29%
19%
45%
GSK Annual Report 2021
151
Strategic report Investor information
Governance and remuneration
Financial statementsElement
Purpose and link to strategy
OperationChair’s fees
To provide an inclusive flat rate
fee that is competitive with
those paid by other companies
of equivalent size and
complexity subject to the limits
contained in GSK’s Articles of
Association.
There is no formal maximum. However, fees are reviewed annually and set by reference
to a review of the Chair’s performance and independently sourced market data.
The Committee is responsible for evaluating and making recommendations to the Board
on the fees payable to the Chair. The Chair does not participate in discussions in respect of their fees.
Basic fees
As above There is no formal maximum. As with the Chair, fees are reviewed annually and set by reference to
independently sourced data.
The Chair and CEO are responsible for evaluating and making recommendations to the Board on the
fees payable to the company’s Non-Executive Directors.
Fee payment
Alignment with shareholders Fees are paid in cash. Non-Executive Directors (including the Chair) are required to invest at least 25%
of their total net fees in shares or ADS of the company, but the company may choose to replace this with
an ownership requirement to hold shares or ADS with an aggregate value at or above one times their
gross annual standard fee until their retirement from the Board. If the current investment requirement is
replaced with this ownership requirement, shares or ADS previously acquired through investment of fees
would continue to be held under those arrangements and would be delivered or released following
retirement from the Board. Such shares or ADS would count towards any minimum ownership
requirement.
Supplemental
fees
To compensate Non-Executive
Directors (other than the
Chair) for taking on additional
Board responsibilities or
undertaking intercontinental
travel.
Additional fees for the Senior Independent Director, Committee Chairs, Science and Medical Experts,
the Workforce Engagement Director role and intercontinental travel.
The company has the authority to pay an additional fee, up to the equivalent of the Committee Chair
supplement to a Non-Executive Director, should the company require significant additional time
commitment in exceptional or unforeseen circumstances.
The company has the authority to pay an additional fee of up to £200,000 to Non-Executive Directors
(excluding the Chair) who are members of the Science Committee for undertaking additional
responsibilities on behalf of GSK and to support R&D.
Benefits
To facilitate execution of
responsibilities and duties
required by the role.
Travel and subsistence costs for Non-Executive Directors are incurred in the normal course of business
in relation to meetings on Board and Committee matters and other GSK-hosted events. For overseas-
based Non-Executive Directors, this includes travel to meetings in the UK. In the event it is necessary for
business purposes, whilst not normal practice, Non-Executive Directors may be accompanied by their
spouse or partner to these meetings or events. The costs associated with the above are all met by the
company and, in some instances, they are deemed to be taxable and therefore treated
as benefits for the Non-Executive Director.
Non-Executive Director remuneration policy 2022
Non-Executive Directors’ fees
Change
2022 Remuneration policy report
continued
Approach to recruitment remuneration
No change
The following policy and principles apply to the roles of Chair
and Non-Executive Director. It seeks to ensure alignment with
shareholders through the requirement to invest in company
shares and ADS.
Chair
Fees will be set at a level that is competitive with those paid by
other companies of equivalent size and complexity. Fees will be
paid partly in shares.
Non-Executive Directors
Fee levels for new Non-Executive Directors will be set on the
same basis as for existing Non-Executive Directors of the
company, subject to local laws and regulations.
In the event of a Non-Executive Director with a different role and
responsibilities being appointed, fee levels will be benchmarked
and set by reference to comparable roles in companies of
equivalent size and complexity.
Loss of office
No change
The Chair and other Non-Executive Directors are not entitled to receive any payments in respect of fees for loss of office when they
retire or step down from the Board.
152
GSK Annual Report 2021
The Remuneration policy (Policy) is set out on pages 144 to 152
of the 2021 Annual Report and it is intended that the Policy for
GSK’s Executive and Non-Executive Directors will operate for a
period of three years from the date of approval at the company’s
Annual General Meeting on 4 May 2022.
The Committee wrote the Policy principally in relation to the
remuneration arrangements for the Executive Directors, whilst
taking into account the possible recruitment of a replacement
or an additional Executive Director during the operation of the
Policy. The Committee intends the Policy to operate for the
period set out above in its entirety. However, it may after due
consideration seek to change the Policy during this period,
but only if it believes it is appropriate to do so for the long-term
success of the company, after consultation with shareholders
and having sought shareholder approval at a general meeting.
The Committee reserves the right to make any remuneration
payments and/or payments for loss of office (including
exercising any discretions available to it in connection with
such payments) notwithstanding that they are not in line with
the Policy where the terms of the payment were agreed:
(i) before the AGM on 7 May 2014 (the date the company’s
first shareholder-approved Directors’ remuneration policy came
into effect);
(ii) before the Policy came into effect, provided that the terms
of the payment were consistent with the shareholder-approved
Remuneration policy in force at the time they were agreed; or
(iii) at a time when the relevant individual was not a Director of
the company and, in the opinion of the Committee, the payment
was not in consideration for the individual becoming a Director
of the company. For these purposes ‘payments’ includes the
Committee satisfying awards of variable remuneration and,
in relation to an award over shares or ADS, the terms of the
payment are ‘agreed’ at the time the award is granted.
Performance Share Plan (PSP) awards are subject to the
terms of the PSP plan rules under which the award has been
granted. The Committee may adjust or amend awards only in
accordance with the provisions of the plan rules. This includes
making adjustments to reflect one-off corporate events, such
as a change in the company’s capital structure.
The Committee may also make minor amendments to the Policy
(for regulatory, exchange control, tax or administrative purposes
or to take account of a change in legislation) without obtaining
shareholder approval for such amendments.
Statement of consideration of shareholder views
The Committee engages in regular dialogue with shareholders
and holds annual meetings with GSK’s largest investors to
discuss and take feedback on its Remuneration policy practices
and governance matters.
Operation and scope of Remuneration policy
2022 Remuneration policy report
continued
The Annual report on remuneration has been prepared in
accordance with the Companies Act 2006 and The Large
and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013 (the Regulations).
In accordance with the Regulations, the following parts of
the Annual report on remuneration are subject to audit: total
remuneration figures for Executive Directors including further
details for each element of remuneration (salary, benefits,
pension, annual bonus and long-term incentive awards);
Non-Executive Directors’ fees and emoluments received in the
year; Directors’ interests in shares, including interests in GSK
share plans; payments to past Directors; payments for loss
of office; and share ownership requirements and holdings,
for which the opinion thereon is expressed on page 164. The
remaining sections of the Annual report on remuneration are
not subject to audit nor are the pages referred to from within
the audited sections.
The Annual report on remuneration has been approved
by the Board of Directors and signed on its behalf by:
Urs Rohner
Remuneration Committee Chair
28 February 2022
Basis of preparation
GSK Annual Report 2021
153
Strategic report Governance and remuneration
Financial statements
Investor informationFinancial
statements
GSK Annual Report 2021
153
In this section
Directors’ statement of responsibilities 154
Independent Auditor’s report 156
Financial statements 168
Notes to the financial statements 172
Financial statements of GlaxoSmithKline plc
prepared under UK GAAP 252
Strategic report Governance and remuneration
Financial statements
Investor information154
GSK Annual Report 2021
The Directors are responsible for preparing the Annual Report,
the Remuneration report and the Group and parent company
financial statements in accordance with applicable law and
regulations.
UK company law requires the Directors to prepare financial
statements for each financial year. The Directors are required
to prepare the Group consolidated financial statements in
accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006
and the International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
The Directors have elected to prepare the parent company
financial statements in accordance with United Kingdom
Accounting Standards and applicable law (United Kingdom
Generally Accepted Accounting Practice). Under company law
the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group and its profit or loss for that period.
In preparing the financial statements, the Directors are
required to:
–
select suitable accounting policies and then apply them
consistently;
–
make judgements and accounting estimates that are
reasonable and prudent;
–
state that the Group financial statements comply with
IFRS, as issued by the IASB and in conformity with the
requirements of the Companies Act 2006;
–
state with regard to the parent company financial statements
that applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the parent company financial statements; and
–
prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group and the
parent company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Group and to enable them to ensure
that the Group financial statements and the Remuneration
report comply with the Companies Act 2006 and Article 4 of
the IAS Regulation. They are also responsible for safeguarding
the assets of the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Group financial statements for the year ended
31 December 2021, comprising principal statements and
supporting notes, are set out in the ‘Financial statements’
on pages 168 to 251 of this report. The parent company
financial statements for the year ended 31 December 2021,
comprising the balance sheet and the statement of changes in
equity for the year ended 31 December 2021 and supporting
notes, are set out on pages 252 to 256.
The responsibilities of the auditor in relation to the financial
statements are set out in the Independent Auditor’s report on
pages 156 to 167.
The financial statements for the year ended 31 December 2021
are included in the Annual Report, which is published in printed
form and made available on our website. The Directors are
responsible for the maintenance and integrity of the Annual
Report on our website in accordance with UK legislation
governing the preparation and dissemination of financial
statements. Access to the website is available from outside
the UK, where comparable legislation may be different.
Each of the current Directors, whose names and functions are
listed in the Corporate Governance section of the Annual
Report 2021 confirms that, to the best of his or her knowledge:
–
the Group financial statements, which have been prepared
in accordance with IFRS, as issued by the IASB and in
conformity with the requirements of Companies Act 2006,
give a true and fair view of the assets, liabilities, financial
position and profit of the Group; and
–
the Strategic report and risk sections of the Annual Report,
which represent the management report, include a fair review
of the development and performance of the business and the
position of the company and the Group taken as a whole,
together with a description of the principal risks and
uncertainties that it faces.
Directors’ statement of responsibilities
GSK Annual Report 2021
155
Strategic report Governance and remuneration
Financial statements
Investor informationDisclosure of information to auditor
The Directors in office at the date of this Annual Report have
each confirmed that:
–
so far as he or she is aware, there is no relevant audit
information of which the company’s auditor is unaware; and
–
he or she has taken all the steps that he or she ought to have
taken as a Director to make himself or herself aware of any
relevant audit information and to establish that the company’s
auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
Going concern basis
Pages 56 to 81 contain information on the performance of
the Group, its financial position, cash flows, net debt position
and borrowing facilities. Further information, including Treasury
risk management policies, exposures to market and credit risk
and hedging activities, is given in Note 43 to the financial
statements, ‘Financial instruments and related disclosures’.
Having assessed the principal risks and other matters
considered in connection with the viability statement, the
Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the financial statements.
Internal control
The Board, through the Audit & Risk Committee, has reviewed
the assessment of risks and the internal control framework that
operates in GSK and has considered the effectiveness of the
system of internal control in operation in the Group for the year
covered by this Annual Report and up to the date of its approval
by the Board of Directors. Further detail on the review of internal
controls is set out in the Governance report on page 112.
The 2018 UK Corporate Governance Code
The Board considers that GlaxoSmithKline plc applies the
principles and complies with the provisions of the UK Corporate
Governance Code maintained by the Financial Reporting
Council, as described in the Corporate Governance section
on pages 83 to 118. The Board further considers that the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for
shareholders to assess the Group’s position and performance,
business model and strategy.
As required by the Financial Conduct Authority’s Listing Rules,
the auditor has considered the Directors’ statement of
compliance in relation to those points of the UK Corporate
Governance Code which are specified for their review.
Annual Report
The Annual Report for the year ended 31 December 2021,
comprising the Report of the Directors, the Remuneration
report, the Financial statements and Additional information
for investors, has been approved by the Board of Directors
and signed on its behalf by
Sir Jonathan Symonds
Chairman
28 February 2022
Directors’ statement of responsibilities
continued
156
GSK Annual Report 2021
Independent Auditor’s report to the members
of GlaxoSmithKline plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
–
The financial statements of GlaxoSmithKline plc (the ‘Parent
company’) and its subsidiaries (the ‘Group’) give a true and
fair view of the state of the Group’s and of the Parent
company’s affairs as at 31 December 2021 and of the
Group’s profit for the year then ended;
–
The Group financial statements have been properly prepared
in accordance with United Kingdom adopted international
accounting standards and International Financial Reporting
Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB);
–
The Parent company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice including FRS 101 “Reduced
Disclosure Framework”; and
–
The financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise the:
Group
–
Consolidated balance sheet as at 31 December 2021;
–
Consolidated income statement for the year then ended;
–
Consolidated statement of comprehensive income for the
year then ended;
–
Consolidated statement of changes in equity for the year
then ended;
–
Consolidated cash flow statement for the year then ended;
and
–
Notes 1 to 47 to the financial statements, which includes the
accounting principles and policies.
Parent company
–
Balance sheet as at 31 December 2021;
–
Statement of changes in equity for the year then ended; and
–
Notes A to L to the financial statements, which includes the
accounting principles and policies.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law,
United Kingdom adopted international accounting standards
and IFRSs as issued by the IASB. The financial reporting
framework that has been applied in the preparation of the
Parent company financial statements is applicable law and
United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the auditor’s responsibilities for the audit of the
financial statements section of our report.
We are independent of the Group and the Parent company in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as
applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We confirm that we have not provided any
non-audit services prohibited by the FRC’s Ethical Standard to
the Group or the Parent company, as noted in the Audit & Risk
Committee report within the Corporate Governance section of
the Annual Report on page 111.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
3. Audit scope and execution
We structured our approach to the audit to reflect how the
Group is organised as well as ensuring our audit was both
effective and risk focused. Our audit approach can be
summarised into the following areas that enabled us to obtain
the evidence required to form an opinion on the Group and
Parent company financial statements:
–
Risk assessment and audit planning at a Group level
. The
central control and common systems throughout most of the
Group enabled us to structure our audit centrally. The use of
data analytic tools allowed for a more detailed understanding
of the flow of transactions, enabling us to focus our risk
assessment and design targeted audit testing procedures.
Our risk assessment procedures considered, amongst other
factors, the impact of the global pandemic and climate
change on the account balances, disclosures and company
practices. We appointed partners from the Group audit team
to lead the global audit of each of the three business units
(pharmaceuticals, vaccines and consumer healthcare), in
addition to partners responsible for the component and legal
entity audits in each country. These global business unit
partners met regularly with senior business unit management
to understand the strategy, performance and other matters
which arose throughout the year that could have impacted the
financial reporting. In addition, we held regular meetings with
members of the Internal Audit, the internal Legal Counsel and
the Global Ethics & Compliance teams to understand their
work and to review their reports to enhance our risk
assessment;
–
Audit work performed at global shared service centres
. A significant amount of the Group’s operational processes
that cover financial reporting is undertaken in shared service
centres. Our Group audit team included senior individuals
responsible for each of the global processes who
coordinated our audit work at the shared service centres
GSK Annual Report 2021
157
Strategic report Governance and remuneration
Financial statements
Investor informationin-scope for the Group audit to ensure we developed a good
understanding of the end-to-end processes that supported
material account balances, classes of transactions and
disclosures within the Group financial statements. We then
evaluated the effectiveness of internal controls over financial
reporting for these processes and considered the
implications for the remainder of our audit work;
–
Audit work executed at component level and individual
legal entities
. The following components were subject to
audit procedures as well as the assessment of the
effectiveness of internal controls over financial reporting:
Australia; Belgium; Canada; China; France; Germany; Italy;
Japan; Spain; Switzerland; United Kingdom; and the United
States. The Group audit team was in active dialogue
throughout the audit with the component audit teams
responsible for the audit work under the direction and
supervision of the Group audit team. This included
determining whether the work was planned and performed
in accordance with the overall Group audit strategy and the
requirements of our Group audit instructions to the
components. Due to restrictions on overseas travel, we did
not visit the components this year, consistent with the prior
year. To satisfy ourselves that our oversight and supervision
was appropriate we performed remote reviews of audit
working papers using videoconferencing technology,
increased the frequency and length of those reviews
depending on the significance and risk of the component and
continued to attend the planning and clearance meetings of
components;
–
Audit procedures undertaken at a Group level and on the
parent company.
In addition to the above, we also performed
audit work on the Group and Parent company financial
statements, including but not limited to the consolidation
of the Group’s results, the preparation of the financial
statements, certain disclosures within the Directors’
Remuneration report, litigation provisions and exposures in
addition to entity level and oversight controls relevant to
financial reporting. All components or legal entities with
annual revenue greater than 1.8% of the total Group revenue
were included in our audit scope. The components or legal
entities not covered by our audit scope were subject to
analytical procedures to confirm our conclusion that there
were no significant risks of material misstatement in the
aggregated financial information; and
–
Internal controls testing approach.
We tested the
effectiveness of internal controls over financial reporting
across all in-scope entities and entity level controls at the
Group level. Common systems allowed for relevant IT
controls to be tested centrally across all components. We
were able to place reliance on controls where planned and
it was more efficient. Notwithstanding the IT controls
deficiencies disclosed in the key audit matters section of
this report, mitigating controls existed which allowed us to
continue to take reliance on controls where planned.
Our audit scope addressed 73% of the Group’s revenue,
76% of the Group’s profit before tax and 85% of the Group’s
total assets.
The impact of climate change on our audit
Climate change has the potential to impact the Group in a
number of ways as set out in the strategic report on pages
49 - 52 of the Annual Report and Notes 17, 19 and 20 of the
financial statements. The Group has set out their environmental
goals under the Paris Climate Accord to have a net zero impact
on climate and a net positive impact on nature by 2030.
In the planning of our audit, we have considered the potential
impact of climate change on the Group’s business and its
financial statements.
We have sought to understand the Group’s identification and
assessment of the potential impacts of climate change, how
these risks influence the Group’s strategy and their implications
on the financial statements.
The Group’s assessment focused on the impacts of more
frequent extreme weather conditions, water scarcity, changes
in the political landscape and media focus which has the
propensity to cause changes in consumer and market
behaviour; volatility in the costs and availability of materials and
resources that could impact future financial performance and
asset valuations.
In consultation with our climate change specialists, we:
–
Conducted detailed risk assessment procedures across all
in-scope balances and transactions to determine any risks of
material misstatement in the financial statements by applying
the expected impact of climate change to our understanding
of the business;
–
Challenged the appropriateness of the Group’s assessment
of the potential impact of climate change and the impact of
these on the financial statements, including in the area of
intangible assets as described in section 6 to this report; and
–
Used our own assessment of the impact of climate change
to challenge the Group’s assessment of going concern,
including considering the potential impact on future
performance and availability of financing.
We have not been engaged to provide assurance over the
accuracy of climate change disclosures set out on pages 49
to 52 in the Annual Report. As part of our audit procedures,
we are required to read and consider these disclosures to
consider whether they are materially inconsistent with the
financial statements or knowledge obtained in the audit.
We did not identify any material inconsistencies as a result
of these procedures.
4. Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our
work.
Report on the audit of the financial statements
continued
Independent Auditor’s report
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158
GSK Annual Report 2021
Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:
Group financial statements
Parent company
financial statements
Materiality
£275 million
(2020 – £290 million)
£68 million
(2020 – £68 million)
Basis for
determining
materiality
In determining our benchmark for
materiality, we considered the
metrics used by investors and other
readers of the financial statements.
In particular, we considered:
Statutory profit before tax, Adjusted
profit before tax, Revenue and Net
cash flows from operations.
Using professional judgement, we
have determined materiality to be
£275 million.
Metric
%
Statutory profit before tax
5.1%
Adjusted profit before tax*
4.1%
Revenue
0.8%
Net cash inflow from
operating activities
3.5%
* A reconciliation between the Statutory
profit before tax and Adjusted profit
before tax is detailed in the Adjusting
Items section of the strategic report.
Materiality was
determined using the
total assets benchmark
capped at 25% of
Group materiality. Our
materiality represents
0.1% of total assets.
Rationale
for the
benchmark
applied
Given the importance of the above
metrics used by investors and other
readers of the financial statements,
we concluded Statutory profit
before tax to be the primary
benchmark with Adjusted profit
before tax, Revenue and Net cash
inflow from operating activities the
supporting benchmarks.
The component materiality
allocated to the in-scope
components ranged between
£83 million and £193 million.
The range of materiality allocated
across components in the audit
of the prior year’s Group financial
statements was between
£87 million and £203 million.
The Parent company
holds the Group’s
investments and is not
in itself profit-oriented.
The strength of the
balance sheet is the key
measure of financial
health that is important
to shareholders since
the primary concern for
the Parent company is
the payment of
dividends. Using a
benchmark of total
assets is therefore the
appropriate metric.
We set performance materiality at a level lower than materiality
to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the
financial statements as a whole. Group and Parent company
performance materiality was set at 70% of Group and Parent
materiality respectively for the 2021 audit (2020 – 70%). In
determining performance materiality, we considered factors
including:
–
Our risk assessment, including our assessment of the
Group’s overall control environment and that we consider it
appropriate to rely on controls over a number of business
processes; and
–
Our past experience of the audit, which has indicated a low
number of corrected and uncorrected misstatements
identified in prior periods.
We agreed with the Audit & Risk Committee that we would
report to the Committee all audit differences in excess of £10
million (2020 – £10 million) as well as any differences below
this threshold, which in our view, warranted reporting on
qualitative grounds. We also report to the Audit & Risk
Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
5. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and
Parent company’s ability to continue to adopt the going concern
basis of accounting included:
–
Enquiries of the Group directors and management regarding
the assumptions used in the going concern models, including
the potential impact of climate change;
–
Evaluating the Group’s existing access to sources of
financing, including undrawn committed bank facilities;
–
Reading analyst reports, industry data and other external
information to determine if it provided corroborative or
contradictory evidence in relation to assumptions used;
–
Comparing forecasted sales to recent historical financial
information;
–
Testing the underlying data generated to prepare the forecast
scenarios and determined whether there was adequate
support for the assumptions underlying the forecast; and
–
Evaluating the Group’s disclosures on going concern against
the requirements of IAS 1.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s and Parent company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the
UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the Directors’ statement in
the financial statements about whether the Directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections
of this report.
Report on the audit of the financial statements
continued
Independent Auditor’s report
continued
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Strategic report Governance and remuneration
Financial statements
Investor informationKey audit matter description How the scope of our audit responded to the key audit matter
Valuation of the ViiV Healthcare Shionogi contingent
consideration liability
The Group has completed a number of significant transactions
which resulted in the recognition of material contingent
consideration liabilities, which are a key source of estimation
uncertainty. The most significant of these liabilities was the
ViiV Healthcare Shionogi Contingent Consideration Liability
(ViiV CCL).
The Group completed the acquisition of the remaining 50%
interest in the Shionogi-ViiV Healthcare joint venture in 2012.
Upon completion, the Group recognised a contingent
consideration liability for the fair value of the expected future
payments to be made to Shionogi. As at 31 December 2021
the liability was valued at £5,559 million.
We identified the ViiV CCL as a key audit matter because of the
significant management estimates and assumptions relating to
the sales forecasts used in valuing the ViiV CCL and the
sensitivity of the valuation to these inputs. The most significant
of these relate to sales forecasts in the United States (US) on
certain products in the treatment portfolio. Such forecasts are
based on an assessment of the expected launch dates, the
ability to shift market practice and prescriber behaviour towards
long-acting injectable treatments and 2-drug regimens, the
continuing impact of COVID-19 related restrictions on HIV
prescriptions and subsequent sales volumes and pricing. The
forecasts also required significant audit effort to perform
appropriate audit procedures to challenge and evaluate the
reasonableness of those forecasts.
As set out in Note 47 ‘Post balance sheet events’ of the Group
financial statements, the agreement reached with Gilead to
settle the global patent infringement litigation relating to
commercialisation of Gilead’s Biktarvy increases the future
consideration payable to Shionogi and therefore impacts the fair
value of the ViiV CCL. As a result, in our audit we assessed
management’s estimate of this impact.
Contingent consideration liabilities, including the ViiV CCL, are
disclosed as a key source of estimation uncertainty in Note 3 of
the Group financial statements with further disclosures provided
in Notes 28, 32 and 43. The matter is also discussed in the
Audit & Risk Committee report within the Corporate
Governance section of the Annual Report.
Audit procedures performed
We performed the following audit procedures, amongst others,
related to the sales forecasts:
–
Obtained the Group’s assessment of the key inputs and
assumptions used in the forecasts and evaluated their
appropriateness, including through enquiries of key individuals
from the senior leadership team, commercial strategy team and
key personnel involved in the budgeting and forecasting process,
and inspection of supporting evidence;
–
Challenged the US volume assumptions made by the Group to
estimate sales forecasts. This involved benchmarking forecast
market share data against external data, such as total
prescription volumes and new patient prescription volumes, in
order to assess for any sources of contradictory evidence;
–
Evaluated the reasonableness of US pricing assumptions by the
Group, by comparing the forecasted Returns and Rebates rate
by product against the current rate, and assessing the forecasted
Returns and Rebates against comparable products and
expected changes in payer policy;
–
Considered the results of clinical studies undertaken in the year
by the Group and key competitors in order to assess whether
these are corroborative or contradictory to assumptions used
in the product portfolio sales forecasts in the US;
–
Benchmarked the Group’s sales forecasts against those
included in reports from 14 analysts and considered sales
forecasts on both a total ViiV basis and an individual product
basis, assessing against identified contradictory data;
–
Inspected the agreement with Gilead and evaluated
management’s approach to ensure it meets relevant accounting
standards requirements and that the inputs used in estimating
the impact on the fair value of the ViiV CCL are consistent with
the agreement and external data; and
–
Tested the controls over the key inputs and assumptions used
in the valuation of the contingent consideration liability, including
review controls over the sales forecasts of the treatment product
portfolio used to value the ViiV CCL.
Key observations communicated to the Audit & Risk Committee
The sales forecasts used in the valuation are reasonable and in line
with relevant supporting information. We are satisfied that the sales
forecasts are reasonable appropriately reflect trends in the overall
HIV treatment market including changes in the competitive
environment and shifts towards both long-acting injectable
treatments and 2-drug regimens.
The approach to valuing the ViiV CCL was consistent with prior
periods and overall we are satisfied that the valuation liability is
reasonable and consistent with IFRS.
6. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion on the
financial statements as a whole, we do not provide a separate opinion on these matters.
Independent Auditor’s report
continued
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continued
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GSK Annual Report 2021
Report on the audit of the financial statements
continued
Independent Auditor’s report
continued
Key audit matter description How the scope of our audit responded to the key audit matter
Valuation of US Returns and Rebates (RAR) accruals
In the US the Group sells to customers under various commercial
and government mandated contracts and reimbursement
arrangements that include rebates, chargebacks and a right of
return for certain pharmaceutical products. As such, revenue
recognition reflects gross-to-net sales adjustments. These
adjustments are known as the Returns and Rebates (RAR)
accruals and are a source of significant estimation uncertainty
which could have a material impact on reported revenue.
In the US Pharmaceuticals business in 2021 $17,215 million of
RAR deductions were made to gross revenue of $33,598 million,
resulting in net revenue of $16,383 million. The balance sheet
accrual at 31 December 2021 for the combined US
Pharmaceuticals and Vaccines businesses amounted to $6,795
million.
The three most significant payer channels (also referred to as
buying groups) to which the RAR accrual relates are managed
healthcare organisations, Medicaid, Ryan White and Medicare
Part D.
The two main causes of significant estimation uncertainty are:
–
The utilisation rate, which is the portion of total sales that will
be made into each payer channel, estimated by the Group in
recording the accruals. The utilisation assumption is the most
challenging of the key assumptions used to derive the accrual
given that it is influenced by market demand and other factors
outside the control of the Group; and
–
The time lag between the point of sale and the point at which
exact rebate amounts are known to the Group upon receipt of
a claim. Those payer channels with the longest time lag result
in a greater accrued period, and therefore, a greater level of
estimation uncertainty in estimating the period end accrual.
The level of estimation uncertainty is also impacted by significant
shifts in channel mix driven by changes in the competitive
landscape, including competitor and generic product launches
and other macroeconomic factors. As such, we focus on the
utilisation assumptions for those products where we deem the
level of estimation uncertainty to be the most significant.
Furthermore, auditing standards presume that a significant fraud
risk exists in revenue recognition. In line with this presumption, we
also focus on the period-end adjustments made to the RAR
accruals. These adjustments reflected updates made to the initial
assumptions included within the forecasted RAR rates and, in our
view, present the greatest opportunity for fraud in revenue
recognition (notwithstanding the existence of internal controls).
US Pharmaceuticals returns and rebates are disclosed as a key
source of estimation uncertainty in Note 3 of the Group financial
statements with further disclosures provided in Note 28. The
matter is also discussed in the Audit & Risk Committee report
within the Corporate Governance section of the Annual Report.
Audit procedures performed
We performed the following audit procedures, amongst others,
related to estimates in the RAR accruals:
–
Challenged assumptions for a selection of utilisation rates,
focusing on certain products where we concluded the accrual is
most sensitive to these assumptions. Our challenge included
comparison to historical utilisation rates, consideration of
historical accuracy and drivers of market changes such as the
impact of ongoing generic competition and the macroeconomic
impacts from the COVID-19 pandemic;
–
Supplemented this with substantive analytical procedures by
developing an independent expectation of the accrual balance
for each of the key segments, based on historical claims received
adjusted to reflect market changes in the period including an
assessment of the time lag between the initial point of sale and
the claim receipt. We then compared this independent
expectation to those recorded to evaluate the appropriateness of
the year ending accrual position;
–
Considered the historical accuracy of estimates and evaluated
whether forecast assumptions had been appropriately updated in
a selection of cases where the actual rebate claims differed to
the amount accrued;
–
Challenged the appropriateness of, and completeness of,
period-end adjustments to the liability made as part of the
ongoing review of the estimated accrual; and
–
Tested the key controls over the estimation of RAR accruals
including the controls associated with the forecasting of
utilisation rates process and the month-end accrual review
controls.
Key observations communicated to the Audit & Risk Committee
We are satisfied that the estimated liability of the RAR accruals at
the year-end is appropriate. We observed a level of prudence in
the estimate when assessing against our own independent
expectations, which is in accordance with the requirements of IFRS
15 Revenue from contracts with customers to limit the risk of a
significant reversal of revenue.
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Financial statements
Investor informationReport on the audit of the financial statements
continued
Key audit matter description How the scope of our audit responded to the key audit matter
Valuation of other intangible assets
As at 31 December 2021, the Group held £29,115 million of
other intangible assets (including licences, patents, trademarks
and brand names, but excluding goodwill and computer
software). The recoverable amount of these other intangible
assets relies on certain assumptions and estimates of future
trading performance which create estimation uncertainty.
The assets most at risk of material impairment were identified
using sensitivity analysis on key assumptions and a review of
potential triggering events that could be indicative of an
impairment in the carrying value of associated assets. As a
result of this analysis, we performed additional audit procedures
on certain indefinite life Consumer Healthcare intangible assets.
Key assumptions applied in determining the recoverable amount
include the future sales growth rates and profit margin levels, as
well as the likelihood of successful new product innovations.
Changes in these assumptions could lead to an impairment of
the carrying value of the other intangible assets.
We identified the valuation of other intangible assets as a key
audit matter due to the inherent judgements involved in
estimating future cash flows. During the year there was
increased uncertainty brought about by the COVID-19
pandemic and associated lockdowns. Auditing such estimates
required extensive audit effort to challenge and evaluate the
reasonableness of forecasts.
The disclosures relating to other intangible assets are included
in Note 20 and 40 of the Group financial statements. The matter
is also discussed in the Audit & Risk Committee report within
the Corporate Governance section of the Annual Report.
Audit procedures performed
We performed the following audit procedures, amongst others,
related to the future sales growth, likelihood of successful new
product innovations and profit margin levels used in the assessment
of other intangible assets for impairment:
–
Met with the key individuals from the senior leadership team,
product category leads, and key personnel involved in the
forecasting process to discuss and evaluate the Group’s
evidence to support future sales growth rates and profitability
assumptions;
–
Evaluated the Group’s risk assessment of the impact of climate
change on long term forecasts which focused on the largest
products with material carrying values and the least headroom
by comparing to external data points.
–
Evaluated the business assumptions applied in estimating sales
and gross profit margin forecasts, including benchmarking of
forecasts against external market data and actual trading
performance costs. This included independent market research
of expected category growth and assessment of any sources of
contradictory evidence;
–
Compared the forecast sales and gross profit margins to the
Plan data (asset by asset internal forecasts) approved by the
GSK Leadership Team and the Board of Directors;
–
Assessed the historical accuracy of forecasts including
consumption data and estimates of new sales from innovation;
–
Considered whether events or transactions that occurred after
the balance sheet date but before the reporting date affect the
conclusions reached on the carrying values of the assets and
associated disclosures; and
–
Tested review controls over the key inputs and assumptions used
in the valuation of other intangible assets. The controls
encompass review of the valuation models, which contain a
number of assumptions such as the revenue growth rates and
profit margins.
Key observations communicated to the Audit & Risk Committee
Our audit challenged the future forecast performance of consumer
healthcare products, and we concluded that the assumptions
underpinning the impairment review of intangible assets were
reasonable and in accordance with IFRS.
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Report on the audit of the financial statements
continued
Independent Auditor’s report
continued
Key audit matter description How the scope of our audit responded to the key audit matter
Valuation of uncertain tax positions, including transfer
pricing
The Group operates in numerous jurisdictions and there are
open tax and transfer pricing matters and exposures with UK,
US and overseas tax authorities that give rise to uncertain tax
positions. There is a wide range of possible outcomes for
provisions and contingencies. Certain judgements in respect of
estimates of tax exposures and contingencies are required in
order to assess the adequacy of tax provisions, which are
sometimes complex as a result of the considerations required
over multiple tax laws and regulations.
At 31 December 2021, the Group has recorded provisions of
£858 million in respect of uncertain tax positions.
Valuation of uncertain tax positions is disclosed as a key source
of estimation uncertainty in Note 3 of the Group financial
statements with further disclosures included in Note 14. The
matter is also discussed in the Audit & Risk Committee report
within the Corporate Governance section of the Annual Report.
Audit procedures performed
With the support of tax specialists, we assessed the
appropriateness of the uncertain tax provisions by performing the
following audit procedures amongst others:
–
Assessed and challenged provisions for uncertain tax positions
through the evaluation of possible outcomes. Our procedures
were focused on those jurisdictions where the Group has the
greatest potential exposure and where the highest level of
judgement is required;
–
Assessed the assumptions and judgements that are required to
determine the range of possible outcomes for recognition and
measurement of uncertain tax positions in compliance with the
requirements of IFRIC 23;
–
Involved our transfer pricing specialists to evaluate the transfer
pricing methodology of the Group and associated approach to
provision recognition and measurement;
–
Considered evidence such as the actual results from the recent
tax authority audits and enquiries, third-party tax advice obtained
by the Group and our tax specialists’ own knowledge of market
practice in relevant jurisdictions; and
–
Tested key controls over preparation, review and reporting of
judgmental tax balances and transactions, which include
provisions for uncertain tax provisions.
Key observations communicated to the Audit & Risk Committee
We are satisfied that the estimates in relation to uncertain tax
positions and the related disclosures are in accordance with IFRS.
From our work we concluded that a consistent approach has been
applied to estimating uncertain tax provisions which, whilst
continuing to be prudent as required by IFRIC 23, are appropriate
and supportable.
GSK Annual Report 2021
163
Strategic report Governance and remuneration
Financial statements
Investor informationReport on the audit of the financial statements
continued
Key audit matter description How the scope of our audit responded to the key audit matter
IT systems which impact financial reporting
The IT systems within the Group form a critical component of
the Group’s financial reporting activities and impact all account
balances.
We identified the IT systems that impact financial reporting as a
key audit matter because of the:
–
Pervasive reliance on complex technology that is integral to
the operation of key business processes and financial
reporting;
–
Reliance on technology which continues to increase in line
with the business strategy, such as the increase in the use of
automation across the Group;
–
Importance of the IT controls in maintaining an effective
control environment. A key interdependency exists between
the ability to rely on IT controls and the ability to rely on
financial data, system configured automated controls and
system reports;
–
Continued remediation of IT controls supporting the
application systems relevant to the Group’s financial
reporting activities; and
–
The implementation of application systems in key business
areas during the year.
IT systems which impact financial reporting are discussed in
the Audit & Risk Committee report within the Corporate
Governance section of the Annual Report.
Audit procedures performed
Our IT audit scope is driven by the level of reliance placed on
technology to obtain sufficient audit evidence within a business
process. The technology deemed relevant to the audit is based on
the financial data, system configured automated controls and/or key
financial reports that reside within it. We used IT specialists to
support our evaluation of the risks associated with technology and
with the testing of the design and operation of IT controls.
Testing over the technology deemed relevant to the audit included
the following areas:
–
General IT controls, including user access and change
management controls;
–
Key financial reports and system configured automated controls;
–
Controls to provide assurance over the completeness and
accuracy of relevant data migrations; and
–
Testing of remediation of previously identified deficiencies.
Our risk assessment procedures included an assessment of the
impact of all unremediated IT control deficiencies to determine the
impact on our audit plan. Where relevant, the audit plan was
adjusted to include the testing of additional manual business
process controls to mitigate the unaddressed IT risk.
Key observations communicated to the Audit & Risk Committee
We are satisfied that IT controls impacting the Group’s financial
reporting activities are designed and operating effectively or control
deficiencies identified were remediated by year end or mitigated by
compensating controls.
Significant progress was made in the year in remediating control
deficiencies relating to user access and change management. The
Group has many layers of business process controls to mitigate the
risk associated with the remaining IT control deficiencies.
Independent Auditor’s report
continued
164
GSK Annual Report 2021
Report on the audit of the financial statements
continued
7. Other information
The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s
report thereon. The Directors are responsible for the other information contained within the Annual Report. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in course of the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required to report that fact.
We summarise below our work in relation to areas of the other information including those areas upon which we are specifically
required to report:
Matters we are specifically required to report
Our responsibility Our reporting
Principal risks and viability statement
Review the confirmation and description in the light of the knowledge
gathered during the audit, such as through considering the directors’
processes to support the statements made, challenging key judgements
and estimates, consideration of historical forecasting accuracy and evaluating
macro-economic assumptions.
Consider if the statements are aligned with the relevant provisions of the Code.
As set out in the “Corporate governance statement”
section, we have nothing material to report, add or draw
attention to in respect of these matters.
Directors’ Remuneration report
Report whether the part of the Directors’ Remuneration report to be audited
is properly prepared and the disclosures specified by the Companies Act
have been made.
As set out in the ‘Opinions on other matters prescribed by
the Companies Act 2006’ section, in our opinion, the part
of the directors’ remuneration report to be audited has
been prepared in accordance with the Companies Act
2006.
Strategic report and directors’ report
Report whether they are consistent with the audited financial statements and
are prepared in accordance with applicable legal requirements.
Report if we have identified any material misstatements in either report in the
light of the knowledge and understanding of the Group and of the Parent
company and their environment obtained in the course of the audit.
As set out in the “Opinions on other matters prescribed
by the Companies Act 2006” section, in our opinion,
based on the work undertaken in the course of the audit,
the information in these reports is consistent with the
audited financial statements and has been prepared in
accordance with applicable legal requirements.
Independent Auditor’s report
continued
GSK Annual Report 2021
165
Strategic report Governance and remuneration
Financial statements
Investor informationOther reporting on other information
Our responsibility Our reporting
Alternative performance measures (APMs)
APMs are measures that are not defined by generally accepted accounting
practice (GAAP) and therefore are not typically included in the financial
statement part of the Annual Report. The Group use APMs, such as adjusted
profit, free cash flow and constant currency growth rates in its reporting of
financial performance.
We have reviewed and assessed the calculation and reporting of these
metrics to assess consistency with the Group’s published definitions and
policies for these items.
We have also considered and assessed whether the use of APMs in the
Group’s reporting results is consistent with the guidelines produced by
regulators such as the European Securities and Markets Authority (ESMA)
guidelines on the use of APMs and the FRC Alternative Performance
Measures Thematic Review published in October 2021.
We also considered whether there was an appropriate balance between the
use of statutory metrics and APMs, in addition to whether clear definitions and
reconciliation for APMs used in financial reporting have been provided.
In our opinion:
–
the use, calculation and disclosure of APMs is
consistent with the Group’s published definitions and
policies;
–
the use of APMs in the Group’s reporting results is
consistent with the guidelines produced by ESMA and
FRC; and
–
there is an appropriate balance between the use of
statutory metrics and APMs, together with clear
definitions and reconciliation for APMs used in financial
reporting.
Dividends and distribution policy
Consider whether the dividends policy is transparent, and the dividends paid
are consistent with the policy, as outlined in the strategic report on page 69.
In our opinion the dividends policy is appropriately
disclosed, and dividends paid are consistent with the
policy.
Report on the audit of the financial statements
continued
Independent Auditor’s report
continued
8. Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s and the Parent
company’s ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the Group or the Parent company or to cease
operations, or have no realistic alternative but to do so.
9. Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
166
GSK Annual Report 2021
10. Extent to which the audit was considered
capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
Identifying and assessing potential risks related to
irregularities
In identifying and assessing the risks of material misstatement in
respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
–
the nature of the industry and sector, control environment and
business performance including the design of the Group’s
remuneration policies, key drivers for directors’ remuneration,
bonus levels and performance targets;
–
results of our enquiries of the senior leadership team, internal
audit and the Audit & Risk Committee, including obtaining
and reviewing supporting documentation, concerning the
Group’s policies and procedures relating to:
–
identifying, evaluating and complying with laws and
regulations and whether they were aware of any instances
of non-compliance;
–
detecting and responding to the risks of fraud and whether
they have knowledge of any actual, suspected or alleged
fraud; and
–
the internal controls established to mitigate risks related to
fraud or non-compliance with laws and regulations; and
–
the matters discussed among the engagement team including
significant component audit teams and involving relevant
internal specialists, including tax, valuations, pensions, IT and
industry specialists regarding how and where fraud might
occur in the financial statements and any potential indicators
of fraud.
We obtained an understanding of the legal and regulatory
frameworks that the Group operates in, focusing on provisions
of those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the
financial statements. The key laws and regulations we
considered in this context included the provisions of the UK
Companies Act, pensions legislation and tax legislation. We
have also considered key laws and regulations that had a
fundamental effect on the operations of the Group, including
the Good Clinical Practice, the FDA regulations, General Data
Protection requirements, Anti-bribery and corruption policy and
the Foreign Corrupt Practices Act.
Independent Auditor’s report
continued
Report on the audit of the financial statements
continued
Audit response to risks identified
As a result of performing the above, we identified the Valuation
of US Returns and Rebates accruals as a key audit matter
related to the potential risk of fraud. The key audit matters
section of our report explains the matter in more detail and also
describes the specific procedures in response to that key audit
matter. In common with all audits under ISAs (UK), we are also
required to perform specific procedures to respond to the risk
of management override.
In addition to the above, our procedures to respond to risks
identified included the following:
–
reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with
provisions of relevant laws and regulations described as
having a direct effect on the financial statements;
–
enquiring of the senior leadership team, the Audit & Risk
Committee and in-house and external legal counsel
concerning actual and potential litigation and claims;
–
performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
–
reading minutes of meetings of those charged with
governance, reviewing internal audit reports and
correspondence with regulators; and
–
in addressing the risk of fraud through management override
of controls, testing the appropriateness of journal entries and
other adjustments; assessing whether the judgements made
in making accounting estimates are indicative of a potential
bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of
business.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members and
significant component audit teams and remained alert to any
indications of fraud or non-compliance with laws and
regulations throughout the audit.
Report on other legal and regulatory requirements
11. Opinions on other matters prescribed by
the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
–
the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
–
the strategic report and the directors’ report have been
prepared in accordance with applicable legal requirements.
GSK Annual Report 2021
167
Strategic report Governance and remuneration
Financial statements
Investor informationReport on the audit of the financial statements
continued
In the light of the knowledge and understanding of the Group
and of the Parent company and their environment obtained in
the course of the audit, we have not identified any material
misstatements in the strategic report or the directors’ report.
12. Corporate governance statement
The Listing Rules require us to review the directors’ statement in
relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the Group’s
compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
–
the directors’ statement with regards to the appropriateness
of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 154;
–
the directors’ explanation as to its assessment of the Group’s
prospects, the period this assessment covers and why the
period is appropriate is set out on page 53;
–
the directors’ statement on fair, balanced and understandable
Annual Report set out on page 115;
–
the board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
pages 46 to 48;
–
the section of the Annual Report that describes the review of
effectiveness of risk management and internal control
systems set out on pages 111 to 112; and
–
the section describing the work of the audit and risk
committee set out on pages 111 to 115.
13. Matters on which we are required to report by
exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
–
we have not received all the information and explanations we
require for our audit; or
–
adequate accounting records have not been kept by the
Parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
–
the Parent company financial statements are not in agreement
with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report
if in our opinion certain disclosures of directors’ remuneration
have not been made or the part of the directors’ remuneration
report to be audited is not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
14. Other matters which we are required to
address
Auditor tenure
Following the recommendation of the Audit & Risk Committee,
with effect from 1 January 2018 we were appointed by the
Board of Directors to audit the financial statements for the year
ended 31 December 2018 and subsequent financial periods.
The period of total uninterrupted engagement of the firm is four
years.
Consistency of the audit report with the additional report to
the Audit & Risk Committee
Our audit opinion is consistent with the additional report to the
Audit & Risk Committee we are required to provide in
accordance with ISAs (UK).
15. Use of our report
This report is made solely to the Parent company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the Parent company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than
the Parent company and the Parent company’s members as a
body, for our audit work, for this report, or for the opinions we
have formed.
In due course, as required by the Financial Conduct Authority
(FCA) Disclosure Guidance and Transparency Rule (DTR)
4.1.14R, these financial statements will form part of the
European Single Electronic Format (ESEF)-prepared Annual
Financial Report filed on the National Storage Mechanism of the
UK FCA in accordance with the ESEF Regulatory Technical
Standard (ESEF RTS). This auditor’s report provides no
assurance over whether the annual financial report has been
prepared using the single electronic format specified in the
ESEF RTS.
The Parent company has passed a resolution in accordance
with section 506 of the Companies Act 2006 that the senior
statutory auditor’s name should not be stated.
Deloitte LLP
Statutory Auditor
London, United Kingdom
28 February 2022
Independent Auditor’s report
continued
168
GSK Annual Report 2021
Consolidated income statement
for the year ended 31 December 20
21
Notes
2021
£m
2020
£m
2019
£m
Turnover
6
Cost of sales
(11,603 )
(11,704 )
(11,863 )
Gross profit 22,511 22,395 21,891
Selling, general and administration
(10,975 )
(11,456 )
(11,402 )
Research and development
(5,278 )
(5,098 )
(4,568 )
Royalty income 419 318 351
Other operating (expense)/income
7
(476 )
Operating profit
8
Finance income
11
Finance expense
12
(784 ) (912 )
(892 )
Share of after tax profits of associates and joint ventures
13
Loss on disposal of interest in associates – –
(36 )
Profit before taxation 5,442 6,968 6,221
Taxation (953 )
14
(346 )
(580 )
Profit after taxation for the year 5,096 6,388 5,268
Profit attributable to non-controlling interests 711 639 623
Profit attributable to shareholders 4,385 5,749 4,645
Basic earnings per share (pence)
15
Diluted earnings per share (pence)
15
Consolidated statement of comprehensive income
for the year ended 31 December 20
21
Notes
2021
£m
2020
£m
2019
£m
Profit for the year 5,096 6,388 5,268
Other comprehensive income/(expense) for the year
Items that may be subsequently reclassified to income statement:
Exchange movements on overseas net assets and net investment hedges
37
(239 ) (832
(59 )
)
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries and associates
37
(25 ) 36
(75
)
Fair value movements on cash flow hedges 5
(19 )
(20
)
Tax on fair value movements on cash flow hedges
(8 )
(18 ) 16
Reclassification of cash flow hedges to income statement 12 54 3
(255 )
(6 )
(908
)
Items that will not be reclassified to income statement:
Exchange movements on overseas net assets of non-controlling interests
37
(20 )
(34 ) (75
)
Fair value movements on equity investments 1,348 372
(911 )
Tax on fair value movements on equity investments 131
(220 )
(95
)
Remeasurement gains/(losses) on defined benefit plans 941 (1,050
(187 )
)
Tax on remeasurement of defined benefit plans 69 189
(223 )
(82 ) 976
(659
)
Other comprehensive (expense)/income for the year
37
(337 ) 970
(1,567
)
Total comprehensive income for the year 4,759 7,358 3,701
Total comprehensive income for the year attributable to:
Shareholders 4,068 6,753 3,153
Non-controlling interests 691 605 548
Total comprehensive income for the year 4,759 7,358 3,701
GSK Annual Report 2021
169
Strategic report Governance and remuneration
Financial statements
Investor informationConsolidated balance sheet
as at 31 December 20
21
Notes
2021
£m
2020
£m
Non-current assets
Property, plant and equipment 9,932 10,176
17
Right of use assets 740 830
18
Goodwill 10,552 10,597
19
Other intangible assets 30,079 29,824
20
Investments in associates and joint ventures 88 364
21
Other investments 2,126 3,060
22
Deferred tax assets 5,218 4,287
14
Derivative financial instruments 18 5
43
Other non-current assets 1,676 1,041
23
Total non-current assets 60,429 60,184
Current assets
Inventories 5,783 5,996
24
Current tax recoverable 486 671
14
Trade and other receivables 7,860 6,952
25
Derivative financial instruments 188 152
43
Liquid investments 61 78
29
Cash and cash equivalents 4,274 6,292
26
Assets held for sale 22 106
27
Total current assets 18,674 20,247
Total assets 79,103 80,431
Current liabilities
Short-term borrowings
29
(3,601 )
(3,725 )
Contingent consideration liabilities
32
(958 )
(765 )
Trade and other payables
28
(17,554 )
(15,840 )
Derivative financial instruments
43
(227 )
(221 )
Current tax payable
14
(489 )
(545 )
Short-term provisions
31
(841 )
(1,052 )
Total current liabilities
(23,670 )
(22,148 )
Non-current liabilities
Long-term borrowings
29
(20,572 )
(23,425 )
Corporation tax payable
14
(180 )
(176 )
Deferred tax liabilities
14
(3,556 )
(3,600 )
Pensions and other post-employment benefits
30
(3,113 )
(3,650 )
Other provisions
31
(630 )
(707 )
Derivative financial instruments
43
(1 )
(10 )
Contingent consideration liabilities
32
(5,118 )
(5,104 )
Other non-current liabilities
33
(921 )
(803 )
Total non-current liabilities
(34,091 )
(37,475 )
Total liabilities
(57,761 )
(59,623 )
Net assets 21,342 20,808
Equity
Share capital 1,347 1,346
36
Share premium account 3,301 3,281
36
Retained earnings 7,944 6,755
37
Other reserves 2,463 3,205
37
Shareholders’ equity 15,055 14,587
Non-controlling interests 6,287 6,221
Total equity 21,342 20,808
The financial statements on pages 168 to 251 were approved by the Board on
28 February
2022 and signed on its behalf bySir Jonathan Symonds
Chairman
170
GSK Annual Report 2021
Consolidated statement of changes in equity
for the year ended 3
211 December 20
Shareholders’ equity
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Other
reserves*
£m
Total
£m
Non-controlling
interests
£m
Total
equity
£m
At 31 December 2018, as revised 1,345 3,091 2,061 3,781 3,672
(2,716 )
(109 )
Implementation of IFRS 16 – – – –
(93 )
(93 )
(93 )
At 31 December 2018, as adjusted 1,345 3,091 2,061 3,688 3,579
(2,809 )
(109 )
Profit for the year – – 4,645 – 4,645 623 5,268
Other comprehensive (expense)/income for the year – – 274 (1,492 ) (75 ) (1,567 )
(1,766 )
Total comprehensive income for the year – – 2,879 274 3,153 548 3,701
Distributions to non-controlling interests – – – – –
(364 )
(364 )
Changes in non-controlling interests – – – – –
(10 )
(10 )
Dividends to shareholders – – – –
(3,953 )
(3,953 )
(3,953 )
Recognition of interest in Consumer Healthcare JV
Realised losses on disposal of equity investments – – 4 – – –
(4 )
Shares issued 1 50 – – 51 – 51
Shares acquired by ESOP Trusts – 33 295 (328 ) – – –
Write-down of shares held by ESOP Trusts – – 344 – – –
(344 )
Share-based incentive plans – – 365 – 365 – 365
Tax on share-based incentive plans – – 19 – 19 – 19
At 31 December 2019 1,346 3,174 4,530 2,355 11,405 6,952 18,357
Profit for the year – – 5,749 – 5,749 639 6,388
Other comprehensive (expense)/income for the year – –
(133 ) 1,137 1,004 (34 ) 970
Total comprehensive income for the year – – 5,616 1,137 6,753 605 7,358
Distributions to non-controlling interests – – – – –
(1,208 )
(1,208 )
Contributions from non-controlling interests – – – – – 3 3
Changes in non-controlling interests – – – – –
(131 )
(131 )
Dividends to shareholders – – – –
(3,977 )
(3,977 )
(3,977 )
Shares issued – 29 – – 29 – 29
Realised profits on disposal of equity investments – – 163 (163 ) – – –
Share of associates and joint ventures realised profits
on disposal of equity investments
(44 )
Shares acquired by ESOP Trusts – 78 531 – – –
(609 )
Write-down of shares held by ESOP Trusts – – – – –
(529 ) 529
Share-based incentive plans – – 381 – 381 – 381
Tax on share-based incentive plans – – – –
(4 )
(4 )
(4 )
At 31 December 2020 1,346 3,281 6,755 3,205 14,587 6,221 20,808
Profit for the year – – 4,385 – 4,385 711 5,096
Other comprehensive (expense)/income for the year – – 454 (317 ) (20 )
(771 )
(337 )
Total comprehensive income for the year – – 4,839 4,068 691 4,759
(771 )
Distributions to non-controlling interests – – – – –
(642 )
(642 )
Contributions from non-controlling interests – – – – – 7 7
Dividends to shareholders – – – –
(3,999 )
(3,999 )
(3,999 )
Realised profits on disposal of equity investments – – 132 (132 ) – – –
Share of associates and joint ventures realised profits
on disposal of equity investments
(7 )
Shares issued 1 20 – – 21 – 21
Write-down of shares held by ESOP Trusts – – – – –
(168 ) 168
Share-based incentive plans – – 367 – 367 – 367
Transactions with non-controlling interests – – – – – 10 10
Tax on share-based incentive plans – – 11 – 11 – 11
At 31 December 2021 1,347 3,301 7,944 2,463 15,055 6,287 21,342
* an analysis of Other reserves is presented as part of Note 37, ‘Movements in equity’.
GSK Annual Report 2021
171
Strategic report Governance and remuneration
Financial statements
Investor informationConsolidated cash flow statement
for the year ended 31 December 20
21
Notes
2021
£m
2020
£m
2019
£m
Cash flow from operating activities
Profit after taxation for the year 5,096 6,388 5,268
Adjustments reconciling profit after tax to operating cash flows 4,147 3,708 4,264
41
Cash generated from operations 9,243 10,096 9,532
Taxation paid
(1,291 )
(1,655 )
(1,512 )
Net cash inflow from operating activities 7,952 8,441 8,020
Cash flow from investing activities
Purchase of property, plant and equipment
(1,172 )
(1,226 )
(1,265 )
Proceeds from sale of property, plant and equipment 143 68 95
Purchase of intangible assets
(1,759 )
(1,013 )
(898 )
Proceeds from sale of intangible assets 772 1,255 404
Purchase of equity investments
(162 )
(411 )
(258 )
Proceeds from sale of equity investments 202 3,269 69
Contingent consideration paid
(114 )
(120 )
(113 )
Purchase of businesses, net of cash acquired – 15
40
(3,571 )
Disposal of businesses, net of cash disposed 259 104
40
(17 )
Investments in associates and joint ventures
40
(1 )
(4 )
(11 )
(Increase)/decrease in liquid investments 18 1
(1 )
Interest received 27 39 82
Proceeds from disposal of associates and joint ventures 277 – –
Dividends from associates, joint ventures and equity investments 9 31 7
Net cash inflow/(outflow) from investing activities 2,161
(1,777 )
(5,354
)
Cash flow from financing activities
Issue of share capital 21 29 51
36
Purchase of non-controlling interests – – (7 )
Increase in long-term loans – 3,298 4,794
Repayment of short-term Notes
(2,313 )
(3,738 )
(4,160 )
(Repayment of)/increase in other short-term loans 318
(3,567 ) 3,095
Repayment of lease liabilities
(215 )
(227 ) (214
)
Interest paid
(786 )
(864 )
(895 )
Dividends paid to shareholders
(3,999 )
(3,977 )
(3,953 )
Distributions to non-controlling interests
(642 )
(1,208 )
(364 )
Contributions from non-controlling interests 7 3 –
Other financing cash flows 20 119
(187 )
Net cash outflow from financing activities
(7,589 )
(10,132 )
(1,840 )
(Decrease)/increase in cash and bank overdrafts
42
(1,414 ) 470 826
Cash and bank overdrafts at beginning of year 5,262 4,831 4,087
Exchange adjustments
(29 )
(39 ) (82 )
(Decrease)/increase in cash and bank overdrafts 470 826
(1,414 )
Cash and bank overdrafts at end of year 3,819 5,262 4,831
Cash and bank overdrafts at end of year comprise:
Cash and cash equivalents 4,274 6,292 4,707
Cash and cash equivalents reported in assets held for sale – – 507
Overdrafts (1,030 )
(455 )
(383 )
172
GSK Annual Report 2021
Notes to the financial statements
1. Presentation of the financial statements
Description of business
marketing of pharmaceutical products, vaccines, over-the-
medicines in the following therapeutic areas: respiratory,
HIV, immuno-inflammation, oncology as well as metabolic,
anti-bacterials and dermatology.
Compliance with applicable law and IFRS
The financial statements have been prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and the International
Financial Reporting Standards as issued by the IASB.
Composition of financial statements
The consolidated financial statements are drawn up in Sterling,
the functional currency of GlaxoSmithKline plc
accordance with IFRS accounting presentation. The financial
statements comprise:
–
Consolidated income statement
–
Consolidated statement of comprehensive income
–
Consolidated balance sheet
–
Consolidated statement of changes in equity
–
Consolidated cash flow statement
–
Notes to the financial statements.
Composition of the Group
A list of the subsidiaries and associates which, in the opinion
of the Directors, principally affected the amount of profit or net
assets of the Group is given in Note 45, ‘Principal Group
companies’.
Financial period
These financial statements cover the financial year from
1 January to 31 December 2021 , with comparative figures for
the financial years from 1 January to 31 December 2020 and,
where appropriate, from 1 January to 31 December 2019.
Accounting principles and policies
The financial statements have been prepared using the
historical cost convention modified by the revaluation of certain
items, as stated in the accounting policies, and on a going
concern basis.
The financial statements have been prepared in accordance
with the Group’s accounting policies approved by the Board
and described in Note 2, ‘Accounting principles and policies’.
Information on the application of these accounting policies,
including areas of estimation and judgement is given in Note 3,
‘Critical accounting judgements and key sources of estimation
uncertainty’.
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Parent company financial statements
The financial statements of the parent company,
GlaxoSmithKline plc, have been prepared in accordance with
UK GAAP and with UK accounting presentation. The company
balance sheet is presented on page 252 and the accounting
policies are given on pages 253 to 256.
Consolidation
The consolidated financial statements include:
–
the assets and liabilities, and the results and cash flows, of
the company and its subsidiaries, including ESOP Trusts
–
the Group’s share of the results and net assets of associates
and joint ventures
–
the Group’s share of assets, liabilities, revenue and expenses
of joint operations.
The financial statements of entities consolidated are made up
to 31 December each year.
Entities over which the Group has the power to direct the
relevant activities so as to affect the returns to the Group,
generally through control over the financial and operating
policies, are accounted for as subsidiaries.
Where the Group has the ability to exercise joint control over,
and rights to, the net assets of entities, the entities are
accounted for as joint ventures. Where the Group has the ability
to exercise joint control over an arrangement, but has rights to
specified assets and obligations for specified liabilities of the
arrangement, the arrangement is accounted for as a joint
operation. Where the Group has the ability to exercise
significant influence over entities, they are accounted for as
associates. The results and assets and liabilities of associates
and joint ventures are incorporated into the consolidated
financial statements using the equity method of accounting.
The Group’s rights to assets, liabilities, revenue and expenses
of joint operations are included in the consolidated financial
statements in accordance with those rights and obligations.
Interests acquired in entities are consolidated from the date the
Group acquires control and interests sold are de-consolidated
from the date control ceases.
2. Accounting principles and policies
GSK Annual Report 2021
173
Strategic report Governance and remuneration
Financial statements
Investor informationNotes to the financial statements
continued
Transactions and balances between subsidiaries are eliminated
and no profit before tax is taken on sales between subsidiaries
until the products are sold to customers outside the Group.
The relevant proportion of profits on transactions with joint
ventures, joint operations and associates is also deferred until
the products are sold to third parties. Transactions with non-
controlling interests are recorded directly in equity. Deferred
tax relief on unrealised intra-Group profit is accounted for only
to the extent that it is considered recoverable.
Business combinations
Business combinations are accounted for using the acquisition
accounting method. Identifiable assets, liabilities and contingent
liabilities acquired are measured at fair value at acquisition date.
The consideration transferred is measured at fair value and
includes the fair value of any contingent consideration.
The fair value of contingent consideration liabilities are
reassessed at each balance sheet date with changes
recognised in the income statement. Payments of contingent
consideration reduce the balance sheet liability and as a result
are not recorded in the income statement.
The part of each payment relating to the original estimate of the
fair value of the contingent consideration on acquisition is
reported within investing activities in the cash flow statement and
the part of each payment relating to the increase in the liability
since the acquisition date is reported within operating cash flows.
Where the consideration transferred, together with the non-
controlling interest, exceeds the fair value of the net assets,
liabilities and contingent liabilities acquired, the excess is
recorded as goodwill. The costs of effecting an acquisition
are charged to the income statement in the period in which
they are incurred.
Goodwill is capitalised as a separate item in the case of
subsidiaries and as part of the cost of investment in the case
of joint ventures and associates. Goodwill is denominated in
the currency of the operation acquired.
Where the cost of acquisition is below the fair value of the net
assets acquired, the difference is recognised directly in the
income statement.
Where not all of the equity of a subsidiary is acquired the
non-controlling interest is recognised either at fair value or at the
non-controlling interest’s share of the net assets of the subsidiary,
on a case-by-case basis. Changes in the Group’s ownership
percentage of subsidiaries are accounted for within equity.
Foreign currency translation
Foreign currency transactions are booked in the functional
currency of the Group company at the exchange rate ruling
on the date of transaction. Foreign currency monetary assets
and liabilities are retranslated into the functional currency at
rates of exchange ruling at the balance sheet date. Exchange
differences are included in the income statement.
On consolidation, assets and liabilities, including related
goodwill, of overseas subsidiaries, associates and joint
ventures, are translated into Sterling at rates of exchange
ruling at the balance sheet date. The results and cash flows
of overseas subsidiaries, associates and joint ventures are
translated into Sterling using average rates of exchange.
Exchange adjustments arising when the opening net assets
and the profits for the year retained by overseas subsidiaries,
associates and joint ventures are translated into Sterling, less
exchange differences arising on related foreign currency
borrowings which hedge the Group’s net investment in these
operations, are taken to a separate component of equity within
Retained Earnings.
When translating into Sterling the assets, liabilities, results
and cash flows of overseas subsidiaries, associates and joint
ventures which are reported in currencies of hyper-inflationary
economies, adjustments are made where material to reflect
current price levels. Any loss on net monetary assets is charged
to the consolidated income statement.
Revenue
Turnover
The Group receives revenue for supply of goods to external
customers against orders received. The majority of contracts
that GSK enters into relate to sales orders containing single
performance obligations for the delivery of pharmaceutical,
vaccine and consumer healthcare products. The average
duration of a sales order is less than 12 months.
Product revenue is recognised when control of the goods is
passed to the customer. The point at which control passes is
determined by each customer arrangement, but generally occurs
on delivery to the customer.
Product revenue represents net invoice value including fixed and
variable consideration. Variable consideration arises on the sale of
goods as a result of discounts and allowances given and accruals
for estimated future returns and rebates. Revenue is not
recognised in full until it is highly probable that a significant reversal
in the amount of cumulative revenue recognised will not occur.
The methodology and assumptions used to estimate rebates
and returns are monitored and adjusted regularly in the light of
contractual and legal obligations, historical trends, past experience
and projected market conditions. Estimates associated with
returns and rebates are revisited at each reporting date or when
they are resolved and revenue is adjusted accordingly. Please refer
to Note 3 for the details on rebates, discounts and allowances.
The Group has entered into collaborative agreements, typically
with other pharmaceuticals or biotechnology companies to
develop, produce and market drug candidates and vaccines that
do not qualify as joint arrangements. When GSK has control over
the commercialisation activities, the Group recognises turnover
and cost of sales on a gross basis. Profit sharing amounts and
royalties due to the counterparty are recorded within cost of sales.
Cost of sales includes profit sharing costs of £640 million (2020
– £4 million; 2019 – £54 million). When the counterparty controls
the commercialisation activities and records the sale, the Group is
not deemed principal in the customer contract and instead records
its share of gross profit as co-promotion income, on a net basis,
within turnover. The nature of co-promotion activities is such that
the Group records no costs of sales. Pharmaceutical turnover
includes co-promotion revenue of £7 million (2020 – £12 million;
2019 – £16 million). Reimbursements to and from the counterparty
in our collaborations for ‘selling, general and administration’ and
‘research and development’ costs are recorded net in the
respective lines in the Consolidated income statement.
2. Accounting principles and policies
continued
174
GSK Annual Report 2021
Other operating income and royalty income
GSK enters into development and marketing collaborations
and out-licences of the Group’s compounds or products to
other parties. These contracts give rise to fixed and variable
consideration from upfront payments, development milestones,
sales-based milestones and royalties.
Income dependent on the achievement of a development
milestone is recognised when it is highly probable that a
significant reversal in the amount of cumulative revenue
recognised will not occur, which is usually when the related event
occurs. Sales-based milestone income is recognised when it is
highly probable that the sales threshold will be reached.
Sales-based royalties on a licence of intellectual property are
not recognised until the relevant product sale occurs.
For all revenue, if the time between the recognition of revenue
and payment from the customer is expected to be more than
one year and the impact is material, the amount of consideration
is discounted using appropriate discount rates.
Value added tax and other sales taxes are excluded from revenue.
Expenditure
Expenditure is recognised in respect of goods and services
received when supplied in accordance with contractual terms.
Provision is made when an obligation exists for a future liability
in respect of a past event and where the amount of the
obligation can be reliably estimated. Manufacturing start-up
costs between validation and the achievement of normal
production are expensed as incurred.
Advertising and promotion expenditure is charged to the income
statement as incurred.
Shipment costs on inter-company transfers are charged to cost
of sales; distribution costs on sales to customers are included in
selling, general and administrative expenditure.
Restructuring costs are recognised and provided for, where
appropriate, in respect of the direct expenditure of a business
reorganisation where the plans are sufficiently detailed and well
advanced, and where appropriate communication to those
affected has been undertaken.
Research and development
Research and development expenditure is charged to the
income statement in the period in which it is incurred.
Development expenditure is capitalised when the criteria for
recognising an asset are met, usually when a regulatory filing
has been made in a major market and approval is considered
highly probable. Property, plant and equipment used for
research and development is capitalised and depreciated
in accordance with the Group’s policy.
Environmental expenditure
Environmental expenditure related to existing conditions
resulting from past or current operations and from which no
current or future benefit is discernible is charged to the income
statement. The Group recognises its liability on a site-by-site
basis when it can be reliably estimated.
This liability includes the Group’s portion of the total costs and
also a portion of other potentially responsible parties’ costs
when it is probable that they will not be able to satisfy their
respective shares of the clean-up obligation. Recoveries of
reimbursements are recorded as assets when virtually certain.
Legal and other disputes
Provision is made for the anticipated settlement costs of legal or
other disputes against the Group where an outflow of resources
is considered probable and a reliable estimate can be made of
the likely outcome. In respect of product liability claims related
to certain products, provision is made when there is sufficient
history of claims made and settlements to enable management
to make a reliable estimate of the provision required to cover
unasserted claims.
In certain cases, an incurred but not reported (IBNR) actuarial
technique is used to determine this estimate. In addition,
provision is made for legal or other expenses arising from
claims received or other disputes.
The Group may become involved in legal proceedings, in
respect of which it is not possible to meaningfully assess
whether the outcome will result in a probable outflow, or to
quantify or reliably estimate the liability. In these cases,
appropriate disclosure about such cases would be included
but no provision would be made.
Costs associated with claims made by the Group against third
parties are charged to the income statement as they are incurred.
Pensions and other post-employment benefits
The costs of providing pensions under defined benefit schemes
are calculated using the projected unit credit method and spread
over the period during which benefit is expected to be derived from
the employees’ services, consistent with the advice of qualified
actuaries.
Pension obligations are measured as the present value of
estimated future cash flows discounted at rates reflecting the
yields of high-quality corporate bonds. Pension scheme assets are
measured at fair value at the balance sheet date.
The costs of other post-employment liabilities are calculated in
a similar way to defined benefit pension schemes and spread
over the period during which benefit is expected to be derived
from the employees’ services, in accordance with the advice of
qualified actuaries. The service cost of providing retirement
benefits to employees during the year, together with the cost of
any curtailment, is charged to operating profit in the year.
Actuarial gains and losses and the effect of changes in actuarial
assumptions are recognised in the statement of comprehensive
income in the year in which they arise.
The Group’s contributions to defined contribution plans are
charged to the income statement as incurred.
Employee share plans
Incentives in the form of shares are provided to employees
under share option and share award schemes.
The fair values of these options and awards are calculated at their
grant dates using a Black-Scholes option pricing model and
charged to the income statement over the relevant vesting periods.
2. Accounting principles and policies
continued
Notes to the financial statements
continued
GSK Annual Report 2021
175
Strategic report Governance and remuneration
Financial statements
Investor informationThe Group provides finance to ESOP Trusts to purchase
company shares to meet the obligation to provide shares when
employees exercise their options or awards. Costs of running the
ESOP Trusts are charged to the income statement.
Shares held by the ESOP Trusts are deducted from other
reserves. A transfer is made between other reserves and retained
earnings over the vesting periods of the related share options or
awards to reflect the ultimate proceeds receivable from
employees on exercise.
Property, plant and equipment
Property, plant and equipment (PP&E) is stated at the cost of
purchase or construction, less provisions for depreciation and
impairment. Financing costs are capitalised within the cost of
qualifying assets in construction.
Depreciation is calculated to write off the cost less residual
value of PP&E, excluding freehold land, using the straight-line
basis over the expected useful life. Residual values and lives are
reviewed, and where appropriate adjusted annually. The normal
expected useful lives of the major categories of PP&E are:
Freehold buildings 20 to 50 years
Leasehold land and buildings Lease term or 20 to 50 years
Plant and machinery 10 to 20 years
Equipment and vehicles 3 to 10 years
On disposal of PP&E, the cost and related accumulated
depreciation and impairments are removed from the financial
statements and the net amount, less any proceeds, is taken
to the income statement.
Leases
The Group recognises right of use assets under lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or
less) and leases of low value assets. Rights to use assets
owned by third parties under lease agreements are capitalised
at the inception of the lease and recognised on the consolidated
balance sheet.
The corresponding liability to the lessor is recognised as a lease
obligation within short and long-term borrowings. The carrying
amount is subsequently increased to reflect interest on the
lease liability and reduced by lease payments made.
For calculating the discounted lease liability on leases with annual
payments of £2 million or more, the implicit rate in the lease is
used. If this is not available, the incremental borrowing rate with a
lease specific adjustment is used. If neither of these is available,
and for leases with annual payments of less than £2 million, the
incremental borrowing rate is used. The incremental borrowing
rate is calculated at the rate of interest at which GSK would have
been able to borrow for a similar term and with a similar security
the funds necessary to obtain a similar asset in a similar market.
Finance costs are charged to the income statement so as to
produce a constant periodic rate of charge on the remaining
balance of the obligations for each accounting period.
Variable rents are not part of the lease liability and the right of use
asset. These payments are charged to the income statement as
incurred. Short-term and low-value leases are not capitalised and
lease rentals are also charged to the income statement as incurred.
Non-lease components are accounted for separately from the
lease components in plant and equipment leases but are not
separately accounted for in land and buildings or vehicle leases.
If modifications or reassessments of lease obligations occur, the
lease liability and right of use asset are re-measured.
Right of use assets where title is expected to pass to GSK at
a point in the future are depreciated on a basis consistent with
similar owned assets. In other cases, right of use assets are
depreciated over the shorter of the useful life of the asset or
the lease term.
Goodwill
Goodwill is stated at cost less impairments. Goodwill is
deemed to have an indefinite useful life and is tested for
impairment at least annually.
Where the fair value of the interest acquired in an entity’s
assets, liabilities and contingent liabilities exceeds the
consideration paid, this excess is recognised immediately
as a gain in the income statement.
Other intangible assets
Intangible assets are stated at cost less provisions for
amortisation and impairments.
Licences, patents, know-how and marketing rights separately
acquired or acquired as part of a business combination are
amortised over their estimated useful lives, generally not
exceeding 30 years, using the straight-line basis, from the
time they are available for use. The estimated useful lives for
determining the amortisation charge take into account patent
lives (exclusivity period), where applicable, as well as the value
obtained from periods of non-exclusivity. For Pharmaceutical
intangible assets, depending on the characteristics, competitive
environment and estimated long-term profits of the asset,
between 80% to 90% of the book value is amortised over the
exclusivity period on a straight-line basis and the remaining
book value is amortised over a non-exclusivity period of 5-15
years on a straight-line basis. For Vaccines intangible assets,
cost is usually amortised over the exclusivity period plus 10
years, or 30 years if no exclusivity period is granted, on a
straight-line basis. Asset lives are reviewed, and where
appropriate adjusted, annually.
Contingent milestone payments are recognised at the point
that the contingent event becomes probable. Any development
costs incurred by the Group and associated with acquired
licences, patents, know-how or marketing rights are written off
to the income statement when incurred, unless the criteria for
recognition of an internally-generated intangible asset are met,
usually when a regulatory filing has been made in a major market
and approval is considered highly probable.
Acquired brands are valued independently as part of the fair value
of businesses acquired from third parties where the brand has a
value which is substantial and long-term and where the brands
either are contractual or legal in nature or can be sold separately
from the rest of the businesses acquired. Brands are amortised
over their estimated useful lives of up to 20 years using the
straight-line basis, except where it is considered that the useful
economic life is indefinite.
2. Accounting principles and policies
continued
Notes to the financial statements
continued
176
GSK Annual Report 2021
The costs of acquiring and developing computer software for
internal use and internet sites for external use are capitalised as
intangible fixed assets where the software or site supports a
significant business system and the expenditure leads to the
creation of a durable asset. ERP systems software is amortised
over seven to ten years and other computer software over three
to five years using the straight-line basis.
Impairment of non-current assets
The carrying values of all non-current assets are reviewed for
impairment, either on a stand-alone basis or as part of a larger
cash generating unit, when there is an indication that the assets
might be impaired. Additionally, goodwill, intangible assets with
indefinite useful lives and intangible assets which are not yet
available for use are tested for impairment annually. Any
provision for impairment is charged to the income statement
in the year concerned.
Impairments of goodwill are not reversed. Impairment losses on
other non-current assets are only reversed if there has been a
change in estimates used to determine recoverable amounts
and only to the extent that the revised recoverable amounts do
not exceed the carrying values that would have existed, net of
depreciation or amortisation, had no impairments been
recognised.
Investments in associates, joint ventures and joint
operations
Investments in associates and joint ventures are carried in the
consolidated balance sheet at the Group’s share of their net
assets at date of acquisition and of their post-acquisition
retained profits or losses and other comprehensive income
together with any goodwill arising on the acquisition. The Group
recognises its rights to assets, liabilities, revenue and expenses
of joint operations.
Inventories
Inventories are included in the financial statements at the lower
of cost (including raw materials, direct labour, other direct costs
and related production overheads) and net realisable value.
Cost is generally determined on a first in, first out basis.
Pre-launch inventory is held as an asset when there is a high
probability of regulatory approval for the product. Before that
point a provision is made against the carrying value to its
recoverable amount; the provision is then reversed at the point
when a high probability of regulatory approval is determined.
Financial instruments
Financial assets
Financial assets are measured at amortised cost, fair value
through other comprehensive income (FVTOCI) or fair value
through profit or loss (FVTPL). The measurement basis is
determined by reference to both the business model for
managing the financial asset and the contractual cash flow
characteristics of the financial asset. For financial assets
other than trade receivables a 12-month expected credit loss
(ECL) allowance is recorded on initial recognition. If there is
subsequent evidence of a significant increase in the credit risk
of an asset, the allowance is increased to reflect the full lifetime
ECL. If there is no realistic prospect of recovery, the asset is
written off.
Expected credit losses are recognised in the income statement
on financial assets measured at amortised cost and at fair value
through other comprehensive income apart from equity
investments.
Other investments
Other investments comprise equity investments and
investments in limited life funds. The Group has elected to
designate the majority of its equity investments as measured at
FVTOCI. They are initially recorded at fair value plus transaction
costs and then remeasured at subsequent reporting dates to
fair value. Unrealised gains and losses are recognised in other
comprehensive income.
On disposal of the equity investment, gains and losses that have
been deferred in Other comprehensive income are transferred
directly to retained earnings. Investments in limited life funds are
measured at FVTPL. They are initially recorded at fair value and
then remeasured at subsequent reporting dates to fair value.
Unrealised gains and losses are recognised in the income
statement.
Dividends on equity investments and distributions from funds
are recognised in the income statement when the Group’s right
to receive payment is established.
Purchases and sales of Other investments are accounted for
on the trade date.
Trade receivables
Trade receivables are measured in accordance with the
business model under which each portfolio of trade receivables
is held. The Group has portfolios in each of the three business
models under IFRS 9: to collect the contractual cash flows
where there is no factoring agreement in place (measured at
amortised cost), to sell the contractual cash flows where the
trade receivables will be sold under a factoring agreement
(measured at FVTPL), and both to collect and to sell the
contractual cash flows where the trade receivables may be sold
under a factoring arrangement (measured at FVTOCI). Trade
receivables measured at amortised cost are carried at the
original invoice amount less allowances for expected credit
losses.
Expected credit losses are calculated in accordance with the
simplified approach permitted by IFRS 9, using a provision matrix
applying lifetime historical credit loss experience to the trade
receivables. The expected credit loss rate varies depending
on whether, and the extent to which, settlement of the trade
receivables is overdue and it is also adjusted as appropriate to
reflect current economic conditions and estimates of future
conditions. For the purpose of determining credit loss rates,
customers are classified into groupings that have similar loss
patterns. The key drivers of the loss rate are the nature of the
business unit and the location and type of customer.
When a trade receivable is determined to have no reasonable
expectation of recovery it is written off, firstly against any
expected credit loss allowance available and then to the
income statement.
Subsequent recoveries of amounts previously provided for or
written off are credited to the income statement. Long-term
receivables are discounted where the effect is material.
Notes to the financial statements
continued
2. Accounting principles and policies
continued
GSK Annual Report 2021
177
Strategic report Governance and remuneration
Financial statements
Investor informationCash and cash equivalents
Cash held in deposit accounts is measured at amortised cost.
Investments in money market funds are held at fair value through
profit or loss because the funds fail the solely payments of
principal and interest (SPPI) test.
Borrowings
All borrowings are initially recorded at the amount of proceeds
received, net of transaction costs. Borrowings are subsequently
carried at amortised cost, with the difference between the
proceeds, net of transaction costs, and the amount due on
redemption being recognised as a charge to the income
statement over the period of the relevant borrowing.
Derivative financial instruments
Derivative financial instruments are used to manage exposure
to market risks. The principal derivative instruments used by
GSK are foreign currency swaps, interest rate swaps, foreign
exchange forward contracts and options. The Group does not
hold or issue derivative financial instruments for trading or
speculative purposes.
Derivative financial assets and liabilities, including derivatives
embedded in host contracts which have been separated from
the host contract, are classified as held-for-trading and are
measured at fair value. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting are
recognised immediately in the income statement.
Hedge accounting
Derivatives designated as hedging instruments are classified
at inception of hedge relationship as cash flow hedges, net
investment hedges or fair value hedges.
Changes in the fair value of derivatives designated as cash flow
hedges are recognised in other comprehensive income to the
extent that the hedges are effective. Ineffective portions are
recognised in profit or loss immediately. Amounts deferred in
other comprehensive income are reclassified to the income
statement when the hedged item affects profit or loss.
Net investment hedges are accounted for in a similar way to
cash flow hedges.
Changes in the fair value of derivatives designated as fair value
hedges are recorded in the income statement, together with the
changes in the fair value of the hedged asset or liability.
Taxation
Current tax is provided at the amounts expected to be paid,
applying tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is provided in full, on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the financial statements. Deferred tax assets are
recognised to the extent that it is probable that future taxable
profits will be available against which the temporary differences
can be utilised. Deferred tax is provided on temporary
differences arising on investments in subsidiaries, associates
and joint ventures, except where the timing of the reversal of the
temporary difference can be controlled and it is probable that
the temporary difference will not reverse in the foreseeable
future. Deferred tax is provided using rates of tax that have been
enacted or substantively enacted by the balance sheet date.
Where an uncertain tax position is identified, management will
make a judgement as to what the probable outcome will be,
assuming the relevant tax authority has full knowledge of the
situation. Where it is assessed that an economic outflow is
probable to arise, a provision is made for the best estimate of
the liability. In estimating any such liability GSK applies a
risk-based approach which takes into account, as appropriate,
the probability that the Group would be able to obtain
compensatory adjustments under international tax treaties.
These estimates take into account the specific circumstances
of each dispute and relevant external advice.
Discounting
Where the time value of money is material, balances are
discounted to current values using appropriate discount rates.
The unwinding of the discounts is recorded in finance income
and finance expense.
2. Accounting principles and policies
continued
Notes to the financial statements
continued
3. Critical accounting judgements and key sources of estimation uncertainty
In preparing the financial statements, management is required
to make judgements about when or how items should be
recognised in the financial statements and estimates and
assumptions that affect the amounts of assets, liabilities,
revenue and expenses reported in the financial statements.
Actual amounts and results could differ from those estimates.
The following are considered to be the critical accounting
judgements and key sources of estimation uncertainty.
Turnover
Reported Group turnover for 2021 was £34,114 million
(2020 – £34,099 million).
Estimates
Gross turnover is reduced by rebates, discounts, allowances
and product returns given or expected to be given, which
vary by product arrangements and buying groups. These
arrangements with purchasing organisations are dependent
upon the submission of claims some time after the initial
recognition of the sale. Accruals are made at the time of sale
for the estimated rebates, discounts or allowances payable or
returns to be made, based on available market information and
historical experience.
178
GSK Annual Report 2021
Notes to the financial statements
continued
The US Pharmaceuticals business has the largest and most
complex arrangements for rebates, discounts and allowances.
The US Pharmaceuticals turnover for 2021 of £8,442 million
(2020 – £7,451 million) was after recording deductions of
£11,486 million (2020 – £12,584 million) for rebates, discounts,
allowances and returns. The balance sheet accruals for rebates,
discounts, allowances and returns for the US Pharmaceuticals
and Vaccines businesses are managed on a combined basis.
At 31 December 2021, the total accrual amounted to
£5,044 million (2020 – £4,686 million). Because of the nature
of these accruals it is not practicable to give meaningful
sensitivity estimates due to the large volume of variables that
contribute to the overall rebates, chargebacks, returns and
other revenue accruals.
As there can be significant variability in final outcomes, the
group applies a constraint when measuring the variable element
within revenue, so that revenue is recognised at a suitably
cautious amount. The objective of the constraint is to ensure
that it is highly probable that a significant reversal of revenue will
not occur when the uncertainties are resolved. The constraint is
applied by making suitably cautious estimates of the inputs and
assumptions used in estimating the variable consideration.
Because the amounts are estimated they may not fully reflect
the final outcome, and the amounts are subject to change
dependent upon, amongst other things, the types of buying
group and product sales mix. The constraints applied in
recognising revenue mean that the risk of a material downward
adjustment to revenue in the next financial year is low.
The level of accrual for rebates and returns is reviewed and
adjusted regularly in the light of contractual and legal
obligations, historical trends, past experience and projected
market conditions. Market conditions are evaluated using
wholesaler and other third-party analyses, market research data
and internally-generated information. It is reasonably possible
that there could be a significant adjustment within the next 12
months to recognise additional revenue, if actual outcomes are
better than the cautious constrained estimates. Revenue is not
recognised in full until it is highly probable that a significant
reversal in the amount of cumulative revenue recognised will
not occur. The amount of turnover recognised in the year from
performance obligations satisfied in previous periods is set out
in Note 6, ‘Turnover and segment information’, and is an
indication of the level of sensitivity in the estimate.
Future events could cause the assumptions on which the
accruals are based to change, which could materially affect
the future results of the Group.
Taxation
The tax charge for the year was £346 million (2020 –
£580 million). At December 2021, current tax payable was
£489 million (2020 – £545 million), non-current corporation
tax payable was £180 million (2020 – £176 million) and current
tax recoverable was £486 million (2020 – £671 million).
Estimates
The Group has open tax issues with a number of revenue
authorities. Management makes a judgement of whether there is
sufficient information to be able to make a reliable estimate of
the outcome of the dispute. If insufficient information is available,
no provision is made.
If sufficient information is available, in estimating a potential tax
liability GSK applies a risk-based approach which takes into
account, as appropriate, the probability that the Group would
be able to obtain compensatory adjustments under international
tax treaties. These estimates take into account the specific
circumstances of each dispute and relevant external advice,
are inherently judgemental and could change substantially over
time as each dispute progresses and new facts emerge.
At 31 December 2021, the Group had recognised provisions
of £858 million in respect of uncertain tax positions (2020 –
£856 million). Due to the number of uncertain tax positions held
and the number of jurisdictions to which these relate, it is not
practicable to give meaningful sensitivity estimates. No
uncertain tax position is individually significant to the Group.
Factors affecting the tax charge in future years are set out in
Note 14, ‘Taxation’. GSK continues to believe that it has made
adequate provision for the liabilities likely to arise from open
assessments. Where open issues exist, the ultimate liability
for such matters may vary from the amounts provided and is
dependent upon the outcome of negotiations with the relevant
tax authorities or, if necessary, litigation proceedings.
Legal and other disputes
Legal costs for the year were £52 million (2020 – £231 million).
At 31 December 2021 provisions for legal and other disputes
amounted to £196 million (2020 – £320 million).
Estimates
Management makes a judgement of whether there is sufficient
information to be able to make a reliable estimate of the likely
outcome of the dispute and the legal and other expenses arising
from claims against the Group. If insufficient information is
available, no provision is made and disclosure of the claim is
given.
The estimated provisions take into account the specific
circumstances of each dispute and relevant external advice, are
inherently judgemental and could change substantially over time
as each dispute progresses and new facts emerge. Details of
the status and various uncertainties involved in the significant
unresolved disputes are set out in Note 46, ‘Legal proceedings’.
The company’s Directors, having taken legal advice, have
established provisions after taking into account the relevant
facts and circumstances of each matter and in accordance with
accounting requirements. In respect of product liability claims
related to certain products, there is sufficient history of claims
made and settlements to enable management to make a reliable
estimate of the provision required to cover unasserted claims.
3. Critical accounting judgements and key sources of estimation uncertainty
continued
GSK Annual Report 2021
179
Strategic report Governance and remuneration
Financial statements
Investor informationThe Group previously accounted for SaaS (software as a
service) configuration and customisation costs as intangible
assets. Following the IFRS IC (Interpretation Committee)
agenda decision on SaaS in April 2021, the Group has adopted
the treatment set out in the IFRS IC agenda decision and
expensed configuration and customisation costs where the
entity does not control the software being configured. The
impacts of the change were an impairment of £68 million from
previously capitalised intangible assets and an increase in 2021
expenses of £40 million presented in Selling, general and
administration and Research and development.
Where the retirement benefit to which an employee is entitled is
capped at a specified number of consecutive years, the Group
previously accounted for these employee benefits from the
employment commencement date. Following the IFRS IC
agenda decision on Attributing Benefit to Periods of Service in
May 2021, the Group has adopted the treatment set out in the
IFRS IC agenda decision to account for the employee benefits
during the last specified number of years where the employee
earn the benefit. The impact of the change was a reduction of
expenses of £42 million presented in Cost of sales, Selling,
general and administration and Research and development.
During the year, the Group implemented ‘Interest Rate
Benchmark Reform Phase 2 - Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16’ which was issued in August 2020
and adopted by the UK Endorsement Board on 5 January 2021.
The amendments address issues that arise from implementation
of the reforms, including the replacement of one benchmark
with an alternative one. A practical expedient is provided such
that the change to contractual cash flows for financial assets
and liabilities (including lease liabilities) is accounted for
prospectively by revising the effective interest rate. In addition,
hedge accounting will not be discontinued solely because of
the IBOR reform. Further information is provided in Note 43.
Certain new accounting standards, amendments to accounting
standards and interpretations have been published that are not
mandatory for 31 December 2021 reporting periods and have
not been early adopted by the group. These standards,
amendments or interpretations are not expected to have a
material impact on the Group in the current or future reporting
periods.
4. New accounting requirements
3. Critical accounting judgements and key sources of estimation uncertainty
continued
Notes to the financial statements
continued
The Group may become involved in legal proceedings, in respect
of which it is not possible to meaningfully assess whether the
outcome will result in a probable outflow, or to quantify or reliably
estimate the liability. In these cases, appropriate disclosure about
such cases would be provided, but no provision would be made
and no contingent liability can be quantified.
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.
The position could change over time and, therefore, there can be
no assurance that any losses that result from the outcome of any
legal proceedings will not exceed the amount of the provisions
reported in the Group’s financial statements by a material amount.
Contingent consideration
The 2021 income statement charge for contingent
consideration was £1,063 million (2020 – £1,275 million).
At 31 December 2021, the liability for contingent consideration
amounted to £6,076 million (2020 – £5,869 million). Of this
amount, £5,559 million (2020 – £5,359 million) related to the
acquisition of the former Shionogi-ViiV Healthcare joint venture
in 2012.
Estimates
Any contingent consideration included in the consideration
payable for a business combination is recorded at fair value at
the date of acquisition. These fair values are generally based on
risk-adjusted future cash flows discounted using appropriate
post-tax discount rates. The fair values are reviewed on a
regular basis, at least annually, and any changes are reflected in
the income statement. See Note 32, ‘Contingent consideration
liabilities’.
Pensions and other post-employment benefits
Judgement
Where a surplus on a defined benefit scheme arises, or there
is potential for a surplus to arise from committed future
contributions, the rights of the Trustees to prevent the Group
obtaining a refund of that surplus in the future are considered in
determining whether it is necessary to restrict the amount of the
surplus that is recognised. Three UK schemes are in surplus, with
a combined surplus of £606 million at 31 December 2021 (2020
– £77 million). There are further recognised pension surpluses
totalling £135 million spread across 6 countries (2020 – £106
million across 6 countries). GSK has made the judgement that
these amounts meet the requirements of recoverability.
Estimates
The costs of providing pensions and other post-employment
benefits are assessed on the basis of assumptions selected by
management. These assumptions include future earnings and
pension increases, discount rates, expected long-term rates of
return on assets and mortality rates, and are disclosed in Note
30, ‘Pensions and other post-employment benefits’.
Discount rates are derived from AA rated corporate bond yields
except in countries where there is no deep market in corporate
bonds where government bond yields are used. A sensitivity
analysis is provided in Note 30, ‘Pensions and other post-
employment benefits’, a 0.25% reduction in the discount rate
would lead to an increase in the net pension deficit of
approximately £772 million and an increase in the annual pension
cost of approximately £17 million. Similarly, a 0.25% increase in
the discount rate would lead to a decrease in the net pension
deficit of approximately £729 million and a decrease in the annual
pension cost of approximately £19 million. The selection of
different assumptions could affect the future results of the Group.
180
GSK Annual Report 2021
Notes to the financial statements
continued
6. Turnover and segment information
Operating segments are reported based on the financial information provided to the Chief Executive Officer and the responsibilities
of the GSK Leadership Team (GLT). GSK reports results under four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines
and Consumer Healthcare, and individual members of the GLT are responsible for each segment.
The Group’s management reporting process allocates intra-Group profit on a product sale to the market in which that sale is
recorded, and the profit analyses below have been presented on that basis.
Corporate and other unallocated turnover and costs includes the results of certain Consumer Healthcare products which are being
held for sale in a number of markets in order to meet anti-trust approval requirements, together with the costs of corporate functions.
Revenue recognised in the year from performance obligations satisfied in previous periods totalled £1,558 million (2020 – £1,207
million) and included £1,069 million (2020 – £649 million) impacting turnover arising from changes to prior year estimates of RAR
(returns and rebates) accruals, £61 million (2020 – £238 million) of milestone income and £428 million (2020 – £320 million) of
royalty income recognised in the current year.
Turnover by segment
2021
£m
2020
£m
2019
£m
Pharmaceuticals 17,554
17,7 2 9
17,056Vaccines 7,157
6,778
6,982Consumer Healthcare
9,607
10,033 8,995
Segment turnover
34,114
34,071 33,706
Corporate and other unallocated turnover
–
28
48
34,114
34,099
33,754
GSK has reviewed the presentation of its pharmaceuticals products and from 1 January 2021 has moved sales of
Arnuity Ellipta
,
Incruse Ellipta
and
Relvar/Breo Ellipta from the Respiratory therapeutic area to the Established Pharmaceuticals therapeutic area.
Comparative information has been revised on to a consistent basis.
Pharmaceuticals turnover by therapeutic area
2021
£m
2020
(revised)
£m
2019
(revised)
£m
Respiratory 1,800
2,863
2,360HIV
4,777
4,8544,876
Immuno-inflammation
885
727
613Oncology
489
372
230Pandemic
958
– –
New and Specialty
9,972
8,335
7, 4 97
Established Pharmaceuticals
7,757
8,721 10,057
17,72 9
17,056 17,554
Vaccines turnover by category
2021
£m
2020
£m
2019
£m
Meningitis 1,018
961
1,029Influenza
679
541733
Shingles
1,721
1,989 1,810
Established Vaccines
2,970
3,231
3,788
6,331
6,982 7,157
Pandemic Vaccines
447
– –
6,778
6,982 7,157
The Group uses the average of exchange rates prevailing during the period to translate the results and cash flows of overseas
subsidiaries, joint ventures and associates into Sterling and period end rates to translate the net assets of those entities. The
currencies which most influence these translations and the relevant exchange rates were:
5. Exchange rates
2021
2020 2019
Average rates:
US$/£ 1.28
1.38
1.29Euro/£
1.16
1.13 1.14
Yen/£
151
137
1392021
2020 2019
Period end rates:
US$/£ 1.32
1.35
1.36Euro/£
1.19
1.11 1.18
Yen/£ 143
155
141
GSK Annual Report 2021
181
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information6. Turnover and segment information
continued
During 2021, the US operations of the Pharmaceuticals and Vaccines businesses made sales to three wholesalers of
£3,159 million (2020 – £2,928 million, 2019 – £2,835 million), £3,081 million (2020 – £3,085 million, 2019 – £3,146 million)
and £2,670 million (2020 – £2,795 million, 2019 – £2,820 million) respectively, after allocating final-customer discounts to the
wholesalers.
Consumer Healthcare turnover by category
2021
£m
2020
£m
2019
£m
Oral health
2,732
2,753
2,673
Pain relief
2,276
2,219 1,781
Vitamins, minerals and supplements
1,512
1,506 611
Respiratory health
1,133
1,209 1,186
Digestive health and other
1,803
1,824 1,646
9,456
9,511
7, 8 97
Brands divested/under review
151
522 1,098
9,607
10,033 8,995
Segment profit
2021
£m
2020
£m
2019
£m
Pharmaceuticals
8,170
7,72 3
7,964
Pharmaceuticals R&D
(3,489)
(3,538) (3,369)
Pharmaceuticals, including R&D
4,681
4,185 4,595
Vaccines 2,966
2,256
2,713Consumer Healthcare
2,239
2,213 1,874
Segment profit
9,176
9,111 9,435
Corporate and other unallocated costs
(370)
(205) (463)
Other reconciling items between segment profit and operating profit
(2,605)
(1,123) (2,011)
Operating profit
6,201
7,78 3
6,961
Finance income
28
44 98
Finance costs
(784)
(892) (912)
Loss on disposal of interest in associates
(36)
– –
Share of after-tax profits of associates and joint ventures
33
33
74
Profit before taxation
5,442
6,968 6,221
Taxation (953)
(346)
(580)Profit after taxation for the year
5,096
6,388 5,268
Other reconciling items between segment profit and operating profit comprise items not specifically allocated to segment profit.
These include impairment and amortisation of intangible assets; major restructuring costs, which include impairments of tangible
assets and computer software; transaction-related adjustments related to significant acquisitions; proceeds and costs of disposals
of associates, products and businesses, significant legal charges and expenses on the settlement of litigation and government
investigations, other operating income other than royalty income and other items, and separation costs. Please refer to the detail of
“Other reconciling items between segment profit and operating profit” in the analysis of adjusting items (Group financial review).
Depreciation and amortisation by segment
2021
£m
2020
£m
2019
£m
Pharmaceuticals
553
557
606
Pharmaceuticals R&D
325
298 230
Pharmaceuticals, including R&D
878
855 836
Vaccines
416
404
418Consumer Healthcare
226
235 224
Segment depreciation and amortisation
1,520
1,494
1,478
Corporate and other unallocated depreciation and amortisation
54
82
79
Other reconciling items between segment depreciation and amortisation and
total depreciation and amortisation
802
775 777
Total depreciation and amortisation
2,376
2,351 2,334
182
GSK Annual Report 2021
Notes to the financial statements
continued
6. Turnover and segment information
continued
PP&E, intangible asset and goodwill impairment by segment
2021
£m
2020
£m
2019
£m
Pharmaceuticals
11
38
137
Pharmaceuticals R&D
54
37
16
Pharmaceuticals, including R&D
65
75 153
Vaccines
20
49
33Consumer Healthcare
12
5 –
Segment impairment
97
129 186
Corporate and other unallocated impairment
63
5
19
Other reconciling items between segment impairment and total impairment
416
680
621
Total impairment
576
814 826
PP&E and intangible asset impairment reversals by segment
Pharmaceuticals (6)
(5)
(12)Pharmaceuticals R&D
(2)
(4)
–
Pharmaceuticals, including R&D
(7)
(16) (6)
Vaccines (1)
(3)
(2)Consumer Healthcare
–
– –
Segment impairment reversals
(10)
(18) (7)
Corporate and other unallocated impairment reversals
–
(1) (3)
Other reconciling items between segment impairment reversals and total impairment reversals
(38)
(53) (15)
Total impairment reversals
(48)
(72) (25)
Net operating assets by segment
2021
£m
2020
£m
Pharmaceuticals
(149)
789
Pharmaceuticals R&D
3,795
3,345
Pharmaceuticals, including R&D
3,646
4,134
Vaccines
8,429
8,995Consumer Healthcare
25,185
25,176
Segment net operating assets
37,260
38,305
Corporate and other unallocated net operating assets
2,353
2,250
Net operating assets
39,613
40,555
Net debt
(19,838)
(20,780)
Investments in associates and joint ventures
88
364
Derivative financial instruments
(22)
(74)
Current and deferred taxation
1,479
637
Assets held for sale (excluding cash and cash equivalents)
22
10 6
Net assets
21,342
20,808
The Pharmaceuticals segment includes the Shionogi-ViiV Healthcare contingent consideration liability of £5,559 million
(2020 – £5,359 million) and the Pfizer put option of £1,008 million (2020 – £960 million).
GSK Annual Report 2021
183
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information6. Turnover and segment information
continued
Geographical information
The UK is regarded as being the Group’s country of domicile.
Turnover by location of customer
2021
£m
2020
£m
2019
£m
UK
975
980
942
US
15,093
14,556 13,890
Rest of World
18,046
18,563 18,922
External turnover
34,114
34,099
33,754
Non-current assets by location of subsidiary
2021
£m
2020
(revised)
£m
UK
6,618
6,279
US
17,852
17,899
Belgium
5,065
5,437Switzerland
6,552
6,133Rest of World
15,390
16,142
Non-current assets
51,477
51,890
Non-current assets by location excludes amounts relating to other investments, deferred tax assets, derivative financial instruments,
pension assets, amounts receivable under insurance contracts and certain other non-current receivables. There are no other
countries with individually material external revenue or non-current assets.
GSK has revised the presentation of its non-current assets by location to include Belgium and Switzerland independently from the
rest of the world.
7. Other operating income/(expense)
2021
£m
2020
£m
2019
£m
Fair value remeasurements of equity investments
37
(6) (14)
Disposal of businesses and assets
591
2,779
541
Fair value remeasurements on contingent consideration recognised in business combinations
(1,058)
(1,286) (92)
Remeasurement of ViiV Healthcare put option liabilities and preferential dividends
(48)
52 234
Fair value adjustments on derivative financial instruments
(4)
–20
Other income
6
65 20
(476)
1,624
689
Disposal of businesses and assets in 2021 included a net gain on disposal of the rights to the royalty stream for cabozantinib and
a net gain on disposal of the cephalosporin antibiotic brands to Sandoz.
Disposal of businesses and assets in 2020 included a net profit on disposal of the Horlicks and other Consumer Healthcare
nutritional brands and two subsidiaries in India and Bangladesh of £2,815 million, which reflected reversal of £240 million of
embedded derivative gains on the value of the shares taken in prior years. This was partly offset by the related £476 million loss
on the shares in Hindustan Unilever Limited, including fair value remeasurement losses between their acquisition as consideration
for the divestment of GSK Consumer Healthcare Limited in India and their subsequent disposal. Other operating income also
included an increase in profit and milestone income from a number of asset disposals.
Fair value remeasurements on contingent consideration recognised as business combinations included £1,026 million related to
the acquisition of the former Shionogi-ViiV Healthcare joint venture and £27 million payable to Novartis related to the Vaccines
acquisition, together with fair value movements on related hedging contracts.
184
GSK Annual Report 2021
Notes to the financial statements
continued
8. Operating profit
The following items have been included in operating profit:
2021
£m
2020
£m
2019
£m
Employee costs (Note 9)
9,003
10,249 9,855
Advertising
1,806
1,777
1,567
Distribution costs
379
408
393
Depreciation of property, plant and equipment
982
989
1,017
Impairment of property, plant and equipment, net of reversals
103
443
669
Depreciation of right of use assets
213
225 214
Impairment of right of use assets
7
3 2
Amortisation of intangible assets
1,181
1,137 1,103
Impairment of intangible assets, net of reversals
416
257
126
Impairment of property, plant and equipment held for sale, net of reversals
1
3 –
Impairment of intangible assets held for sale, net of reversals
1
20
1
Impairment of goodwill allocated to a disposal group, net of reversals
–
16
4
Net foreign exchange (gains)/losses
(2)
1 10
(37)
Inventories:
Cost of inventories included in cost of sales
9,192
9,480 9,482
Write-down of inventories
946
699
578
Reversal of prior year write-down of inventories
(384)
(274) (230)
Short-term lease charge
7
11 12
Low-value lease charge
3
5 4
Variable lease payments
10
11 13
Fees payable to the company’s auditor and its associates in relation to the Group (see below)
31.7
29.9 30.4
The reversals of prior year write-downs of inventories principally arise from the reassessment of usage or demand expectations
prior to inventory expiration.
Net foreign exchange (gains)/losses include a net gain of £35 million (2020 – £36 million loss; 2019 – £75 million gain) arising
from the recycling of exchange on liquidation or disposal of overseas subsidiaries. The recycling of exchange on disposal of
overseas associates of a loss of £10 million (2020 – £nil) is reported through loss on disposal of interest in associates.
Included within operating profit are Major restructuring charges of £626 million (2020 – £1,532 million; 2019 – £1,105 million),
see Note 10, ‘Major restructuring costs’.
Fees payable to the company’s auditor and its associates:
2021
£m
2020
£m
2019
£m
Audit of parent company and consolidated financial statements including attestation under s.404
of Sarbanes-Oxley Act 2002
13.2
13.8
15.6
Audit of the company’s subsidiaries
14.5
14.5 13.5
Total audit services
2 7.7
28.3 29.1
Audit related and other assurance services
4.0
1.6 1.2
All other services
–
–
0.1
Total audit-related and non-audit services
4.0
1.6 1.3
31.7
29.9 30.4
The other assurance services provided by the auditor related to agreed upon procedures and other assurance services outside of
statutory audit requirements. In addition to the above, fees paid to the auditor in respect of the GSK pension schemes were:
2021
£m
2020
£m
2019
£m
Audit 0.2
0.2
0.2Other services –
–
–There was no material fee paid in 2021 to other auditors in respect of audits of certain of the company’s subsidiaries acquired
during the year (2020 – £0.2 million, 2019 – £0.8 million).
Audit fees include £0.9 million in relation to incremental audit work performed in 2021 for audit opinions issued compliant with
PCAOB auditing standards in preparation for the Consumer Healthcare demerger.
Audit related and other assurance services include £2.4 million due to reporting accountant work performed in preparation for the
Consumer Healthcare demerger.
GSK Annual Report 2021
185
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information9. Employee costs
2021
£m
2020
£m
2019
£m
Wages and salaries 7,583
6,941
7,802Social security costs
856
917
852Pension and other post-employment costs, including augmentations (Note 30)
463
519560
Cost of share-based incentive plans 432
404
393Severance and other costs from integration and restructuring activities 428
339
618 9,003
10,249 9,855
The Group provides benefits to employees, commensurate with local practice in individual countries, including, in some markets,
healthcare insurance, subsidised car schemes and personal life assurance.
The cost of share-based incentive plans is analysed as follows:
2021
£m
2020
£m
2019
£m
Share Value Plan 302
303
313Performance Share Plan
59
64 58
Share option plans 4
5
4Cash settled and other plans
37
1268
404
393 432
The average monthly number of persons employed by the Group (including Directors) during the year was:
2021
Number
2020
Number
2019
Number
Manufacturing
33,303
34,898 36,653
Selling, general and administration
46,782
49,162
48,535
Research and development
11,876
11,824
12,026
91,961
95,884
97,214
The average monthly number of Group employees excludes temporary and contract staff. The numbers of Group employees at the
end of each financial year are given in the financial record on page 265.
The compensation of the Directors and senior management (members of the GLT) in aggregate, was as follows:
2021
£m
2020
£m
2019
£m
Wages and salaries
29
2823
Social security costs 4
3
4Pension and other post-employment costs 3
3
3Cost of share-based incentive plans
30
25 27
65
55
62
Further information on the remuneration of the Directors is given in the sections of the annual report on remuneration labelled as
audited within pages 120 to 152.
186
GSK Annual Report 2021
Notes to the financial statements
continued
10. Major restructuring costs
Within the Pharmaceuticals sector, the highly regulated manufacturing operations and supply chains and long lifecycle of the
business mean that restructuring programmes, particularly those that involve the rationalisation or closure of manufacturing or R&D
sites, are likely to take several years to complete.
Major restructuring costs are those related to specific Board-approved Major restructuring programmes, including integration costs
following material acquisitions, which are structural and are of a significant scale where the costs of individual or related projects
exceed £25 million.
The existing Combined restructuring and integration programme incorporates the previous Major Change programme, the
Pharmaceuticals restructuring programme and the restructuring and integration programme following the Novartis transaction in
2015. This programme is now substantially complete. In July 2018, the Board approved a Major restructuring programme, designed
to significantly improve the competitiveness and efficiency of the Group’s cost base with savings delivered primarily through supply
chain optimisation and reductions in administrative costs. This programme is now substantially complete. In February 2019, the
Board approved a Major restructuring plan to generate synergies from the integration of the Pfizer consumer healthcare business
into GSK’s Consumer Healthcare business. In January 2020, the Board approved a two-year Separation Preparation programme
to prepare for the separation of GSK into two companies.
The total restructuring costs of £626 million in 2021 were incurred in the following areas:
–
Restructuring costs to prepare for separation of GSK into two companies
–
Restructuring following the integration of the Pfizer consumer healthcare business into GSK Consumer Healthcare
–
Continued implementation of the restructuring programme that started in July 2018, to simplify the operating models and improve
resource allocation of the Pharmaceutical and Consumer Healthcare supply chains
–
Continued transformation of central functions, including GSK technology platforms and interfaces, to deliver greater digital
synergies, simplification of applications and staff reductions.
The analysis of the costs charged to operating profit under these programmes was as follows:
2021
£m
2020
£m
2019
£m
Increase in provision for Major restructuring programmes (see Note 31)
383
746
345
Amount of provision reversed unused (see Note 31)
(151)
(96) (148)
Impairment losses recognised
27
361 521
Other non-cash charges
29
104
99
Other cash costs
338
417
288
626
1,532 1,105
Provision reversals of £151 million (2020 – £96 million, 2019 – £148 million) reflected provision releases mainly for the Separation
Preparation programme and 2018 Major restructuring programme. Asset impairments of £27 million and other non-cash charges of
£29 million principally comprised fixed asset write-downs of manufacturing facilities and accelerated depreciation where asset lives
have been shortened in the supply chain manufacturing network as a result of the Major restructuring programmes. All other
charges have been or will be settled in cash and include site closure costs, consultancy and project management costs.
The analysis of Major restructuring charges by programme was as follows:
2021
Cash
£m
Non-cash
£m
Total
£m
Separation Preparation programme
371
59
430
Consumer Healthcare Joint Venture integration programme
173
11
184
2018 Major restructuring programme (including Tesaro)
18
9
27
Combined restructuring and integration programme
8
(23)
(15)
570
56
626
2020
Cash
£m
Non-cash
£m
Total
£m
Separation Preparation programme
625 216 841
Consumer Healthcare Joint Venture integration programme
298 28 326
2018 Major restructuring programme (including Tesaro)
105 210
315
Combined restructuring and integration programme
39
11
50
1,067 465 1,532
GSK Annual Report 2021
187
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information10. Major restructuring costs
continued
The analysis of Major restructuring charges by income statement line was as follows:
2021
£m
2020
£m
2019
£m
Cost of sales
154
667
658
Selling, general and administration
426
659 332
Research and development
46
206 114
Other operating expense
–
– 1
626
1,532 1,105
11. Finance income
2021
£m
2020
£m
2019
£m
Finance income arising from:
Financial assets measured at amortised cost
26
29
69
Financial assets measured at fair value through profit or loss
–
10 10
Net gains arising from the forward element of forward contracts in net investment hedge relationships
–
5 19
Other finance income
2
– –
28
44 98
12. Finance expense
2021
£m
2020
£m
2019
£m
Finance expense arising on:
Financial liabilities at amortised cost
(744)
(813) (832)
Derivatives at fair value through profit or loss
–
(7) (6)
Net losses arising from:
Financial instruments mandatorily measured at fair value through profit or loss
(599)
353 (425)
Retranslation of loans
599
(357) 424
Reclassification of hedges from other comprehensive income
(2)
(2) (2)
Unwinding of discounts on provisions
(2)
(3) (8)
Finance expense arising on lease liabilities
(31)
(40) (39)
Other finance expense
(5)
(23) (24)
(784)
(892) (912)
Finance expense arising on derivatives at fair value through profit or loss relates to swap interest expense.
188
GSK Annual Report 2021
Notes to the financial statements
continued
13. Associates and joint ventures
The Group’s share of after-tax profits and losses of associates and joint ventures is set out below:
2021
£m
2020
£m
2019
£m
Share of after-tax profits of associates
36
33 85
Share of after-tax losses of joint ventures
(3)
– (11)
33
33
74
Following the disposal of Innoviva, Inc in May 2021 (see details in Note 21), at 31 December 2021, the Group held no significant
individual associates. At 31 December 2020, the Group held one significant associate, Innoviva, Inc.
Summarised income statement information in respect of Innoviva until May 2021 is set out below. The Group’s 2021 share of
after-tax profits of associates and other comprehensive income includes a profit of £33 million and other comprehensive income of
£nil in respect of Innoviva.
The results of Innoviva included in the summarised income statement information below represent the estimated earnings of
Innoviva in the relevant periods, based on publicly available information at the balance sheet date. 2021 figures include share of
Innoviva’s turnover, profit and total comprehensive income until the date of the disposal.
2021
£m
2020
£m
2019
£m
Turnover
108
253 193
Profit after taxation
106
174
116
Total comprehensive income
106
174
116
Aggregated financial information in respect of GSK’s share of other associated undertakings and joint ventures is set out below:
2021
£m
2020
£m
2019
£m
Share of turnover
–
– 32
Share of after-tax losses
–
(8)
(5)
Share of other comprehensive income
28
53 1
Share of total comprehensive income/(expense)
28
45
(5)
The Group’s sales to associates and joint ventures were £nil in 2021 (2020 – £nil; 2019 – £11 million).
Please refer to the Balance sheet information on associates and joint ventures in Note 21.
GSK Annual Report 2021
189
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information14. Taxation
The Group’s tax charge is the sum of the total current and deferred tax expense.
Taxation charge based on profits for the year
2021
£m
2020
£m
2019
£m
UK current year charge
132
30
149
Rest of World current year charge
1,044
1,177
1,407
Charge/(credit) in respect of prior periods
172
66
(420)
Current taxation
1,348
1,273 1,136
Deferred taxation
(1,002)
(693) (183)
346
580
953
In 2021, GSK made payments of £114 million in UK corporation tax to HMRC. These amounts are for UK corporation tax only, and
do not include the various other business taxes borne in the UK by GSK each year.
The deferred tax credits in each period reflect the origination of current year expenses where offset against taxable profits in future
periods is probable. This relates primarily to the unwind of deferred tax liabilities on intangible assets, the recognition of current
year tax losses and the reversal of other temporary differences. The deferred tax credit in 2021 also reflected the impact of the
revaluation of deferred tax assets and liabilities following enactment of the increase in the headline rate of UK corporation tax from
19% to 25%.
Significant prior year credits in 2019 reflected the impact of the settlement of a number of open issues with tax authorities.
The following table reconciles the tax charge calculated at the UK statutory rate on the Group profit before tax with the actual tax
charge for the year.
Reconciliation of taxation on Group profits
2021
£m
2021
%
2020
£m
2020
%
2019
£m
2019
%
Profit before tax
5,442
6,968 6,221
UK statutory rate of taxation
1,034 19.0
1,324 19.0 1,182 19.0
Differences in overseas taxation rates
419
7.7
552
7.9
667
10.7
Benefit of intellectual property incentives
(400) (7.3)
(586) (8.4) (691) (11.1)
R&D credits
(102) (1.9)
(105) (1.5) (119) (1.9)
Fair value remeasurement of non-taxable put options
15
0.3
(3) (0.0) (45) (0.7)
Tax losses where no benefit is recognised
5
0.1
18 0.3 15 0.2
Permanent differences on disposals, acquisitions and transfers
(163) (3.0)
(338) (4.9)
68
1.1Other permanent differences
74
1.4
98
1.4 119 1.9
Reassessments of prior year estimates
(172) (3.2)
(228) (3.3) (364) (5.9)
Changes in tax rates
(364) (6.7)
(152) (2.2) 121 2.0
Tax charge/tax rate
346
6.4
580
8.3 953 15.3
As a global healthcare company, we have a substantial business and employment presence in many countries around the world.
The impact of differences in overseas taxation rates arose from profits being earned in countries with tax rates higher than the UK
statutory rate, the most significant of which in 2021 were the US, Belgium, Germany, Italy and Japan. The adverse impact was
partly offset by the benefit of intellectual property incentives such as the UK Patent Box and Belgian Patent Income Deduction
regimes, which provide a reduced rate of corporation tax on profits earned from qualifying patents. We claim these incentives in the
manner intended by the relevant statutory or regulatory framework.
In 2021, ‘Changes in tax rates’ included credits in relation to the enactment of the increase in the headline rate of UK corporation
tax from 19% to 25% (effective 2023). In 2020, ‘Changes in tax rates’ included credits in relation to the UK, where a previously
proposed reduction in the corporation tax rate from 19% to 17% was cancelled, and India, where the tax treatment of dividends
changed with effect from 1 April 2020. The UK credit in 2020 partly reversed the expense in 2019 where a future benefit was
provided at the formerly enacted corporation tax rate of 17%.
Permanent differences on disposals, acquisitions and transfers in 2021 reflects tax credits arising on the transfer of intellectual
property within the Group and in 2020 reflected the tax impact of the disposal of Horlicks and other Consumer Healthcare brands
to, and subsequent disposal of shares received in, Hindustan Unilever.
The Group’s 2021 tax rate has also been influenced by the closure of open issues with tax authorities in various jurisdictions. The
re-assessment of prior year estimates includes both current and deferred tax.
Future tax charges, and therefore our effective tax rate, may be affected by factors such as acquisitions, disposals, restructurings,
the location of research and development activity, tax regime reforms and resolution of open matters as we continue to bring our tax
affairs up to date around the world.
Continued focus on tax reform is expected in 2022 and future years driven by the OECD’s project to address the tax challenges
arising from the digitalisation of the economy. This may result in significant changes to established tax principles and an increase in
tax authority disputes. In turn, this could adversely affect GSK’s effective tax rate or could result in higher cash tax liabilities.
190
GSK Annual Report 2021
Notes to the financial statements
continued
14. Taxation
continued
Tax on items charged to equity and statement of comprehensive income
2021
£m
2020
£m
2019
£m
Current taxation
Share-based payments
–
(14) 1
Defined benefit plans
–
(18) 16
Fair value movements on cash flow hedges
5
12 –
Fair value movements on equity investments
36
89
–
41
69
17
Deferred taxation
Share-based payments
(11)
18 18
Defined benefit plans
223
(51)
173
Fair value movements on cash flow hedges
3
6 16
Fair value movements on equity investments
(167)
131 (95)
48
10 4
112
Total credit to equity and statement of comprehensive income
89
173
129
All of the above items have been charged to the statement of comprehensive income except for tax on share-based payments.
Issues relating to taxation
The integrated nature of the Group’s worldwide operations involves significant investment in research and strategic manufacture at
a limited number of locations, with consequential cross-border supply routes into numerous end-markets. In line with current OECD
guidelines, we base our transfer pricing policy on the arm’s length principle and support our transfer prices with economic analysis
and reports. However, different tax authorities may seek to attribute further profit to activities being undertaken in their jurisdiction
potentially resulting in double taxation. The Group also has open items in several jurisdictions concerning such matters as the
deductibility of particular expenses and the tax treatment of certain business transactions. GSK applies a risk based approach to
determine the transactions most likely to be subject to challenge and the probability that the Group would be able to obtain
compensatory adjustments under international tax treaties.
The calculation of the Group’s total tax charge therefore necessarily involves a degree of estimation and judgement in respect of
certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or,
as appropriate, through a formal legal process. At 31 December 2021 the Group had recognised provisions of £858 million in
respect of such uncertain tax positions (2020 – £856 million) presented as current tax payables or as reductions in current tax
recoverable assets. The net increase in recognised provisions during 2021 was driven by the reassessment of estimates and the
utilisation of provisions for uncertain tax positions following the settlement of a number of open issues with tax authorities in various
jurisdictions. Whilst the ultimate liability for such matters may vary from the amounts provided and is dependent upon the outcome
of agreements with the relevant tax authorities, or litigation where appropriate, the Group continues to consider that it has made
appropriate provision for periods which are open and not yet agreed by the tax authorities.
A provision for deferred tax liabilities of £204 million as at 31 December 2021 (2020 – £150 million) has been made in respect of
taxation that would be payable on the remittance of profits by certain overseas subsidiaries. Whilst the aggregate amount of
unremitted profits at the balance sheet date was approximately £15 billion (2020 – £17 billion), the majority of these unremitted
profits would not be subject to tax (including withholding tax) on repatriation, as UK legislation relating to company distributions
provides for exemption from tax for most overseas profits, subject to certain exceptions. Deferred tax is not provided on temporary
differences of £831 million (2020 – £974 million) arising on unremitted profits as management has the ability to control any future
reversal and does not consider such a reversal to be probable.
GSK Annual Report 2021
191
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information14. Taxation
continued
Movement in deferred tax assets and liabilities
Accelerated
capital
allowances
£m
Intangible
assets
£m
Contingent
consideration
£m
Intra-Group
profit
£m
Pensions &
other post
employment
benefits
£m
Tax
losses
£m
Share
option
and award
schemes
£m
Other
net
temporary
differences
£m
Total
£m
At 1 January 2020
(242) (4,192) 81 956 286
757
1,120864
942Exchange adjustments
(9) 41
–
(29)
4
(2) (3) (57) (55)
Credit/(charge) to income statement
(45) 194 (44) 120 (5) 454 693
86
(67)Credit/(charge) to statement of
comprehensive income
– – – –
50
–(13) (141) (104)
Acquisitions / Disposals
–
(25)
– – – – – –
(25)
R&D credits utilisation
– – – – – – –
(108) (108)
At 31 December 2020
(296) (3,982) 843 1,024
874
1,06060
1,104687
Exchange adjustments
17
(41)
– 6
(17) (1)
– –
(36)Credit/(charge) to income statement
65 312
7
(31)
6
391 20 232 1,002
Credit/(charge) to statement of
comprehensive income
– – – –
(223)
–
11 164 (48)
Acquisitions / Disposals
3 – – – – – –
(4) (1)
R&D credits utilisation
– – – – – – –
58 58
At 31 December 2021
(211) (3,711) 850 91 1,554 1,662
999 640
1,450Deferred tax liabilities provided in relation to intangible assets predominately relate to temporary differences arising on assets and
liabilities acquired as part of historic business combinations.
The Group continues to recognise deferred tax assets on future obligations in respect of contingent consideration amounts payable to
minority shareholders. These payments are tax deductible at the point in time at which payment is made.
A deferred tax asset is recognised on intra-Group profits arising on inter-company inventory which are eliminated within the
consolidated accounts. As intra-Group profits are not eliminated from the individual entities’ tax returns a temporary difference arises
that will reverse at the point in time inventory is sold externally.
The deferred tax asset recognised on tax losses of £1,450 million (2020 – £1,060 million) relates to trading losses. Such deferred tax
assets are only recognised where it is probable that future taxable profit will be available to utilise losses, as supported by product
level forecasts. Other net temporary differences included accrued expenses for which a tax deduction is only available on a paid basis.
Deferred tax assets and liabilities are recognised on the balance sheet as follows:
2021
£m
2020
£m
Deferred tax assets
5,218
4,287
Deferred tax liabilities
(3,556)
(3,600)
1,662
687
2021
2020
Unrecognised tax losses
Tax losses
£m
Unrecognised
deferred tax
asset
£m
Tax losses
£m
Unrecognised
deferred tax
asset
£m
Trading losses expiring:
Within 10 years 181
1,068
962 198
More than 10 years 51
390
62
414 Available indefinitely
200 43
265 47
At 31 December
1,658 303
1,641 279
Capital losses expiring:
Available indefinitely 419
2,356
2,287 557
At 31 December 419
2,356
2,287 557
Deferred tax assets are only recognised where it is probable that future taxable profit will be available to utilise losses.
192
GSK Annual Report 2021
Notes to the financial statements
continued
15. Earnings per share
2021
pence
2020
pence
2019
pence
Basic earnings per share 93.9
8 7. 6
115.5Diluted earnings per share 92.6
86.6
114.1Basic earnings per share has been calculated by dividing the profit attributable to shareholders by the weighted average number of
shares in issue during the period after deducting shares held by the ESOP Trusts and Treasury shares. The trustees have waived
their rights to dividends on the shares held by the ESOP Trusts.
Diluted earnings per share has been calculated after adjusting the weighted average number of shares used in the basic calculation
to assume the conversion of all potentially dilutive shares. A potentially dilutive share forms part of the employee share schemes
where its exercise price is below the average market price of GSK shares during the period and any performance conditions
attaching to the scheme have been met at the balance sheet date.
The numbers of shares used in calculating basic and diluted earnings per share are reconciled below.
Weighted average number of shares in issue
2021
millions
2020
millions
2019
millions
Basic
5,003
4,976
4,947Dilution for share options and awards
62
62
69
Diluted 5,016
5,065
5,03816. Dividends
2021
2020 2019
Paid/payable
Dividend
per share
(pence)
Total
dividend
£m
Paid
Dividend
per share
(pence)
Total
dividend
£m
Paid
Dividend
per share
(pence)
Total
dividend
£m
First interim
8 July 2021
9 July 202019
951
19
11 July 2019946
19
940
Second interim
7 October 2021
8 October 202019
951
19
10 October 2019946
19 941
Third interim
13 January 2022
19
952
14 January 2021
19
9 January 2020946
19 941
Fourth interim
7 April 2022
23 1,152
8 April 2021
23 1,151*
9 April 202023 1,144
Total
80
4,006
80
3,98980
3,966* The estimate for the fourth interim dividend for 2020 disclosed in the 2020 annual report and accounts was £1,146 million, £5 million less than the dividend that was ultimately paid.
Under IFRS, interim dividends are only recognised in the financial statements when paid and not when declared. GSK normally
pays a dividend two quarters after the quarter to which it relates and one quarter after it is declared. The 2021 financial statements
recognise those dividends paid in 2021, namely the third and fourth interim dividends for 2020, and the first and second interim
dividends for 2021.
The amounts recognised in each year were as follows:
2021
£m
2020
£m
2019
£m
Dividends to shareholders
3,999
3,977
3,953
GSK Annual Report 2021
193
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information17. Property, plant and equipment
Land and
buildings
£m
Plant,
equipment
and vehicles
£m
Assets in
construction
£m
Total
£m
Cost at 1 January 2020
7,632 12,061 1,906
21,599
Exchange adjustments
10 6
121
10
237
Additions through business combinations
– 5 –
5
Other additions
29
147
1,0521,228
Capitalised borrowing costs
– –
15
15
Disposals and write-offs
(336) (875) (29)
(1,240)
Reclassifications 189
840
(1,058)(29)
Transfer to assets held for sale
(132) (194) (6)
(332)
Cost at 31 December 2020
7,488
12,105 1,890
21,483
Exchange adjustments
(214) (315) (47)
(576)
Other additions
16
98
1,0911,205
Capitalised borrowing costs
– –
16
16
Disposals and write-offs
(217) (940) (17)
(1,174)
Reclassifications 202
906
(1,182)(74)
Transfer to assets held for sale
(63) (38) (1)
(102)
Cost at 31 December 2021
7,212 11,816 1,750
20,778
Depreciation at 1 January 2020
(3,216) (7,191)
–
(10,407)
Exchange adjustments
(49) (77)
–
(126)
Charge for the year
(271) (718)
–
(989)
Disposals and write-offs
154 716
–
870
Transfer to assets held for sale
72
130
–
202
Depreciation at 31 December 2020
(3,310) (7,140)
–
(10,450)
Exchange adjustments
100
191
–
291
Charge for the year
(267) (715)
–
(982)
Disposals and write-offs
169 893
–
1,062
Transfer to assets held for sale
27 27
–
54
Depreciation at 31 December 2021
(3,281) (6,744)
–
(10,025)
Impairment at 1 January 2020
(379)
(445) (20)
(844)
Exchange adjustments
(6)
– 1
(5)
Disposals and write-offs
190 124 16
330
Impairment losses
(147) (303) (27)
(477)
Reversal of impairments
13 18
3
34
Transfer to assets held for sale
49
55
1
105
Impairment at 31 December 2020
(280) (551) (26)
(857)
Exchange adjustments
7
10
320
Disposals and write-offs
30
76
13
119
Impairment losses
(21) (54) (37)
(112)
Reversal of impairments
– 5 4
9
Impairment at 31 December 2021
(264) (514) (43)
(821)
Total depreciation and impairment at 31 December 2020
(3,590) (7,691) (26)
(11,307)
Total depreciation and impairment at 31 December 2021
(3,545) (7,258) (43)
(10,846)
Net book value at 1 January 2020
4,037 4,425 1,886
10,348
Net book value at 31 December 2020
3,898 4,414 1,864
10,176
Net book value at 31 December 2021
3,667 4,558
1,707
9,932
194
GSK Annual Report 2021
Notes to the financial statements
continued
17. Property, plant and equipment
continued
The weighted average interest rate for capitalised borrowing costs in the year was 3% (2020 – 3%). Disposals and write-offs in
the year included a number of assets with nil net book value that are no longer in use in the business.
The impairment losses principally arose from decisions to rationalise facilities and were calculated based on fair value less costs
of disposal. The fair value less costs of disposal valuation methodology uses significant inputs which are not based on observable
market data, and therefore this valuation technique is classified as level 3 of the fair value hierarchy. These calculations determine
the net present value of the projected risk-adjusted, post-tax cash flows of the relevant asset or cash generating unit, applying a
discount rate of the Group post-tax weighted average cost of capital (WACC) of 6.5%, adjusted where appropriate for specific
segment, country and currency risk.
Assets that continue to be used by the Group are generally assessed as part of their associated cash generating unit on a value
in use basis. For value in use calculations, the post-tax cash flows do not include the impact of future uncommitted restructuring
plans or improvements. Where an impairment is indicated and a pre-tax cash flow calculation is expected to give a materially
different result, the test would be reperformed using pre-tax cash flows and a pre-tax discount rate. The Group WACC is
equivalent to a pre-tax discount rate of approximately 8%.
The net impairment losses have been charged to cost of sales: £46 million (2020 – £398 million), R&D: £3 million
(2020 – £3 million) and SG&A: £54 million (2020 – £42 million), and included £20 million (2020 – £343 million) arising from
the Major restructuring programmes.
Reversals of impairment arose from subsequent reviews of the impaired assets where the conditions which gave rise to the original
impairments were deemed no longer to apply. All of the reversals have been credited to cost of sales.
During 2021, £74 million (2020 – £29 million) of computer software was reclassified from assets in construction to intangible
assets on becoming ready for use.
We have assessed the qualitative and quantitative impact of climate related risks on asset recoverable amounts and concluded that
their impact does not cause material impairments.
18. Right of use assets
Land and
buildings
£m
Plant and
equipment
£m
Vehicles
£m
Total
£m
Net book value at 1 January 2020
821 22 123
966
Exchange adjustments
(11)
1 1
(9)
Additions 119
2
66
187
Depreciation (152) (5) (68)
(225)
Disposals (73) (2) (9)
(84)
Impairments (3)
– –
(3)
Reclassifications (2)
– –
(2)
Net book value at 31 December 2020
699
18 113
830
Exchange adjustments
(9) (1) (5)
(15)
Additions 152
1
62215
Depreciation (149) (5) (59)
(213)
Disposals (53) (4) (13)
(70)
Impairments (7)
– –
(7)
Net book value at 31 December 2021
633
9
98
740
The total cash outflow for leases amounted to £215 million. The Group has entered into lease contracts that have not yet
commenced. The nominal value of estimated future lease payments under these lease contracts approximates £60 million as of
31 December 2021. These contracts mainly concern the relocation of the US Corporate headquarters, with a lease period
between 2022 and 2029.
An analysis of lease liabilities is set out in Note 29, ‘Net debt’.
GSK Annual Report 2021
195
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information2021
£m
2020
£m
Cost at 1 January
10,597
10,562
Exchange adjustments
(55)
(54)
Additions through business combinations (Note 40)
–
124
Other movements
10
–
Transfer to assets held for sale
–
(35)
Cost at 31 December
10,552
10,597
Net book value at 1 January
10,597
10,562
Net book value at 31 December
10,552
10,597
The £10 million increase in goodwill corresponds to an immaterial payment of pension liabilities to the Consumer Healthcare
sub-group as required in the sale and purchase agreement and the increase in the non-controlling interest in the sub-group as
result of the transaction.
Goodwill is allocated to the Group’s segments as follows:
2021
£m
2020
£m
Pharmaceuticals
4,228
4,245Vaccines
1,264
1,295Consumer Healthcare
5,060
5,057
Net book value at 31 December
10,552
10,597
The recoverable amounts of the cash generating units are assessed using a fair value less costs of disposal model. Fair value less
costs of disposal is calculated using a discounted cash flow approach, with a post-tax discount rate applied to the projected
risk-adjusted post-tax cash flows and terminal value.
The discount rate used is based on the Group WACC of 6.5% (2020 – 7%), as most cash generating units have integrated
operations across large parts of the Group. The discount rate is adjusted where appropriate for specific segment, country and
currency risks. The valuation methodology uses significant inputs which are not based on observable market data, therefore this
valuation technique is classified as level 3 in the fair value hierarchy.
Details relating to the discounted cash flow models used in the impairment tests of the Pharmaceuticals, Vaccines and Consumer
Healthcare cash generating units are as follows:
Valuation basis Fair value less costs of disposal
Key assumptions Sales growth rates
Profit margins
Terminal growth rate
Discount rate
Taxation rate
Determination of assumptions Growth rates are internal forecasts based on both internal and external market information.
Margins reflect past experience, adjusted for expected changes.
Terminal growth rates based on management’s estimate of future long-term average growth rates.
Discount rates based on Group WACC, adjusted where appropriate.
Taxation rates based on appropriate rates for each jurisdiction.
Period of specific projected cash flows Five years
Terminal growth rate and discount rate
Pharmaceuticals 0% p.a. (2020 – 1% p.a) 7% (2020 – 7.5% p.a)
Vaccines 0% p.a. (2020 – 1% p.a) 7% (2020 – 7.5% p.a)
Consumer Healthcare 2.5% p.a. (2020 – 2% p.a) 6% (2020 – 6% p.a)
The terminal growth rates do not exceed the long-term projected growth rates for the relevant markets, reflect the impact of future
generic competition and take account of new product launches. Goodwill is monitored for impairment at the segmental level. In
each case the valuations indicated sufficient headroom such that a reasonably possible change to key assumptions is unlikely to
result in an impairment of the related goodwill. The Consumer Healthcare cash generating unit also comprises a collection of
smaller cash generating units including brands with indefinite lives with a carrying value of £18.4 billion (2020 – £18.4 billion).
Details of indefinite life brands are given in Note 20, ‘Other intangible assets’.
We have assessed the qualitative and quantitative impact of climate related risks on asset recoverable amounts and concluded that
their impact does not cause material impairments.
19. Goodwill
196
GSK Annual Report 2021
Notes to the financial statements
continued
20. Other intangible assets
Computer
software
£m
Licences,
patents,
amortised
brands etc.
£m
Indefinite life
brands
£m
Total
£m
Cost at 1 January 2020
2,397 19,716 19,894
42,007
Exchange adjustments
(1) (7) (74)
(82)
Capitalised development costs
–
313
–
313
Additions through business combinations
2 – –
2
Other additions
240
494
–
734
Disposals and asset write-offs
(260) (20)
–
(280)
Transfer to assets held for sale
(4) (246) (635)
(885)
Reclassifications 29
572 (572)
29
Cost at 31 December 2020
2,403 20,822 18,613
41,838
Exchange adjustments
(15) (207) 65
(157)
Capitalised development costs
–
346
–346
Other additions
184 1,410
–
1,594
Disposals and asset write-offs
(221) (935)
–
(1,156)
Transfer to assets held for sale
(1) (6) (43)
(50)
Reclassifications
74
(9)9
74
Cost at 31 December 2021
2,424 21,439 18,626
42,489
Amortisation at 1 January 2020
(1,302) (7,114)
–
(8,416)
Exchange adjustments
(3) 28
–
25
Charge for the year
(241) (896)
–
(1,137)
Disposals and asset write-offs
221
8 –
229
Transfer to assets held for sale
3
42
–
45
Amortisation at 31 December 2020
(1,322) (7,932)
–
(9,254)
Exchange adjustments
13 52
–
65
Charge for the year
(225) (956)
–
(1,181)
Disposals and asset write-offs
165
572
–
737
Transfer to assets held for sale
– 2 –
2
Amortisation at 31 December 2021
(1,369) (8,262)
–
(9,631)
Impairment at 1 January 2020
(37) (2,325) (274)
(2,636)
Exchange adjustments
–
39
140
Impairment losses
(29) (255) (11)
(295)
Reversal of impairments
–
38
–38
Disposals and asset write-offs
38
– –
38
Transfer to assets held for sale
–
55
–
55
Reclassification
–
(39)39
–
Impairment at 31 December 2020
(28) (2,487) (245)
(2,760)
Exchange adjustments
– 5 –
5
Impairment losses
(93) (362)
–
(455)
Reversal of impairments
– 2
37
39
Disposals and asset write-offs
30
362
–
392
Impairment at 31 December 2021
(91) (2,480) (208)
(2,779)
Total amortisation and impairment at 31 December 2020
(1,350) (10,419) (245)
(12,014)
Total amortisation and impairment at 31 December 2021
(1,460) (10,742) (208)
(12,410)
Net book value at 1 January 2020
1,058 10,277 19,620
30,955
Net book value at 31 December 2020
1,053 10,403 18,368
29,824
Net book value at 31 December 2021
964
10,697 18,418
30,079
The weighted average interest rate for capitalised borrowing costs in the year was 3% (2020 – 3%).
The net book value of computer software included £526 million (2020 – £612 million) of internally generated costs.
The carrying value at 31 December 2021 of intangible assets, for which impairments have been charged in the year following those
impairments, was £694 million (2020 – £67 million). The carrying value at 31 December 2021 of intangible assets, for which
impairment reversals have been charged in the year following those impairment reversals, was £104 million (2020 – £205 million).
The patent expiry dates of the Group’s most significant assets, where relevant, are set out on pages 272 and 273. Please refer to
Note 2 to the Group’s accounting policy and estimate of the useful life for intangible assets over the exclusivity and non-exclusivity
periods.
GSK Annual Report 2021
197
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationAmortisation and impairment losses, net of reversals, have been charged in the income statement as follows:
Amortisation
Net impairment losses
2021
£m
2020
£m
2021
£m
2020
£m
Cost of sales
807
779
(32)
21
Selling, general and administration
163
167
65
17Research and development
212
191
382
219 1,182
1,137
415
257
Licences, patents, amortised brands etc. includes a large number of acquired licences, patents, know-how agreements and
marketing rights, which are either marketed or in use, or still in development. Note 40, ‘Acquisitions and disposals’ gives details
of additions through business combinations in the year. The book values of the largest individual items are as follows:
2021
£m
2020
£m
Tesaro Assets
2,677
2,669
Meningitis portfolio
1,889
2,114
Dolutegravir
1,093
1,177
Benlysta
644
745
Alector Assets
509
–
iTeos Assets
444
–
Lamisil
259
275
Merck Assets
–
264
Vir Assets
212
49
BMS Assets
219
239
Fluarix/FluLaval
180
219
Okairos
191
205
CureVac Assets
164
108
Stiefel trade name
151
180
Others
2,065
2,159
10,697
10,403
On 2 July 2021 GSK signed an agreement for a global co-development and co-commercialisation collaboration in
immuno-neurology with Alector for two clinical stage first-in-class monoclonal antibodies for neurodegenerative diseases.
From the total upfront payment recognised as an intangible asset of £509 million, a total of £363 million was paid in 2021 and a
total of £146 million will be paid in 2022.
On 14 June 2021 GSK signed a co-development and co-commercialisation collaboration with iTeos Therapeutics for EOS-448,
an anti-TIGIT monoclonal antibody, recognising an intangible asset of £444 million.
Tesaro assets comprise
Zejula
and
Jemperli
, as well as combination therapies. The meningitis portfolio includes
Menveo
,
Bexsero
,
Men ABCWY and
Menjugate
.
has been moved into licences, patents, amortised brands etc. following the decision to start Lamisil
amortisation during 2020. GSK divested the Breathe Right brand in 2020.
Indefinite life brands comprise a portfolio of Consumer Healthcare products primarily acquired with the acquisitions of Sterling
Winthrop, Inc. in 1994, Block Drug Company, Inc. in 2001, the Novartis consumer healthcare business in 2015 and the Pfizer
consumer healthcare business in 2019. The book values of the major brands are as follows:
2021
£m
2020
£m
Advil
3,362
3,349
Voltaren
2,725
2,725
Centrum
1,828
1,824
Caltrate
1,731
1,678
Otrivin
1,385
1,385
Preparation H
1,152
1,139
Robitussin
1,126
1,111
Nexium
670
668
Fenistil
598
598
Chapstick
521
512
Emergen-C
439
433
Theraflu
436
433
Panadol
395
396
Sensodyne
270
270
Others
1,780
1,847
18,418
18,368
20. Other intangible assets
continued
198
GSK Annual Report 2021
Notes to the financial statements
continued
Each of these brands is considered to have an indefinite life, given the strength and durability of the brand and the level of
marketing support. The brands are in relatively similar stable and profitable market sectors, with similar risk profiles, and their
size, diversification and market shares mean that the risk of market-related factors causing a reduction in the lives of the brands
is considered to be relatively low. The Group is not aware of any material legal, regulatory, contractual, competitive, economic or
other factors which could limit their useful lives. Accordingly, they are not amortised.
Each brand is tested annually for impairment and other amortised intangible assets are tested when indicators of impairment arise.
This testing applies a fair value less costs of disposal methodology, generally using 10-year post-tax cash flow forecasts with a
terminal value calculation and a discount rate equal to the Group post-tax WACC of 6.5% (2020 – 7%), adjusted where
appropriate for specific segment, country and currency risks. This valuation methodology uses significant inputs which are not
based on observable market data, and therefore this valuation technique is classified as level 3 of the fair value hierarchy. The main
assumptions include future sales price and volume growth, product contribution, the future expenditure required to maintain the
product’s marketability and registration in the relevant jurisdictions and exchange rates. These assumptions are based on past
experience and are reviewed as part of management’s budgeting and strategic planning cycle for changes in market conditions
and sales erosion through competition. The terminal growth rates applied of between -3% and 3% are management’s estimates
of future long-term average growth rates of the relevant markets.
During the year ended 31 December 2021, Robitussin and Preparation H were affected by lower cold and flu incidence resulting
from the COVID-19 social distancing measures and by supply chain issues respectively which has resulted in a reduced level of
headroom. The Group has performed a sensitivity analysis based on changes in key assumptions considered to be reasonably
possible by management leaving all other assumptions unchanged. Sensitivity analysis for the year ended 31 December 2021 has
identified these two brands as being sensitive to reasonably possible changes in key assumptions. In order for the recoverable
amount to be equal to the carrying values of Robitussin and Preparation H, either the discount rate would have to be increased by
0.5% and 0.1%, or the operating margin decreased by 4.1% and 1.5%, or the long term growth rate decreased by 0.7% and 0.2%
respectively. The group consider that changes in key assumptions of this magnitude are reasonably possible in the current
environment.
Other than as described above, the group do not consider that any reasonably possible changes in the key assumptions would
cause the fair value less cost of sale of the brands disclosed in page 197 above to fall below their carrying values.
We have assessed the qualitative and quantitative impact of climate related risks on asset recoverable amounts and concluded that
their impact does not cause material impairments.
21. Investments in associates and joint ventures
Joint
ventures
£m
Associates
£m
2021
Total
£m
Joint
ventures
£m
Associates
£m
2020
Total
£m
At 1 January
15 299 314
349
15364
Exchange adjustments
–
(15)
(15)
–
(9) (9)
Additions
– 1 4 4
1
–Disposals
–
(278)(278)
– – –
Distributions received
–
(9)
(9)
–
(31)
(31)
Net fair value movements through Other comprehensive income
–
28
28
–
53 53
Impairment of interest in associates
–
(36)
(36)
– – –
Profit/(loss) after tax recognised in the consolidated income statement
(3) 33
36
33
–
33At 31 December
12
76
1588
349 364
The Group held one significant associate at 31 December 2020, Innoviva, Inc. At 31 December 2020, the Group owned 32 million
shares or 31.6% of Innoviva, which is a biopharmaceutical company listed on NASDAQ. Innoviva partnered with GSK in the
development of the long-acting beta agonist, vilanterol, and currently receives royalty income from sales of products that contain
this component, namely
Relvar/Breo Ellipta
and
Anoro Ellipta. It also has a 15% economic interest in royalties paid by GSK on
sales of
Trelegy Ellipta
. The remaining 85% of the economic interest in these royalties is held by Theravance Biopharma Inc., in
which the Group holds an investment (see Note 22).
On 20 May 2021, the Group agreed with Innoviva Inc to sell all of its shares in Innoviva back to Innoviva for £277 million. Following
settlement of the transaction, GSK no longer held any Innoviva stock. A loss of £46 million (including £10 million of recycling of
exchange differences in Innoviva) is presented in “Loss on disposal of interest in associates” in the Consolidated income statement.
The transaction did not include any changes in Innoviva’s commercial interest in royalties paid by GSK. “Loss on disposal of interest
in associates” also includes a £10 million gain from a disposal of another immaterial associate. Please refer to the Income statement
information on associates and joint ventures in Note 13.
20. Other intangible assets
continued
GSK Annual Report 2021
199
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationDisposals include the book values of Innoviva at £277 million, and £1 million of another investment for which GSK received
non-cash consideration.
Summarised balance sheet information at 31 December 2020, in respect of Innoviva is set out below:
At 31 December
2020
£m
Non-current assets 482
Current assets
251
Current liabilities
(4)
Non-current liabilities
(283)
Net assets
446
The carrying value of the Group’s investment in Innoviva in 2020 is analysed as follows:
2020
£m
Interest in net assets of associate
141
Goodwill
85
Fair value and other adjustments
65
Carrying value at 31 December
291
The investment in Innoviva had a market value of £291 million at 31 December 2020.
22. Other investments
Investments
designated as
measured at
FVTOCI
£m
Investments
measured at
FVTPL
£m
2021
£m
Investments
designated as
measured at
FVTOCI
£m
Investments
measured at
FVTPL
£m
2020
£m
At 1 January 2,939 121
3,060
1,78156
1,837Additions 125 52 3,614
177
409
3,205Net fair value movements through Other comprehensive income (897) –
(897)
1,318 – 1,318
Net fair value movements through profit or loss – (438) (438)
37
–37
Disposals and settlements (240) (11) (2,702) (3,271)
(251)
(569)At 31 December 1,927 199
2,126
2,939 121 3,060
Other investments comprise non-current equity investments which are recorded at fair value at each balance sheet date. For
investments traded in an active market, the fair value is determined by reference to the relevant stock exchange quoted bid price.
For other investments, the fair value is estimated by management with reference to relevant available information, including the
current market value of similar instruments, recent financing rounds and discounted cash flows of the underlying net assets. Net
fair value movements include the impact of exchange (gains of £20 million through Other comprehensive income and £2 million
through profit or loss) (2020 – losses of £91 million and £nil respectively). Other investments include listed investments of
£1,736 million (2020 – £2,281 million).
GSK has elected to designate the majority of its equity investments as measured at fair value through Other comprehensive income
(FVTOCI). The most significant of these investments held at 31 December 2021 were in CureVac AG in which the Group held 8%
and Vir Biotechnology in which the Group held 6.5%. These investments had a fair value at 31 December 2021 of £380 million
(2020 - £887 million) and £266 million (2020 – £130 million) respectively. The other investments include equity stakes in
companies with which GSK has research collaborations and in companies which provide access to biotechnology developments
of potential interest. In June 2020, GSK issued US$ US notes which are exchangeable at the option of the note holders at any time
until maturity of the notes in June 2023 for shares held by GSK in Theravance Biopharma, Inc. If the notes are exchanged, GSK
expects to deliver the shares but may, at its option under certain circumstances, deliver cash or a combination of Theravance
Biopharma shares and cash. The Theravance Biopharma shares are measured at FVTOCI and had a fair value at 31 December
2021 of £79 million (2020 – £126 million).
On disposal of equity investments measured at FVTOCI, the accumulated fair value movements are reclassified from the fair value
reserve to retained earnings. Investments with a fair value of £240 million (2020 – £569 million) were disposed of during the year.
The cumulative gain on these investments after tax was £132 million (2020 – £163 million).
Certain other investments, such as investments in funds with limited lives and investments acquired with an intention to sell, are
measured at fair value through profit or loss (FVTPL). Additions and disposals of investments measured at FVTPL in 2020 included
the acquisition of shares in Hindustan Unilever Limited on the merger of GSK’s Indian listed Consumer Healthcare entity with
Hindustan Unilever and the subsequent divestment of those shares.
21. Investments in associates and joint ventures
continued
200
GSK Annual Report 2021
Notes to the financial statements
continued
23. Other non-current assets
2021
£m
2020
£m
Amounts receivable under insurance contracts
849
756Pension schemes in surplus
741
183Other receivables
86
102
1,676
1,041
Amounts receivable under insurance contacts are held at cash surrender value with movements through profit or loss.
Within the other receivables of £86 million (2020 – £102 million), £44 million (2020 – £67 million) is classified as financial assets
of which £23 million (2020 – £30 million) is classified as fair value through profit or loss. On the remaining balance of £21 million
(2020 – £37 million), the expected credit loss allowance was immaterial at 31 December 2021 and 2020.
24. Inventories
2021
£m
2020
£m
Raw materials and consumables
1,772
1,170
Work in progress
1,889
2,395
Finished goods
2,122
2,431
5,783
5,996
25. Trade and other receivables
2021
£m
2020
£m
Trade receivables, net of loss allowance
6,246
5,549
Accrued income
12
13
Prepayments
315
359
Interest receivable
3
3
Employee loans and advances
18
11
Other receivables
1,266
1,017
7,860
6,952
Trade receivables included £nil (2020 – £nil) due from associates and joint ventures. Other receivables included £nil (2020 – £nil)
due from associates and joint ventures.
Loss allowance - trade receivables
2021
£m
2020
£m
At 1 January
151
130
Exchange adjustments
(3)
(4)
Charge for the year
52
41
Subsequent recoveries of amounts provided for
(39)
(8)
Utilised
(11)
(8)
At 31 December
150
151
Of the total trade receivables balance, £86 million (2020 – £50 million) was considered credit impaired, against which a
£4 million (2020 – £20 million) expected credit loss allowance has been applied. No amount was purchased or originated
credit impaired.
Within the other receivables of £1,266 million (2020 – £1,017 million), £553 million (2020 – £402 million) was classified as
financial assets of which £nil (2020 – £nil) was classified as fair value through profit and loss. On the remaining balance of
£553 million (2020 – £402 million), an expected credit loss allowance of £5 million (2020 – £6 million) was recognised at
31 December 2021 with no charge reported in profit or loss during the year.
For more discussion on credit risk practices, please refer to Note 43.
GSK Annual Report 2021
201
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information26. Cash and cash equivalents
2021
£m
2020
£m
Cash at bank and in hand
1,427
1,762
Short-term deposits
2,847
4,530
4,274
6,292
Cash and cash equivalents included £0.2 billion (2020 – £0.2 billion) not available for general use due to restrictions applying
in the subsidiaries where it is held. Restrictions include exchange controls and taxes on repatriation.
27. Assets held for sale
2021
£m
2020
£m
Property, plant and equipment
22
25
Other intangibles
–
62
Inventory
–
19
22
106
Non-current assets and disposal groups are transferred to Assets held for sale when it is expected that their carrying amounts
will be recovered principally through disposal and a sale is considered highly probable. They are held at the lower of carrying
amount and fair value less costs to sell.
There is no inventory written down to fair value less costs to sell included in Assets held for sale (2020 - £19 million). The valuation
methodology used significant inputs which were not based on observable market data and therefore this valuation is classified as
level 3 in the fair value hierarchy.
Intangible assets of £48 million were transferred from Other intangibles during the year (2020 - £785 million). There were no
intangible assets held for sale after impairments, exchange movements and assets divested during the year remaining at 31
December 2021 (2020 - £62 million).
202
GSK Annual Report 2021
Notes to the financial statements
continued
28. Trade and other payables
2021
£m
2020
£m
Trade payables
4,535
4,357
Wages and salaries
1,470
1,367
Social security
152
159
ViiV Healthcare put option
1,008
960
Other payables
518
409
Deferred income
307
361
Customer return and rebate accruals
6,322
5,775
Other accruals
3,242
2,452
17,554
15,840
Trade and other payables included £nil (2020 – £65 million) due to associates and joint ventures. The Group provides limited
supplier financing arrangements to certain customers. The amounts involved at 31 December 2021 were not material.
Revenue recognised in the year that was included in deferred income at 1 January 2021 was £29 million (2020 – £33 million).
Customer return and rebate accruals are provided for by the Group at the point of sale in respect of the estimated rebates,
discounts or allowances payable to customers, and included £5,044 million (2020 – £4,686 million) in respect of US
Pharmaceuticals and Vaccines, as more fully described in the Group financial review on page 80. Accruals are made at the time of
sale but the actual amounts paid are based on claims made some time after the initial recognition of the sale. As the amounts are
estimated, they may not fully reflect the final outcome and are subject to change dependent upon, amongst other things, the types
of buying group and product sales mix. The level of accrual is reviewed and adjusted quarterly in light of historical experience of
actual amounts paid and any changes in arrangements. Future events could cause the assumptions on which the accruals are
based to change, which could affect the future results of the Group.
Pfizer’s put option over its shareholding in ViiV Healthcare is currently exercisable. Pfizer may request an IPO of ViiV Healthcare
at any time and if either GSK does not consent to such IPO or an offering is not completed within nine months, Pfizer could
require GSK to acquire its shareholding. The amount of the liability for this put option, which is held on the gross redemption
basis, is derived from an internal valuation of the ViiV Healthcare business, utilising both discounted forecast future cash flow
and multiples-based methodologies.
The table below shows on an indicative basis the income statement and balance sheet sensitivity of the Pfizer put option to
reasonably possible changes in key assumptions.
Increase/(decrease) in financial liability and loss/(gain) in Income statement
2021
£m
2020
£m
10% increase in sales forecasts*
89
117
10% decrease in sales forecasts*
(89)
(116)
1% (100 basis points) increase in discount rate
(30)
(41)
1% (100 basis points) decrease in discount rate
34
45
10 cent appreciation of US Dollar
55
52
10 cent depreciation of US Dollar
(47)
(45)
10 cent appreciation of Euro
26
42
10 cent depreciation of Euro
(22)
(34)
* The sales forecast is for ViiV Healthcare sales only in respect of the ViiV Healthcare put option.
An explanation of the accounting for ViiV Healthcare is set out on page 57.
GSK Annual Report 2021
203
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information29. Net debt
Listing exchange
2021
£m
2020
£m
Current assets:
Liquid investments
61
78
Cash and cash equivalents
4,274
6,292
4,335
6,370
Short-term borrowings:
Commercial paper
(252)
(17)
Bank loans, overdrafts and other
(550)
(1,128)
LIBOR +0.35% US$ US Medium Term Note 2021 New York Stock Exchange
–
(549)
EURIBOR +60% € Euro Medium Term Note 2021 London Stock Exchange
–
(1,351)
0.000% € Euro Medium Term Note 2021 London Stock Exchange
–
(450)
2.850% US$ US Medium Term Note 2022 New York Stock Exchange
(1,483)
–
2.875% US$ US Medium Term Note 2022 New York Stock Exchange
(1,113)
–
Lease liabilities
(203)
(230)
(3,601)
(3,725)
Long-term borrowings:
2.850% US$ US Medium Term Note 2022 New York Stock Exchange
–
(1,463)
2.875% US$ US Medium Term Note 2022 New York Stock Exchange
–
(1,097)
2.800% US$ US Medium Term Note 2023 New York Stock Exchange
(926)
(913)
0.125% € Euro Medium Term Note 2023 London Stock Exchange
(629)
(673)
Exchangeable US$ US Medium Term Note 2023 New York Stock Exchange
(204)
(199)
3.375% US$ US Medium Term Note 2023 New York Stock Exchange
(925)
(912)
0.000% € Euro Medium Term Note 2023 London Stock Exchange
(420)
(450)
0.534% US$ US Medium Term Note 2023 New York Stock Exchange
(926)
(913)
3.000% US$ US Medium Term Note 2024 New York Stock Exchange
(739)
(728)
1.375% € Euro Medium Term Note 2024 London Stock Exchange
(836)
(894)
4.000% € Euro Medium Term Note 2025 London Stock Exchange
(627)
(670)
3.625% US$ US Medium Term Note 2025 New York Stock Exchange
(738)
(728)
1.000% € Euro Medium Term Note 2026 London Stock Exchange
(587)
(628)
1.250% € Euro Medium Term Note 2026 London Stock Exchange
(838)
(896)
3.375% £ Euro Medium Term Note 2027 London Stock Exchange
(595)
(595)
3.875% US$ US Medium Term Note 2028 New York Stock Exchange
(1,294)
(1,278)
1.250% £ Euro Medium Term Note 2028 London Stock Exchange
(743)
(742)
3.375% US$ US Medium Term Note 2029 New York Stock Exchange
(733)
(723)
1.375% € Euro Medium Term Note 2029 London Stock Exchange
(418)
(447)
1.750% € Euro Medium Term Note 2030 London Stock Exchange
(628)
(672)
5.250% £ Euro Medium Term Note 2033 London Stock Exchange
(984)
(983)
5.375% US$ US Medium Term Note 2034 London Stock Exchange
(368)
(363)
1.625% £ Euro Medium Term Note 2035 London Stock Exchange
(744)
(743)
6.375% US$ US Medium Term Note 2038 New York Stock Exchange
(2,022)
(1,996)
6.375% £ Euro Medium Term Note 2039 London Stock Exchange
(695)
(695)
5.250% £ Euro Medium Term Note 2042 London Stock Exchange
(987)
(987)
4.200% US$ US Medium Term Note 2043 New York Stock Exchange
(364)
(359)
4.250% £ Euro Medium Term Note 2045 London Stock Exchange
(789)
(789)
Other long-term borrowings
(1)
(2)
Lease liabilities
(812)
(887)
(20,572)
(23,425)
Net debt
(19,838)
(20,780)
204
GSK Annual Report 2021
Notes to the financial statements
continued
Current assets
Liquid investments are classified as financial assets at amortised cost. At 31 December 2021, they included US Treasury Notes
and other government bonds. The effective interest rate on liquid investments at 31 December 2021 was approximately 0.1%
(2020 – approximately 1.1%). Liquid investment balances at 31 December 2021 earning interest at floating rates amount to
£2 million (2020 – £78 million). Liquid investment balances at 31 December 2021 earning interest at fixed rates amount to
£59 million (2020 – £nil).
Balances reported within cash and cash equivalents have an original maturity of three months or less. The effective interest
rate on cash and cash equivalents at 31 December 2021 was approximately 0.6% (2020 – approximately 0.3%). Cash and cash
equivalents at 31 December 2021 earning interest at floating and fixed rates amounted to £3,906 million and £39 million
respectively (2020 – £6,100 million and £9 million) and non-interest bearing holdings amounted to £329 million (2020 –
£183 million).
GSK’s policy regarding the credit quality of cash and cash equivalents is set out in Note 43, ‘Financial instruments and
related disclosures’.
Short-term borrowings
GSK has a $10 billion (£7.4 billion) US commercial paper programme, of which $nil was in issue at 31 December 2021 (2020 –
$25 million (£17 million)). GSK has a £5 billion Euro commercial paper programme, of which €300 million (£252 million) was in
issue at 31 December 2021 (2020 – £nil). GSK has a £1.9 billion three-year committed facility and $2.5 billion (£1.9 billion) under
a 364 day committed facility. The three-year committed facility was agreed in September 2019 extended by one year in September
2020 and was extended again by one year to 2024 in August 2021. The 364-day committed facility was agreed in August 2021.
These facilities were undrawn at 31 December 2021.
In preparation for the separation of the Consumer Healthcare business, in February 2022 GSK cancelled and replaced the three
year and 364 day facilities. New revolving credit facilities of equivalent size were agreed with maturities in September 2025 and
September 2023.
The weighted average interest rate on commercial paper borrowings at 31 December 2021 was -0.5% (2020 – 2.4%).
The weighted average interest rate on current bank loans and overdrafts at 31 December 2021 was 7.9% (2020 – 5.8%).
The average effective pre-swap interest rate of notes classified as short-term at 31 December 2021 was 3.0% (2020 – 0.0%).
The 0.0% rate in 2020 reflected the maturities of a LIBOR +0.35% coupon note in May 2021, and both a zero coupon and a
EURIBOR +0.60% note in September 2021.
Long-term borrowings
At the year-end, GSK had long-term borrowings of £20.6 billion (2020 – £23.4 billion), of which £11.7 billion (2020 – £13.3 billion)
fell due in more than five years. The average effective pre-swap interest rate of all notes in issue at 31 December 2021 was
approximately 3.3% (2020 – approximately 3.6%).
Long-term borrowings repayable after five years carry interest at effective rates between 1.4% and 6.4%, with repayment dates
ranging from 2027 to 2045.
Pledged assets
The Group held pledged investments in US Treasury Notes with a par value of $56 million (£42 million), (2020 – $50 million
(£37 million)) as security against irrevocable letters of credit issued on the Group’s behalf in respect of the Group’s self-insurance
activity. Provisions in respect of self-insurance are included within the provisions for legal and other disputes discussed in Note 31,
‘Other provisions’.
Lease liabilities
The maturity analysis of discounted lease liabilities recognised on the Group balance sheet is as follows:
2021
£m
2020
£m
Rental payments due within one year
203
230
Rental payments due between one and two years
185
207
Rental payments due between two and three years
120
126
Rental payments due between three and four years
93
96
Rental payments due between four and five years
73
86
Rental payments due after five years
341
372
Total lease liabilities
1,015
1,117
29. Net debt
continued
GSK Annual Report 2021
205
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information30. Pensions and other post-employment benefits
Pension and other post-employment costs
2021
£m
2020
£m
2019
£m
UK pension schemes
198
255 181
US pension schemes
42
62 120
Other overseas pension schemes
164
189 185
Unfunded post-retirement healthcare schemes
67
13
74
471
519
560
Analysed as:
Funded defined benefit/hybrid pension schemes
245
341 300
Unfunded defined benefit pension schemes
21
32 41
Unfunded post-retirement healthcare schemes
67
13
74
Defined benefit schemes
333
386
415
Defined contribution pension schemes
138
133 145
471
519
560
The costs of the defined benefit pension and post-retirement healthcare schemes are charged in the income statement as follows:
2021
£m
2020
£m
2019
£m
Cost of sales
129
143 149
Selling, general and administration
153
185 195
Research and development
51
59
71
333
387
415
GSK entities operate pension arrangements which cover the Group’s material obligations to provide pensions to retired employees.
These arrangements have been developed in accordance with local practices in the countries concerned. Pension benefits can be
provided by state schemes; by defined contribution schemes, whereby retirement benefits are determined by the value of funds
arising from contributions paid in respect of each employee; or by defined benefit schemes, whereby retirement benefits are based
on employee pensionable remuneration and length of service.
Pension costs of defined benefit schemes for accounting purposes have been calculated using the projected unit credit method. In
certain countries pension benefits are provided on an unfunded basis, some administered by trustee companies. Formal,
independent, actuarial valuations of the Group’s main plans are undertaken regularly, normally at least every three years.
Remeasurement movements in the year are recognised through the statement of comprehensive income. Discount rates are
derived from AA rated corporate bond yields except in countries where there is no deep market in corporate bonds where
government bond yields are used. Discount rates are selected to reflect the term of the expected benefit payments. Projected
inflation rates and pension increases are long-term predictions based on the yield gap between long-term index-linked and fixed
interest Gilts. In the UK, mortality rates are determined by adjusting the SAPS S3 standard mortality tables to reflect recent scheme
experience. These rates are then projected to reflect improvements in life expectancy in line with the CMI 2020 projections with a
long-term rate of improvement of 1.25% per year for both males and females. In the US, mortality rates are calculated using the
PRI-2012 white collar table adjusted to reflect recent experience. These rates are projected using MP-2020 to allow for future
improvements in life expectancy.
206
GSK Annual Report 2021
Notes to the financial statements
continued
The average life expectancy assumed now for an individual at the age of 60 and projected to apply in 2041 for an individual then at
the age of 60 is as follows:
UK
US
Male
Years
Female
Years
Male
Years
Female
Years
Current
2 7.7
28.727. 2
28.5Projected for 2041
29.2 30.2 28.7 30.0
The assets of funded schemes are generally held in separately administered trusts, either as specific assets or as a proportion of a
general fund, or are insurance contracts. Assets are invested in different classes in order to maintain a balance between risk and
return. Investments are diversified to limit the financial effect of the failure of any individual investment. The physical asset allocation
strategy for three of the four UK plans is 42.5% in return-seeking assets and 57.5% in liability-matching assets. During 2019, a
buy-in insurance contract was purchased to cover substantially all of the obligations of the other UK plan. At 31 December 2021,
the value of the insurance contract was £570 million (2020 – £620 million). The asset allocation of the US plans is currently set at
25% return-seeking assets and 75% liability-matching assets.
The pension plans are exposed to risk that arises because the estimated market value of the plans’ assets might decline, the
investment returns might reduce, or the estimated value of the plans’ liabilities might increase.
In line with the agreed mix of return-seeking assets to generate future returns and liability-matching assets to better match future
pension obligations, the Group has defined an overall long-term investment strategy for the plans, with investments across a broad
range of assets. The main market risks within the asset and hedging portfolio are against credit risk, interest rates, long-term
inflation, equities, property, currency and bank counterparty risk.
The plan liabilities are a series of future cash flows with relatively long duration. On an IAS 19 basis, these cash flows are sensitive to
changes in the expected long-term inflation rate and the discount rate (AA corporate bond yield curve) where an increase in long-term
inflation corresponds with an increase in the liabilities, and an increase in the discount rate corresponds with a decrease in the liabilities.
The interest rate risk and credit rate risk in the US are partially hedged. The targets are based on an accounting measure of the
plan liabilities.
For the UK plans, there is an interest rate and inflation hedging strategy in place. The targets are based on an economic measure of
the plan liabilities. Furthermore, the plans also currently hedge a portion of their equity exposure with a staggered maturity profile.
In the UK, the defined benefit pension schemes operated for the benefit of former Glaxo Wellcome employees and former
SmithKline Beecham employees remain separate. These schemes were closed to new entrants in 2001 and subsequent UK
employees are entitled to join a defined contribution scheme. In addition, the Group operates a number of post-retirement
healthcare schemes, the principal one of which is in the US.
Following a period of consultation with impacted employees, it was announced on 17 December 2020 that the UK defined benefit
plans would be closed to future accrual effective from 31 March 2022. As a result, post closure the accrued benefits of active
participants will be revalued in line with inflation (RPI for the legacy Glaxo Wellcome plans and CPI for the legacy SmithKline Beecham
plans subject to the relevant caps for each arrangement) rather than capped pay increases. In addition, all defined benefit plan
participants who are still active at 1 April 2022 will receive a defined pension contribution of £10,000 each. The effect of closure and
the defined contribution enhancement together resulted in a one-off cost of £74 million in 2020.
It was announced on 9 September 2020 that the US cash balance pension plans would be closed to future accrual from 1 January
2021. This change resulted in a credit of £56 million. On 1 June 2020 and 9 September 2020, two amendments were made to the
retiree healthcare plans in the US resulting in a credit of £55 million.
The Group has applied the following financial assumptions in assessing the defined benefit liabilities:
UK
US
Rest of World
2021
% pa
2020
% pa
2019
% pa
2021
% pa
2020
% pa
2019
% pa
2021
% pa
2020
% pa
2019
% pa
Rate of increase of future earnings
2.00
2.00 2.00
n/an/a 4.00
2.902.60
2.70
Discount rate
2.00
1.40 2.00
2.70
2.30 3.20
1.100.60 1.10
Expected pension increases
3.20
2.80 3.00
n/an/a n/a
2.302.10 2.10
Cash balance credit/conversion rate
n/a
n/a n/a
2.001.90 2.60
0.200.10 0.10
Inflation rate
3.20
2.80 3.00
2.252.00 2.25
1.901.30 1.40
Sensitivity analysis detailing the effect of changes in assumptions is provided on page 213. The analysis provided reflects the
assumption changes which have the most material impact on the results of the Group.
30. Pensions and other post-employment benefits
continued
GSK Annual Report 2021
207
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationThe amounts recorded in the income statement and statement of comprehensive income for the three years ended 31 December
2021 in relation to the defined benefit pension and post-retirement healthcare schemes were as follows:
Pensions
Post-retirement
benefits
2021
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Amounts charged to operating profit
Current service cost
56
9
151
216
29
Past service cost
28
2
(25)
5
12
Net interest cost
3
19
6
28 26
Gains from settlements
– –
(10)
(10)
–
Expenses 15 12
–
27
–
102
42 122
266
67
Remeasurement gains/(losses) recorded in the statement of
comprehensive income
572 97
194
863
78
Pensions
Post-retirement
benefits
2020
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Amounts charged to operating profit
Current service cost
61 83
147
29136
Past service cost/(credit)
98
(56)
1
43 (55)
Net interest (income)/cost
3
23
10
36 39
Gains from settlements
– –
(18) (18) (7)
Expenses
9
12–
21–
171
62 140
37313
Remeasurement gains/(losses) recorded in the statement of
comprehensive income
51 (96) (60) (105) (82)
Pensions
Post-retirement
benefits
2019
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Amounts charged to operating profit
Current service cost
62 266 22
74
130Past service cost/(credit)
49
(3) (15) 31
–
Net interest (income)/cost
(19) 29 16 26 52
Gains from settlements
– –
(9) (9)
–
Expenses
7
20–
27
–99
120 122 341
74
Remeasurement losses recorded in the statement of
comprehensive income
(894) (1) (78)
(973)
(77)The amounts included within past service costs in the UK included £27 million (2020 – £24 million; 2019 – £58 million) of
augmentation costs which arose from Major restructuring programmes, together with a charge of £nil (2020 –£74 million) in
relation to the impact of the closure of the defined benefit schemes to future accrual.
In 2020, the past service credit of £56 million in the US reflected the closure of the cash balance pension plans from 1 January
2021. Amendments to the retiree healthcare plan in the US in 2020 resulted in a credit of £55 million to past service costs in
post-retirement benefits in 2020.
30. Pensions and other post-employment benefits
continued
208
GSK Annual Report 2021
Notes to the financial statements
continued
A summarised balance sheet presentation of the Group defined benefit pension schemes and other post-retirement benefits is set
out in the table below:
2021
£m
2020
£m
2019
£m
Recognised in Other non-current assets:
Pension schemes in surplus
741
183
127
Recognised in Assets held for sale:
Post-retirement benefits
–
–
(9)
Recognised in Pensions and other post-employment benefits:
Pension schemes in deficit
(1,870)
(2,287) (2,048)
Post-retirement benefits
(1,243)
(1,363) (1,409)
(3,113)
(3,650) (3,457)
In the event of a plan wind-up, GSK believes the UK pension scheme rules provide the company with the right to a refund of surplus
assets following the full settlement of plan liabilities. As a result, the net surplus in the UK defined benefit pension schemes is
recognised in full.
The fair values of the assets and liabilities of the UK and US defined benefit pension schemes, together with aggregated data for
other defined benefit pension schemes in the Group are as follows:
At 31 December 2021
UK
£m
US
£m
Rest of World
£m
Group
£m
Equities: – listed
3,954 522
731
5,207
– – 4
4
Multi-asset funds
1,415
– –
1,415
Property: – listed
– –
68
68
502 154
1
657
Corporate bonds: – listed
1,503
975
1402,618
– –
15
15
Government bonds: – listed
5,054
724
984
6,762
Insurance contracts
1,334
–
917
2,251
Other (liabilities)/assets
(130) 149
72
91
Fair value of assets
13,632 2,524 2,932
19,088
Asset ceiling restrictions
– –
(26)
(26)
Present value of scheme obligations
(13,299) (3,248) (3,644)
(20,191)
Net surplus/(obligation)
333 (724) (738)
(1,129)
Included in Other non-current assets
606
–
135
741
Included in Pensions and other post-employment benefits
(273) (724)
(873)
(1,870)
333 (724) (738)
(1,129)
Actual return on plan assets
541
97
48
686
The multi-asset funds comprise investments in pooled investment vehicles that are invested across a range of asset classes,
increasing diversification within the growth portfolio. The value of funds in this asset class with a quoted market price is
£350 million (2020 – £847 million).
The ‘Other (liabilities)/assets’ category comprises cash and mark to market values of derivative positions.
Index-linked gilts held as part of a UK repo programme are included in government bonds. The related loan of £513 million
at 31 December 2021 (2020 – £650 million; 2019 – £243 million) is deducted within ‘Other assets’.
30. Pensions and other post-employment benefits
continued
GSK Annual Report 2021
209
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationAt 31 December 2020
UK
£m
US
£m
Rest of World
£m
Group
£m
Equities: – listed
2,686 539
686
3,911
– – 5
5
Multi-asset funds
2,075
– –
2,075
Property: – listed
– –
57
57
447
136
2
585
Corporate bonds: – listed
1,113 1,066 154
2,333
– –
20
20
Government bonds: – listed
6,055 758
999
7,812
Insurance contracts
1,409
–
988
2,397
Other (liabilities)/assets
(203) 136
78
11
Fair value of assets
13,582 2,635 2,989
19,206
Present value of scheme obligations
(13,858) (3,445) (4,007)
(21,310)
Net surplus/(obligation)
(276) (810) (1,018)
(2,104)
Included in Other non-current assets
77
–
106
183
Included in Pensions and other post-employment benefits
(353) (810) (1,124)
(2,287)
(276) (810) (1,018)
(2,104)
Actual return on plan assets
1,092 159
177
1,428
At 31 December 2019
UK
£m
US
£m
Rest of World
£m
Group
£m
Equities: – listed
2,904 4,213
671
638– – 8 8
Multi-asset funds
2,700
– –
2,700Property: – listed
– –
55 55
460
145
2
607
Corporate bonds: – listed
297
855 141 1,293
326
–
23
349
Government bonds: – listed
4,923 803
889
6,615Insurance contracts
1,406
–
832 2,238
Other (liabilities)/assets
(35) 315
74
354Fair value of assets
12,981 18,432
2,789
2,662Present value of scheme obligations
(13,293) (3,506) (3,554) (20,353)
Net surplus/(obligation)
(312) (717) (892) (1,921)
Included in Other non-current assets
70
–
57
127
Included in Pensions and other post-employment benefits
(382) (717) (949) (2,048)
(312) (717) (892) (1,921)
Actual return on plan assets
787
356 345 1,488
30. Pensions and other post-employment benefits
continued
210
GSK Annual Report 2021
Notes to the financial statements
continued
30. Pensions and other post-employment benefits
continued
Pensions
Post-retirement
benefits
Movements in fair values of assets
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Assets at 1 January 2019
12,581 2,808 2,390
17,779
–
Exchange adjustments
–
(110) (120)
(230)
–
Additions through business combinations
– –
14
14
–
Interest income
360
111
37
508
–
Expenses (7) (20)
–
(27)
–
Settlements and curtailments
– – 1
1 –
Remeasurement 312
427
245984
–
Employer contributions
187
40
116
343
110
Scheme participants’ contributions
3 –
17
20
17
Benefits paid
(570)
(285) (105)
(960) (127)
Assets at 31 December 2019
12,981
2,789
2,66218,432
–
Exchange adjustments
–
(86) 138
52
–
Interest income
256
87
29372
–
Expenses (9) (12)
–
(21)
–
Settlements and curtailments
– –
(20)
(20)
–
Remeasurement 836
72
1481,056
–
Employer contributions
156 33 124
313
105
Scheme participants’ contributions
3 –
18
21
18
Benefits paid
(641) (248) (110)
(999) (123)
Assets at 31 December 2020
13,582 2,635 2,989
19,206
–
Exchange adjustments
–
31 (184)
(153)
–
Interest income
187 57
18
262
–
Expenses (15) (12)
–
(27)
–
Settlements and curtailments
– –
(7)
(7)
–
Remeasurement 354
40 30
424
–
Employer contributions
139
40
133312
105
Scheme participants’ contributions
3 –
24
27
15
Benefits paid
(618) (267) (97)
(982) (120)
Assets at 31 December 2021
13,632 2,524 2,906
19,062
-
During 2021, the Group made additional funding contributions to the UK pension schemes of £44 million (2020 – £76 million;
2019 – £78 million) but £nil (2020 – £nil; 2019 – £nil) to the US schemes. In 2018, GSK reached a revised agreement
with the trustees of the UK pension schemes to make additional contributions to eliminate the pension deficits identified within the
schemes at the 31 December 2017 actuarial funding valuation. Based on these funding agreements, the additional contributions
to eliminate the pension deficit are expected to be £44 million in 2022 and these are included within Note 35, ‘Commitments’ on
page 216. This funding commitment supersedes the previous agreement made in 2016. The contributions were based on a
government bond yield curve approach to selecting the discount rate; the rate chosen included an allowance for expected
investment returns which reflected the asset mix of the schemes.
Employer contributions for 2022, including special funding contributions, are estimated to be approximately £380 million in respect
of defined benefit pension schemes and £90 million in respect of post-retirement benefits.
GSK Annual Report 2021
211
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationPensions
Post-retirement
benefits
Movements in defined benefit obligations
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Obligations at 1 January 2019
(12,087) (3,474) (3,213)
(18,774) (1,379)
Exchange adjustments
–
140
177
317
50
Additions through business combinations
– –
(56)
(56) (48)
Service cost
(62) (74) (130)
(266) (22)
Past service cost
(49)
3
15
(31)
–
Interest cost
(341) (140) (53)
(534) (52)
Settlements and curtailments
– – 8
8 –
Remeasurement (1,321) (246) (390)
(1,957) (77)
Scheme participants’ contributions
(3)
–
(17)
(20) (17)
Benefits paid
570
285
105
960
127
Obligations at 31 December 2019
(13,293) (3,506) (3,554)
(20,353) (1,418)
Exchange adjustments
–
118 (188)
(70)
36
Disposals
– – –
– 9
Service cost
(61) (83) (147)
(291) (36)
Past service cost
(98)
56
(1)(43)
55
Interest cost
(259) (110) (39)
(408) (39)
Settlements and curtailments
– –
38
38
7
Remeasurement (785) (168) (208)
(1,161) (82)
Scheme participants’ contributions
(3)
–
(18)
(21) (18)
Benefits paid
641 248
110
999
123
Obligations at 31 December 2020
(13,858) (3,445) (4,007)
(21,310) (1,363)
Exchange adjustments
–
(40) 258
218
4
Service cost
(56) (9) (151)
(216) (29)
Past service cost
(28) (2) 25
(5) (12)
Interest cost
(190) (76) (23)
(289) (26)
Settlements and curtailments
– –
17
17
–
Remeasurement 218
57
164439
78
Scheme participants’ contributions
(3)
–
(24)
(27)
(15)
Benefits paid
618
267 97
982
120
Obligations at 31 December 2021
(13,299) (3,248) (3,644)
(20,191) (1,243)
The defined benefit pension obligation is analysed as follows:
2021
£m
2020
£m
2019
£m
Funded
(19,419)
(20,504) (19,547)
Unfunded
(772)
(806) (806)
(20,191)
(21,310) (20,353)
The liability for the US post-retirement healthcare scheme has been assessed using the same assumptions as for the US pension
scheme, together with the assumption for future medical inflation of 6.25% (2020 – 6.0%) in 2021, grading down to 5% in
2027 and thereafter. At 31 December 2021, the US post-retirement healthcare scheme obligation was £1,059 million
(2020 – £1,124 million; 2019 – £1,198 million). Post-retirement benefits are unfunded.
30. Pensions and other post-employment benefits
continued
212
GSK Annual Report 2021
Notes to the financial statements
continued
The movement in the net defined benefit liability is as follows:
2021
£m
2020
£m
2019
£m
At 1 January
(2,104)
(1,921) (995)
Exchange adjustments
65
(18)
87
Additions through business combinations
–
–
(42)
Service cost
(216)
(291) (266)
Past service cost
(5)
(43) (31)
Interest cost
(27)
(36) (26)
Settlements and curtailments
10
18
9
Remeasurements:
Return on plan assets, excluding amounts included in interest
424
1,056
984
(Loss)/gain from change in demographic assumptions
(62)
69
78
Gain/(loss) from change in financial assumptions
716
(1,340) (2,022)
Experience (loss)/gain
(215)
110
(13)
Employer contributions
312
313 343
Expenses (27)
(27)
(21)At 31 December
(1,129)
(2,104) (1,921)
The remeasurements included within post-retirement benefits are detailed below:
2021
£m
2020
£m
2019
£m
Gain from change in demographic assumptions
19
7 –
Gain/(loss) from change in financial assumptions
35
(93) (80)
Experience gains
24
4 3
78
(82) (77)
The defined benefit pension obligation analysed by membership category is as follows:
2021
£m
2020
£m
2019
£m
Active
4,196
4,660
4,572
Retired 10,485
11,115
11,257Deferred 5,296
4,880
5,39320,191
21,310 20,353
The post-retirement benefit obligation analysed by membership category is as follows:
2021
£m
2020
£m
2019
£m
Active
494
551549
Retired
748
808 869
Deferred
1
4 –
1,243
1,363 1,418
The weighted average duration of the defined benefit obligation is as follows:
2021
years
2020
years
2019
years
Pension benefits
15
16 15
Post-retirement benefits
12
12 12
30. Pensions and other post-employment benefits
continued
GSK Annual Report 2021
213
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationSensitivity analysis
The effect of changes in assumptions used on the benefit obligations and on the 2022 annual defined benefit pension and
post-retirement costs are detailed below. This information has been determined by taking into account the duration of the liabilities
and the overall profile of the plan memberships.
0.25%
increase
£m
0.25%
decrease
£m
Discount rate
(Decrease)/increase in annual pension cost
(19)
17
Increase/(decrease) in annual post-retirement benefits cost
1
(1)
(Decrease)/increase in pension obligation
(729)
772
(Decrease)/increase in post-retirement benefits obligation
(34) 35
0.5%
increase
£m
0.5%
decrease
£m
(Decrease)/increase in annual pension cost
(41) 33
Increase/(decrease) in annual post-retirement benefits cost
2
(2)
(Decrease)/increase in pension obligation
(1,413) 1,586
(Decrease)/increase in post-retirement benefits obligation
(67)
73
0.25%
increase
£m
0.25%
decrease
£m
Inflation rate
Increase/(decrease) in annual pension cost
15 (14)
Increase/(decrease) in pension obligation
547
(529)
1 year
increase
£m
Life expectancy
Increase in annual pension cost
16
Increase in annual post-retirement benefits cost
1
Increase in pension obligation
724
Increase in post-retirement benefits obligation
36
1%
increase
£m
Rate of future healthcare inflation
Increase in annual post-retirement benefits cost
1
Increase in post-retirement benefits obligation
39
30. Pensions and other post-employment benefits
continued
214
GSK Annual Report 2021
Notes to the financial statements
continued
31. Other provisions
Legal
and other
disputes
£m
Major
restructuring
programmes
£m
Employee
related
provisions
£m
Other
provisions
£m
Total
£m
At 1 January 2021
320 253
860
3261,759
Exchange adjustments
2
(18) (8) (4)
(28)
Charge for the year
117
383 81 119
700
Reversed unused
(75) (151) (11) (36)
(273)
Unwinding of discount
– 2 – –
2
Utilised (168) (389) (65) (28)
(650)
Reclassifications and other movements
–
(8) (1) (3)
(12)
Transfer to Pension obligations
–
(27)
– –
(27)
At 31 December 2021
196 652 322
301
1,471
To be settled within one year
160 545
66
70
841
To be settled after one year
36
107
256 231
630
At 31 December 2021
196 652 322
301
1,471
Legal and other disputes
The Group is involved in a substantial number of legal and other
disputes, including notification of possible claims, as set out in
Note 46, ‘Legal proceedings’. Provisions for legal and other
disputes include amounts relating to product liability, anti-trust,
government investigations, contract terminations and self
insurance.
The net charge for the year of £42 million (including reversals
and estimated insurance recoveries) primarily related to
provisions for product liability cases, commercial disputes
and various other government investigations.
The discount on the provision is £nil in 2021 (2020 – increased
by £1 million). The discount was calculated using risk-adjusted
projected cash flows and risk-free rates of return.
In respect of product liability claims related to certain products,
provision is made when there is sufficient history of claims
made and settlements to enable management to make a reliable
estimate of the provision required to cover unasserted claims.
The ultimate liability for such matters may vary from the amounts
provided and is dependent upon the outcome of litigation
proceedings, investigations and possible settlement
negotiations.
It is in the nature of the Group’s business that a number of
these matters may be the subject of negotiation and litigation
over many years. Litigation proceedings, including the various
appeal procedures, often take many years to reach resolution,
and out-of-court settlement discussions can also often be
protracted. Indemnified disputes will result in a provision
charge and a corresponding receivable.
The Group is in potential settlement discussions in a number
of the disputes for which amounts have been provided and,
based on its current assessment of the progress of these
disputes, estimates that £160 million of the amount provided
at 31 December 2021 will be settled within one year. At
31 December 2021, it was expected that £4 million
(2020 – £13 million) of the provision made for legal and other
disputes will be reimbursed by third parties. For a discussion
of legal issues, see Note 46, ‘Legal proceedings’.
Major restructuring programmes
During 2021, the Group had four major restructuring
programmes in progress: the Combined restructuring and
integration programme and the 2018 Major restructuring
programme, both of which are now substantially complete,
the Consumer Healthcare Joint Venture integration programme
and the Separation Preparation programme. The programmes
are focused primarily on simplifying supply chain processes,
rationalising the Group’s manufacturing network, restructuring
the Pharmaceuticals commercial operations, integrating the
Pfizer consumer healthcare business and preparing for the
separation of GSK into two new companies.
Restructuring provisions primarily include severance costs
when management has made a formal decision to eliminate
certain positions and this has been communicated to the
groups of employees affected and appropriate consultation
procedures completed, where appropriate. No provision is
made for staff severance payments that are paid immediately.
The discount on the provisions increased by £2 million in 2021
(2020 – increased by £2 million).
Pension augmentation includes £27 million relating to the
defined benefit plan arising from staff redundancies, as shown
in Note 30, ‘Pensions and other post-employment benefits’.
Employee related provisions
Employee related provisions include obligations for certain
medical benefits to disabled employees and their spouses in
the US. At 31 December 2021, the provision for these benefits
amounted to £69 million (2020 – £77 million). Other employee
benefits reflect a variety of provisions for severance costs,
jubilee awards and other long-service benefits.
Given the nature of these provisions, the amounts are likely to
be settled over many years.
Other provisions
Included in other provisions are provisions for onerous
contracts, insurance provisions and a number of other
provisions including vehicle insurance and regulatory matters.
GSK Annual Report 2021
215
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information32. Contingent consideration liabilities
The consideration for certain acquisitions includes amounts contingent on future events such as development milestones or sales
performance. The Group has provided for the fair value of this contingent consideration as follows:
Shionogi-
ViiV
Healthcare
£m
Novartis
Vaccines
£m
Other
£m
Total
£m
At 1 January 2019
5,937 296 53
6,286
Remeasurement through income statement
31
67
(15)83
Cash payments: operating cash flows
(767)
(13)
–
(780)
Cash payments: investing activities
(98) (11) (4)
(113)
Other movements
– – 3
3
At 31 December 2019
5,103 339
37
5,479
Remeasurement through income statement
1,114 161
–
1,275
Cash payments: operating cash flows
(751) (14)
–
(765)
Cash payments: investing activities
(107) (9) (4)
(120)
At 31 December 2020
5,359
477
335,869
Remeasurement through income statement
1,026 32
5
1,063
Cash payments: operating cash flows
(721) (21)
–
(742)
Cash payments: investing activities
(105) (9)
–
(114)
At 31 December 2021
5,559
479
38
6,076
Of the contingent consideration payable at 31 December 2021, £958 million (2020 – £765 million) is expected to be paid within
one year.
The consideration payable for the acquisition of the Shionogi-ViiV Healthcare joint venture and the Novartis Vaccines business
is expected to be paid over a number of years. As a result, the total estimated liabilities are discounted to their present values,
shown above. The Shionogi-ViiV Healthcare contingent consideration liability is discounted at 8% (2020 – 8.5%) and the
Novartis Vaccines contingent consideration liability is discounted at 7.5% (2020– 8%) for commercialised products and at
8.5% (2020 – 9%) for pipeline assets.
The Shionogi-ViiV Healthcare and Novartis Vaccines contingent consideration liabilities are calculated principally based on the
forecast sales performance of specified products over the lives of those products.
The table below shows on an indicative basis the income statement and balance sheet sensitivity to reasonably possible changes
in key inputs to the valuations of the contingent consideration liabilities.
2021
2020
Increase/(decrease) in financial liability and loss/(gain) in Income statement
Shionogi-
ViiV
Healthcare
£m
Novartis
Vaccines
£m
Shionogi-
ViiV
Healthcare
£m
Novartis
Vaccines
£m
10% increase in sales forecasts*
506
61
515
80
10% decrease in sales forecasts*
(506) (57)
(516) (78)
1% increase in discount rate
(198) (38)
(207) (39)
1% decrease in discount rate
213
45
223 45
10 cent appreciation of US Dollar
343
1
305
4
10 cent depreciation of US Dollar
(299) (4)
(262) (2)
10 cent appreciation of Euro
102
28
125
30
10 cent depreciation of Euro
(85) (27)
(105) (24)
* The sales forecast is for ViiV Healthcare sales only in respect of the Shionogi-ViiV Healthcare contingent consideration.
An explanation of the accounting for ViiV Healthcare is set out on page 57.
216
GSK Annual Report 2021
Notes to the financial statements
continued
33. Other non-current liabilities
2021
£m
2020
£m
Accruals
13
41Deferred income
85
21
Other payables
823
741
921
803
Other payables includes a number of employee-related liabilities including employee savings plans.
34. Contingent liabilities
At 31 December 2021, contingent liabilities where GSK has a present obligation as a result of a past event, comprising guarantees
and other items arising in the normal course of business, amounted to £126 million (2020 – £138 million). These contingent
liabilities arise where the Group has a present obligation arising from a past event. At 31 December 2021, £0.2 million (2020
– £0.4 million) of financial assets were pledged as collateral for contingent liabilities. Provision is made for the outcome of tax, legal
and other disputes where it is both probable that the Group will suffer an outflow of funds and it is possible to make a reliable
estimate of that outflow. At 31 December 2021, other than for those disputes where provision has been made, if it is not possible to
meaningfully assess whether the outcomes will result in a probable outflow, or to quantify or reliably estimate the liability, if any, no
provision is recorded. Descriptions of the significant legal and other disputes to which the Group is a party are set out in Note 46,
‘Legal proceedings’.
35. Commitments
Contractual obligations and commitments
2021
£m
2020
£m
Contracted for but not provided in the financial statements:
Intangible assets
12,082
12,307
Property, plant and equipment
616
528
Investments
146
153Purchase commitments
484
746
Pensions
44
88
Interest on loans
7,603
8,309
Future finance charges on leases
153
180
21,128
22,311
The commitments related to intangible assets include milestone payments, which are dependent on successful clinical development
or on meeting specified sales targets, and which represent the maximum that would be paid if all milestones, however unlikely, are
achieved. The amounts are not risk-adjusted or discounted. The net decrease in intangible asset commitments in 2021 is mainly
attributable to the termination of a number of agreements including the termination of the agreement for bintrafusp alfa with Merck
KGaA, Darmstadt, Germany offset by an increase in a number of new R&D collaborations including with Alector, iTeos Therapeutics
and Lifemine Therapeutics.
In 2018, GSK reached an agreement with the trustees of the UK pension schemes to make additional contributions to eliminate the
pension deficit identified at the 31 December 2017 actuarial funding valuation. A payment of £44 million is due in 2022. The table
above includes this commitment, but excludes the normal ongoing annual funding requirement in the UK of approximately £110
million.
The Group also has other commitments which principally relate to revenue payments to be made under licences and other alliances.
Commitments in respect of future interest payable on loans are disclosed before taking into account the effect of interest rate
swaps.
GSK Annual Report 2021
217
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information36. Share capital and share premium account
Ordinary Shares of 25p each
Share
premium
Number £m £m
Share capital issued and fully paid
At 1 January 2019
5,379,067,624 1,345 3,091
Issued under employee share schemes
4,034,607
1
50
Ordinary shares acquired by ESOP Trusts
– –
33
At 31 December 2019
5,383,102,231 1,346 3,174
Issued under employee share schemes
2,087,386
–
29Ordinary shares acquired by ESOP Trusts
– –
78
At 31 December 2020
5,385,189,617 1,346 3,281
Issued under employee share schemes
1,825,442
1
20
Ordinary shares acquired by ESOP Trusts
– – –
At 31 December 2021
5,387,015,059 1,347 3,301
31 December 2021
000
31 December 2020
000
Number of shares issuable under employee share schemes
75,210
48,205
Number of unissued shares not under option
4,537,775
4,566,605
At 31 December 2021, of the issued share capital, 23,205,289 shares were held in the ESOP Trusts, 355,205,950 shares were
held as Treasury shares and 5,008,603,820 shares were in free issue. All issued shares are fully paid. The nominal, carrying and
market values of the shares held in the ESOP Trusts are disclosed in Note 44, ‘Employee share schemes’.
37. Movements in equity
Retained earnings and other reserves amounted to £10,407 million at 31 December 2021 (2020 – £9,960 million; 2019 –
£6,885 million) of which £476 million (2020 – £440 million; 2019 – £394 million) related to associates and joint ventures.
The cumulative translation exchange in equity is as follows:
Net translation exchange included in:
Retained
earnings
£m
Fair value
reserve
£m
Non-
controlling
interests
£m
Total
translation
exchange
£m
At 1 January 2019
381
1
(52)
330
Exchange movements on overseas net assets and net investment hedges
(830) (2) (75)
(907)
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries
(75)
– –
(75)
At 31 December 2019
(524) (1) (127)
(652)
Exchange movements on overseas net assets and net investment hedges
(51) (8) (34)
(93)
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries
36
– –
36
At 31 December 2020
(539) (9) (161)
(709)
Exchange movements on overseas net assets and net investment hedges
(239)
–
(20)
(259)
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries
and associates
(25)
–
–
(25)
At 31 December 2021
(803) (9) (181)
(993)
218
GSK Annual Report 2021
Notes to the financial statements
continued
The analysis of other comprehensive income by equity category is as follows:
2021
Retained
earnings
£m
Other
reserves
£m
Non-
controlling
interests
£m
Total
£m
Items that may be subsequently reclassified to income statement:
Exchange movements on overseas net assets and net investment hedges
(239)
– –
(239)
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries
and associates
(25)
–
–
(25)
Fair value movements on cash flow hedges
– 5 –
5
Reclassification of cash flow hedges to income and expense
–
12
–
12
Tax on fair value movements on cash flow hedges
–
(8)
–
(8)
Items that will not be reclassified to income statement:
Exchange movements on overseas net assets of non-controlling interests
– –
(20)
(20)
Fair value movements on equity investments
–
(911)
–
(911)
Tax on fair value movements on equity investments
–
131
–
131
Remeasurement losses on defined benefit plans
941
– –
941
Tax on remeasurement losses in defined benefit plans
(223)
– –
(223)
Other comprehensive (expense)/income for the year
454 (771) (20)
(337)
2020
Retained
earnings
£m
Other
reserves
£m
Non-
controlling
interests
£m
Total
£m
Items that may be subsequently reclassified to income statement:
Exchange movements on overseas net assets and net investment hedges
(51) (8)
–
(59)
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries
36
– –
36
Fair value movements on cash flow hedges
–
(19)
–
(19)
Reclassification of cash flow hedges to income and expense
–
54
–54
Tax on fair value movements on cash flow hedges
–
(18)
–
(18)
Items that will not be reclassified to income statement:
Exchange movements on overseas net assets of non-controlling interests
– –
(34)
(34)
Fair value movements on equity investments
–
1,348
–
1,348
Tax on fair value movements on equity investments
–
(220)
–
(220)
Remeasurement losses on defined benefit plans
(187)
– –
(187)
Tax on remeasurement losses in defined benefit plans
69
– –
69
Other comprehensive (expense)/income for the year
(133) 1,137 (34)
970
2019
Retained
earnings
£m
Other
reserves
£m
Non-
controlling
interests
£m
Total
£m
Items that may be subsequently reclassified to income statement:
Exchange movements on overseas net assets and net investment hedges
(830) (2)
–
(832)
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries
(75)
– –
(75)
Fair value movements on cash flow hedges
–
(20)
–
(20)
Reclassification of cash flow hedges to income and expense
– 3 – 3
Tax on fair value movements on cash flow hedges
–
16
–
16
Items that will not be reclassified to income statement:
Exchange movements on overseas net assets of non-controlling interests
– –
(75) (75)
Fair value movements on equity investments
–
372
–372
Tax on fair value movements on equity investments
–
(95)
–
(95)
Remeasurement gains on defined benefit plans
(1,050)
– –
(1,050)
Tax on remeasurement gains in defined benefit plans
189
– –
189
Other comprehensive (expense)/income for the year
(1,766) (1,567)
274
(75)Information on net investment hedges is provided in part (d) of Note 43 ‘Financial instruments and related disclosures’.
37. Movements in equity
continued
GSK Annual Report 2021
219
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationThe analysis of other reserves is as follows:
ESOP Trust
shares
£m
Fair value
reserve
£m
Cash flow
hedge reserve
£m
Other
reserves
£m
Total
£m
At 1 January 2019
(161) 140 (47) 2,129
2,061
Exchange adjustments
10
– – –
10
Transferred to Retained earnings in the year on disposal of equity investments
– 5 – –
5
Net fair value movement in the year
–
264 (1)
–
263
Ordinary shares acquired by ESOP Trusts
(328)
– – –
(328)
Write-down of shares held by ESOP Trusts
344
– – –
344
At 31 December 2019
(135) 2,129
409
(48)2,355
Exchange adjustments
20
– – –
20
Transferred to Retained earnings in the year on disposal of equity investments
–
(207)
– –
(207)
Net fair value movement in the year
–
1,100
17
–
1,117
Ordinary shares acquired by ESOP Trusts
(609)
– – –
(609)
Write-down of shares held by ESOP Trusts
529
– – –
529
At 31 December 2020
(195) 1,302 (31) 2,129
3,205
Exchange adjustments
(1)
– – –
(1)
Transferred to Retained earnings in the year on disposal of equity investments
–
(139)
– –
(139)
Net fair value movement in the year
–
(780)
10
–
(770)
Transferred to income and expense in the year on impairments of equity investments
168
– – –
168
At 31 December 2021
(28) 383 (21) 2,129
2,463
Other reserves include various non-distributable merger and pre-merger reserves amounting to £1,849 million at 31 December
2021 (2020 – £1,849 million; 2019 – £1,849 million). Other reserves also include the capital redemption reserve created as a result
of the share buy-back programme amounting to £280 million at 31 December 2021 (2020 – £280 million; 2019 – £280 million).
38. Non-controlling interests
Total non-controlling interests includes the following individually material non-controlling interests. Other non-controlling interests
are individually not material.
ViiV Healthcare
GSK holds 78.3% of the ViiV Healthcare sub-group, giving rise to a material non-controlling interest. Summarised financial
information in respect of the ViiV Healthcare sub-group is as follows:
2021
£m
2020
£m
2019
£m
Turnover 4,816
4,637
4,848Profit after taxation
1,087
762
2,574Other comprehensive income/(expense)
(17)
33 (29)
Total comprehensive income
1,070
795
2,5452021
£m
2020
£m
Non-current assets
2,796
2,564Current assets
2,711
2,405
Total assets
5,507
4,969
Current liabilities
(3,121)
(2,748)
Non-current liabilities
(8,472)
(8,343)
Total liabilities
(11,593)
(11,091)
Net liabilities
(6,086)
(6,122)2021
£m
2020
£m
2019
£m
Net cash inflow from operating activities
2,128
2,249 2,375
Net cash outflow from investing activities
(287)
(294) (202)
Net cash outflow from financing activities (1,947)
(1,608)
(2,483)(Decrease)/increase in cash and bank overdrafts in the year 226
233
(528)37. Movements in equity
continued
220
GSK Annual Report 2021
Notes to the financial statements
continued
The above financial information relates to the ViiV Healthcare group on a stand-alone basis, before the impact of Group-related
adjustments, primarily related to the recognition of preferential dividends. The profit after taxation of £1,087 million (2020 –
£762 million; 2019 – £2,574 million) is stated after charging preferential dividends payable to GSK, Shionogi and Pfizer and after a
charge of £1,218 million (2020 – £1,112 million; 2019 – £37 million) for remeasurement of contingent consideration payable. This
consideration is expected to be paid over a number of years.
The following amounts attributable to the ViiV Healthcare group are included in GSK’s Financial statements:
2021
£m
2020
£m
2019
£m
Share of profit for the year attributable to non-controlling interest 482
196
223Dividends paid to non-controlling interest
224
419310
Non-controlling interest in the Consolidated balance sheet (344)
(570)
(539)Consumer Healthcare Joint Venture
GSK holds 68% of the Consumer Healthcare sub-group, giving rise to a material non-controlling interest. Summarised financial
information in respect of the Consumer Healthcare sub-group is as follows:
2021
£m
2020
£m
2019
£m
Turnover 4,240
9,545
9,837Profit after taxation 150
1,439
1,219Other comprehensive expenses
(10)
(266) (721)
Total comprehensive income/(expenses) (571)
1,429
9532021
£m
2020
£m
Non-current assets
29,200
29,134Current assets
5,251
4,918Total assets
34,451
34,052Current liabilities
(4,238)
(4,254)Non-current liabilities
(3,733)
(3,890)
Total liabilities
(7,971)
(8,144)
Net assets
26,480
25,9082021
£m
2020
£m
2019
£m
Net cash inflow from operating activities 1,014
1,356
1,419Net cash inflow/(outflow) from investing activities
(33)
1,018(776)
Net cash outflow from financing activities (78)
(1,236)
(2,437)Increase in cash and bank overdraft in the year/period 160
87
–The above financial information relates to the Consumer Healthcare Joint Venture on a stand-alone basis (2019 – for the period
from its formation on 31 July 2019 to December 2019), before the impact of Group-related adjustments and the classification of
cash pooling accounts with Group companies outside the Consumer Healthcare Joint Venture but after Major restructuring
charges.
The following amounts attributable to the Consumer Healthcare Joint Venture are included in GSK’s financial statements:
2021
£m
2020
£m
2019
£m
Share of profit for the year/period attributable to non-controlling interest
460
374
69
Dividends paid to non-controlling interest
367
–735
Non-controlling interest in the Consolidated balance sheet 6,911
6,609
6,53838. Non-controlling interests
continued
GSK Annual Report 2021
221
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information39. Related party transactions
During the year, the Group disposed of its interest in Innoviva Inc. See Note 21 for details of disposal. The royalties due from GSK
to Innoviva in the year until the date of disposal were £113 million (2020 – £261 million).
A loan of £4.6 million (2020 – £3.0 million) to Medicxi Ventures I LP remained due to GSK at 31 December 2021. In 2021, GSK
increased the investment in Kurma Biofund II, FCPR by £0.2 million and Medicxi Ventures I LP of £1.0 million. As part of the joint
venture agreement with Qura Therapeutics LLC, the Group has an obligation to fund the joint venture up to April 2025, with both
GSK and its joint venture partner committing financial support in the amount of $26 million. At December 2021, the outstanding
liability due to Qura was $13 million.
Cash distributions were received from our investments in Medicxi Ventures I LP of £5.5 million, in Longwood Founders Fund, LP
of £3.0 million and in Apollo Therapeutics LLP of £0.1 million.
The aggregate compensation of the Directors and GLT is given in Note 9, ‘Employee costs’.
40. Acquisitions and disposals
Details of the acquisition and disposal of significant subsidiaries and associates, joint ventures and other businesses are given below:
2021
Business acquisitions
GSK completed no material business acquisitions in 2021.
Business disposals
GSK made a number of business disposals for net cash consideration received in the year of £10 million. The profit on the disposal
of the businesses in the year of £24 million was calculated as follows:
Total
£m
Consideration:
Cash consideration including currency forwards, purchase adjustments and deferred consideration
10
Total
10
Net assets sold:
Property, plant and equipment
3
Cash and cash equivalents
1
Other net assets
1
Total
5
Costs:
Deal costs
(16)
Reclassification of exchange from other comprehensive income
35
Gain on disposals in 2021
24
Associates and joint ventures
On 20 May 2021 GSK agreed with Innoviva, Inc (“Innoviva”) to sell all of its approximately 32 million shares of common stock of
Innoviva back to Innoviva at a price of $12.25 per share, raising gross proceeds of approximately $392 million. Following settlement
of the transaction, GSK will no longer hold any Innoviva stock. See details in Note 21 ‘Investment in associates and joint ventures’.
Cash flows
Business
disposals
£m
Associates
and joint
ventures
disposals
£m
Cash consideration received
43
277
Net deferred consideration paid
(51)
–
Transaction costs
(8)
–
Cash and cash equivalents (divested)/acquired
(1)
–
Cash (outflow)/inflow
(17)
277
222
GSK Annual Report 2021
Notes to the financial statements
continued
2020
Business acquisitions
GSK completed one smaller business acquisition when it acquired 55% of Pfizer Biotech Corporation Taiwan, a part of Pfizer’s
consumer healthcare business, which was not previously recognised as part of the Consumer Healthcare Joint Venture, on
28 September 2020 for non cash consideration of £129 million. This represented goodwill of £124 million, cash of £21 million
and other assets acquired of £18 million less non-controlling interest of £14 million and net liabilities of £20 million.
Total
£m
Net assets acquired:
Intangible assets
2
Property, plant and equipment
5
Inventory
5
Trade and other receivables
6
Cash and cash equivalents
21
Trade and other payables
(20)
19
Non-controlling interest
(14)
Goodwill 124
129
Non-cash consideration (settlement of a promissory note)
129
Total consideration
129
Business disposals
On 1 April 2020, GSK completed its divestment of Horlicks and other Consumer Healthcare nutrition products in India and a
number of other countries (excluding Bangladesh) to Unilever and the merger of GSK’s Indian listed Consumer Healthcare entity
with Hindustan Unilever, an Indian listed public company. GSK received a 5.7% equity stake in Hindustan Unilever and £395 million
in cash. GSK disposed of its equity stake in Hindustan Unilever during May 2020.
The divestment in Bangladesh closed on 30 June 2020. Total cash consideration received was £177 million.
The cash divested as part of the disposal of the India and Bangladesh Consumer Healthcare entities was £478 million.
The profit on the disposal of the businesses in the year of £2,795 million was calculated as follows:
Horlicks
divestment
£m
Other
£m
Total
£m
Consideration:
Cash consideration receivable including currency forwards and purchase adjustments
492
157
649
Equity investment in Hindustan Unilever Limited
3,124
–
3,124
Total 3,616
157 3,773
Net assets disposed:
Goodwill 142
1
143Intangible assets
15
103
118Property, plant and equipment
56
12
68
Inventory
– 6 6
Cash and cash equivalents
478
3
481
Other net (liabilities)/assets
(155)
1
(154)
Total 536 126 662
Costs:
Transaction costs
12 28
40
Derivative 240
–
240Reclassification of exchange from other comprehensive income
36
–
36
Total 288 28 316
Gain on disposals
2,792
3
2,79540. Acquisitions and disposals
continued
GSK Annual Report 2021
223
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationThe exposure to share price movements embedded in the agreement to merge GSK’s Indian listed Consumer Healthcare entity
with Hindustan Unilever Limited as part of the divestment of Horlicks and other nutrition products in India and a number of other
countries was recognised as a derivative between signing of the agreement in 2018 and completion of the transaction in 2020.
£240 million is recorded as a cost in the table above for the derecognition of the derivative asset. This largely reflects fair value
gains recognised in the Income Statement in prior periods.
Associates and joint ventures
During the year, GSK made investments into associates of £4 million and £4 million was paid in cash.
Cash flows
Business
acquisitions
£m
Business
disposals
£m
Associates
and joint
ventures
investments
£m
Cash consideration received/(paid)
–
786
(4)
Net deferred consideration
–
(19)
–
Transaction costs
(6) (27)
–
Cash and cash equivalents acquired/(divested)
21 (481)
–
Cash inflow/(outflow)
15 259 (4)
2019
Business acquisitions
Pfizer consumer healthcare business
The acquisition of Pfizer’s consumer healthcare business completed on 31 July 2019.
GSK and Pfizer have contributed their respective consumer healthcare businesses into a new Consumer Healthcare Joint Venture
in a non-cash transaction, whereby GSK has acquired Pfizer’s consumer healthcare business in return for shares in the Joint
Venture. GSK has an equity interest of 68% and majority control of the Joint Venture and Pfizer has an equity interest of 32%.
As the Group has control over the Consumer Healthcare Joint Venture it is consolidated within the Group’s financial statements.
In a number of territories, legal completion of the acquisition has not occurred because of regulatory constraints. However, the
Consumer Healthcare Joint Venture obtained control of the majority of these businesses in these territories from 31 July 2019
and has consolidated the net assets of those businesses from that date, but in all cases is entitled to the benefits of the trading
of businesses in the delayed territories.
The non-controlling interest in the Consumer Healthcare Joint Venture, calculated applying the proportionate goodwill method,
represents Pfizer’s share of the net assets of the Joint Venture, excluding goodwill.
Goodwill of £3.9 billion, which is not expected to be deductible for tax purposes, has been recognised. The goodwill represents
the potential for further synergies arising from combining the acquired businesses with GSK’s existing business together with the
value of the workforce acquired. Total transaction costs recognised in 2018 and 2019 for the acquisition amounted to £77 million.
Since acquisition on 31 July 2019, sales of £1.2 billion arising from the Pfizer consumer healthcare business have been included in
Group turnover. If the business had been acquired at the beginning of the year, it is estimated that Group turnover in 2019 would
have been approximately £1.5 billion higher. The business has been integrated into the Group’s existing activities and it is not
practicable to identify the impact on the Group profit in the period.
Tesaro Inc.
On 22 January 2019, GSK acquired 100% of Tesaro Inc., an oncology focused biopharmaceutical company, for cash consideration
of $5.0 billion (£3.9 billion), in order to strengthen the Group’s pharmaceutical pipeline. Transaction costs amounted to £31 million.
Goodwill of £1.2 billion, none of which is expected to be tax-deductible, has been recognised. The goodwill represents the
potential for further synergies arising from combining the acquired businesses with GSK’s existing business together with the value
of the workforce acquired. From acquisition on 22 January 2019 to 31 December 2019, sales of £0.2 billion arising from the Tesaro
business have been included in Group turnover. The business has been integrated into the Group’s existing activities and it is not
practicable to identify the impact on the Group profit in the period.
40. Acquisitions and disposals
continued
224
GSK Annual Report 2021
Notes to the financial statements
continued
The fair value of the assets acquired in business combinations, including goodwill, are set out in the table below. Amounts related to
the Pfizer consumer healthcare business acquisition are provisional and subject to change.
Pfizer
consumer
healthcare
business
£m
Tesaro
£m
Other
£m
Net assets acquired:
Intangible assets
12,357 3,092
–
Property, plant and equipment
354
6 –
Right of use assets
39 40
–
Inventory
986
162–
Trade and other receivables
546
115 35
Other assets including cash and cash equivalents
302 254 16
Trade and other payables
(779)
(282) (39)
Net deferred tax liabilities
(2,591) (252)
–
Other liabilities
(99) (5)
–
Term loan
–
(445)
–
Non-controlling interest
(3,577)
– –
Goodwill 3,854 1,169
–
Total 11,392 3,854 12
Consideration settled by shares in GSK Consumer Healthcare Joint Venture
11,392
– –
Cash consideration paid
–
3,854
6
Fair value of investment in joint venture converted into subsidiary
– – 6
Total consideration
11,392 3,854 12
The non-controlling interest of £3,577 million represents Pfizer’s share of the fair value of the Pfizer consumer healthcare business,
excluding goodwill. The total non-controlling interest initially recognised in the Consolidated statement of changes in equity of
£6,887 million also includes Pfizer’s share of the book value of GSK Consumer Healthcare.
Business disposals
GSK made a number of business disposals for net cash consideration received in the year of £104 million. The profit on the
disposal of the businesses in the year of £201 million was calculated as follows:
£m
Total
£m
Cash consideration receivable net of subsidy payable
106
Net assets disposed:
Goodwill (4)
Intangible assets
(1)
Property, plant and equipment
(44)
Inventory (7)
Cash and cash equivalents
(12)
Other net assets
(4)
(72)
Transaction costs
(27)
Reclassification of exchange from other comprehensive income
75
Non-controlling interest divested
16
98
Transaction signed but not yet completed – gain on embedded derivative
143
Transaction signed but not yet completed – transaction costs
(40)
Total profit on disposal
201
40. Acquisitions and disposals
continued
GSK Annual Report 2021
225
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationTransaction signed but not yet completed at 31 December 2019
In December 2018, GSK agreed to divest Horlicks and other Consumer Healthcare nutrition brands to Unilever
PLC
and to form a merger of GlaxoSmithKline Consumer Healthcare Limited with Hindustan Unilever Limited for a total consideration valued at
approximately £3.1 billion. GlaxoSmithKline Consumer Healthcare Limited was a public company listed on the National Stock
Exchange (NSE) and Bombay Stock Exchange (BSE), in which GSK held a 72.5% stake. Following the merger of GlaxoSmithKline
Consumer Healthcare Limited with Hindustan Unilever Limited, a public company listed on the NSE and BSE, GSK would own
133.8 million Hindustan Unilever Limited shares.
The Group entered into forward foreign exchange contracts in relation to the transaction. Contracts with a value of £1.7 billion
were designated as a cash flow hedge of part of the foreign exposure arising on the transaction. Further contracts with a value of
£0.6 billion were designated as net investment hedges against INR and EUR assets. In addition, the exposure to share price
movements in the forward purchase of shares in Hindustan Unilever Limited were recognised as an embedded derivative. The
embedded derivative was in an asset position and had a fair value of £240 million at 31 December 2019 (2018 – £100 million).
Associates and joint ventures
During the year, GSK made investments of £27 million into associates and joint ventures of which £11 million was paid in cash.
Cash flows
Business
acquisitions
£m
Business
disposals
£m
Associates
and joint
venture
investments
£m
Cash consideration (paid)/received
(3,860) 161 (11)
Net deferred consideration received
–
29
–
Transaction costs
(95) (73)
–
Cash and cash equivalents acquired/divested
384
(13)
–
Cash (outflow)/inflow
(3,571)
10 4
(11)41. Adjustments reconciling profit after tax to operating cash flows
2021
£m
2020
£m
2019
£m
Profit after tax
5,096
6,388 5,268
Tax on profits
346
580
953
Share of after-tax profits of associates and joint ventures
(33)
(33) (74)
Finance expense net of finance income
756
848
814
Depreciation
1,195
1,214 1,231
Amortisation of intangible assets
1,182
1,137 1,103
Impairment and assets written off
540
781
825
Profit on sale of businesses
(38)
(2,831) (201)
Profit on sale of intangible assets
(568)
(426) (342)
Loss on sale of investments in associates
36
– –
Profit on sale of equity investments
(8)
(69) (2)
Business acquisition costs
–
–
59
Changes in working capital:
Decrease in inventories
25
119 300
Increase in trade receivables
(782)
(224) (32)
Increase in trade payables
284
225 263
(Increase) in other receivables
(314)
(159) (160)
Contingent consideration paid (see Note 32)
(742)
(765) (780)
Other non-cash increase in contingent consideration liabilities
1,063
1,275 83
Increase in other payables
1,324
818
89
Increase/(decrease) in pension and other provisions
(340)
400 (188)
Share-based incentive plans
367
381 365
Fair value adjustments
(17)
464
19
Other
(129)
(27) (61)
4,147
3,708
4,264
Cash generated from operations
9,243
10,096 9,532
40. Acquisitions and disposals
continued
226
GSK Annual Report 2021
Notes to the financial statements
continued
42. Reconciliation of net cash flow to movement in net debt
2021
£m
2020
£m
2019
£m
Net debt, as previously reported
(20,780)
(25,215) (21,621)
Implementation of IFRS 16
–
–
(1,303)
Net debt at beginning of year, as adjusted
(20,780)
(25,215) (22,924)
Increase in cash and bank overdrafts
(1,414)
470
826
Increase/(decrease) in liquid investments
(18)
1
(1)
Increase in long-term loans
–
(3,298) (4,794)
Repayment of short-term Notes
2,313
3,738
4,160
Repayment of/(increase in) other short-term loans
(318)
3,567 (3,095)
Repayment of lease liabilities
215
227
214
Debt of subsidiary undertakings acquired
–
–
(524)
Exchange adjustments
314
(135) 1,015
Other non-cash movements
(150)
(135) (92)
Movement in net debt
942
4,435 (2,291)
Net debt at end of year
(19,838)
(20,780) (25,215)
Analysis of changes in net debt
At 1 January
2021
£m
Exchange
£m
Other
£m
Interest
expense
£m
Change
in fair value
£m
Reclass-
ifications
£m
Cash flow
£m
At
31 December
2021
£m
Liquid investments
78
1 – – – –
(18)
61
Cash and cash equivalents
6,292 (29) (1)
– – –
(1,988) 4,274
Overdrafts (1,030)
– – – – –
574
(456)
5,262 (29) (1)
– – –
(1,414)
3,818
Debt due within one year:
Commercial paper
(17)
8 – – – –
(243)
(252)
European/US MTN & Bank facilities
(2,350)
1 – – –
(2,494) 2,247
(2,596)
Lease liabilities
(230)
5 7 – –
(200) 215
(203)
Other (98) 15 (2)
– – –
(9)(94)
(2,695) 29 2,210
5 – –
(2,694)(3,145)
Debt due after one year:
European/US MTN & Bank facilities
(22,538)
306
–
(22)
–
2,494
–
(19,760)
Lease liabilities
(887)
7
(132)
– –
200
–
(812)
(23,425) 313 (132) (22)
–
2,694–
(20,572)
Net debt
(20,780) 314 (128) (22)
– –
778
(19,838)
Interest payable
(247)
–
(30) (753)
– –
786
(244)
Derivative financial instruments
(74) (22)
– – –
(20)72
–Total liabilities from financing activities*
(26,441) 342 (157) (775)
72
(23,983)–
2,976* Excluding cash and cash equivalents, overdrafts and liquid investments.
GSK Annual Report 2021
227
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationAnalysis of changes in net debt
At 1 January
2020
£m
Exchange
£m
Other
£m
Interest
expense
£m
Change
in fair value
£m
Reclass-
ifications
£m
Cash flow
£m
At
31 December
2020
£m
Liquid investments
79
– – – – –
(1)
78
Cash and cash equivalents
4,707
(44) 6,292
– – – –
1,629 Cash and cash equivalents - AHFS
507
– – – – –
(507)
–
Overdrafts (383) (1,030)
5 – – – –
(652)4,831 (39)
– – – –
5,262 470
Debt due within one year:
Commercial paper
(3,586) (50)
– – – –
3,619 (17)
European/US MTN and Bank facilities
(2,658)
38 – – –
(3,468)
3,738
(2,350)Lease liabilities
(240) (4) 16
– –
(229)
227
(230)Other (51) 12 (7) (98)
– – –
(52)(6,535) (4) 7,532 (2,695)
9 – –
(3,697)Debt due after one year:
European/US MTN & Bank facilities
(22,580) (104) (4) (20) (3,298) (22,538)
–
3,468 Lease liabilities
(1,010) 19 (125)
–
229 –
–
(887)(23,590) (85) (129) (20) (3,298) (23,425)
–
3,697 Net debt
(25,215) (128) (120) (20)
– –
4,703 (20,780)
Interest payable
(244)
1 –
(868)
– –
864
(247)
Derivative financial instruments
335
– – –
(290)
–
(119) (74)
Total liabilities from financing activities*
(30,034) (88) (120) (888) (290)
–
4,979
(26,441)
* Excluding cash and cash equivalents, overdrafts and liquid investments.
For further information on significant changes in net debt see Note 29, ‘Net debt’.
42. Adjustments of net cash flow to movement in net debt
continued
228
GSK Annual Report 2021
Notes to the financial statements
continued
The objective of GSK’s Treasury activity is to minimise the
post-tax net cost of financial operations and reduce its volatility
to benefit earnings and cash flows. GSK uses a variety of
financial instruments to finance its operations and derivative
financial instruments to manage market risks from these
operations. Derivatives principally comprise of foreign exchange
forward contracts and swaps which are used to swap
borrowings and liquid assets into currencies required for Group
purposes as well as interest rate swaps which are used to
manage exposure to financial risks from changes in interest
rates. These financial instruments reduce the uncertainty of
foreign currency transactions and interest payments.
Derivatives are used exclusively for hedging purposes in
relation to underlying business activities and not as trading or
speculative instruments.
Capital management
GSK’s financial strategy supports the Group’s strategic
priorities and is regularly reviewed by the Board. GSK manages
the capital structure of the Group through an appropriate mix of
debt and equity.
The capital structure of the Group consists of net debt of
£19.8 billion (see Note 29, ‘Net debt’) and total equity, including
items related to non-controlling interests, of £21.3 billion (see
‘Consolidated statement of changes in equity’ on page 170).
Total capital, including that provided by non-controlling
interests, is £41.1 billion.
The Group continues to manage its financial policies to a credit
profile that particularly targets short-term credit ratings of A-1
and P-1 while maintaining single A long-term ratings consistent
with those targets. The Group’s long-term credit rating with
Standard & Poor’s is A (stable outlook) and with Moody’s
Investor Services (‘Moody’s’) it is A2 (stable outlook). The
Group’s short-term credit ratings are A-1 and P-1 with Standard
& Poor’s and Moody’s respectively.
Liquidity risk management
GSK’s policy is to borrow centrally in order to meet anticipated
funding requirements. The strategy is to diversify liquidity
sources using a range of facilities and to maintain broad access
to financial markets. Each day, we sweep cash to or from a
number of global subsidiaries and central Treasury accounts for
liquidity management purposes. GSK utilises both physical and
notional cash pool arrangements as appropriate by location and
currency. For notional cash pools, liquidity is drawn against
foreign currency balances to provide both local funding and
central liquidity as required and with balances actively managed
and maintained to appropriate levels. As balances in notional
pooling arrangements are not settled across currencies, gross
cash and overdraft balances are reported.
At 31 December 2021, GSK had £3.6 billion of borrowings
repayable within one year and held £4.3 billion of cash and
cash equivalents and liquid investments of which £2.9 billion
was held centrally.
GSK has access to short-term finance under a $10 billion
(£7.4 billion) US commercial paper programme; $nil (£nil) was
in issue at 31 December 2021 (2020 – $25 million (£17
million)). GSK has access to short-term finance under a £5
billion Euro commercial paper programme;
€
300 million (£252
million) was in issue at 31 December 2021 (2020 – £nil). At 31
December 2021, GSK had a £1.9 billion three-year committed
facility and a $2.5 billion (£1.9 billion) 364-day committed
facility. The three-year committed facility was agreed in
September 2019, extended by one year in September 2020
and was extended again by one year to 2024 in August 2021.
The 364-day committed facility was agreed in August 2021.
These committed facilities were undrawn at 31 December
2021. GSK considers this level of committed facilities to be
adequate, given current liquidity requirements.
In preparation for the separation of the Consumer Healthcare
business, in February 2022 GSK cancelled and replaced the
three year and 364 day facilities. New revolving credit facilities
of equivalent size were agreed with maturities in September
2025 and September 2023.
GSK has a £20.0 billion Euro Medium Term Note programme
and at 31 December 2021, £10.5 billion of notes were in issue
under this programme. The Group also had $15.7 billion
(£11.6 billion) of notes in issue at 31 December 2021 under a
US shelf registration. GSK’s borrowings mature at dates
between 2022 and 2045.
The put option owned by Pfizer in ViiV Healthcare is
exercisable. In reviewing liquidity requirements GSK considers
that sufficient financing options are available should the put
option be exercised.
Market risk
Interest rate risk management
The objective of GSK’s Treasury activity is to minimise the
effective net interest cost and to balance the mix of debt at fixed
and floating rates over time.
The Group’s main interest rate risk arises from borrowings and
investments with floating rates and refinancing of maturing fixed
rate debt where any changes in interest rates will affect future
cash flows or the fair values of financial instruments. The policy
on interest rate risk management limits the net amount of
floating rate debt to a specific cap, reviewed and agreed no
less than annually by the Board.
The majority of debt is issued at fixed interest rates and
changes in the floating rates of interest do not significantly
affect the Group’s net interest charge. This includes some
borrowings for which interest rate swaps are in place which
removes the impact of the associated periodic repricing.
Short-term borrowings including bank facilities are exposed to
the risk of future changes in market interest rate as are the
majority of cash and liquid investments.
43. Financial instruments and related disclosures
GSK Annual Report 2021
229
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationInterest rate benchmark reform
‘Interest rate benchmark reform – Amendments to IFRS 9, IAS
39, IFRS 4, IFRS 7 and IFRS 16’ Phase I and Phase II were
issued by the IASB in September 2019 and August 2020, and
adopted by the UK Endorsement Board on 5 January 2021.
Phase I of the amendment modifies specific hedge accounting
requirements to allow hedge accounting to continue for
affected hedges during the period of uncertainty before the
hedged items or hedging instruments affected by the current
interest rate benchmarks are amended as a result of the
ongoing interest rate benchmark reforms. Phase II also provides
that, for financial instruments measured using amortised cost
measurement, changes to the basis for determining the
contractual cash flows required by interest rate benchmark
reform should be reflected by adjusting their effective interest
rate and no immediate gain or loss should be recognised.
The Group has closely monitored the market and the output
from the various industry working groups managing the
transition to new benchmark interest rates. This includes
announcements made by LIBOR regulators, including the
Financial Conduct Authority (FCA) and the US Commodity
Futures Trading Commission, regarding the transition away
from LIBOR (including GBP LIBOR, USD LIBOR and
EURIBOR) to the Sterling Overnight Index Average Rate
(SONIA), the Secured Overnight Financing Rate (SOFR),
and the Euro Short-Term Rate (€STR) respectively.
At 31 December 2021, the Group was not directly exposed
to interest rate benchmark reform as it held no interest rate
derivatives or floating rate debt that referenced to LIBOR. The
Group did not transition any material derivatives or floating rate
debt into a new index as all of the instruments referencing
LIBOR matured before December 2021.
Foreign exchange risk management
The Group’s objective is to minimise the exposure of overseas
operating subsidiaries to transaction risk by matching local
currency income with local currency costs where possible.
Foreign currency transaction exposures arising on external
and internal trade flows are selectively hedged. GSK’s internal
trading transactions are matched centrally and inter-company
payment terms are managed to reduce foreign currency risk.
Where possible, GSK manages the cash surpluses or
borrowing requirements of subsidiary companies centrally
using forward contracts to hedge future repayments back
into the originating currency.
In order to reduce foreign currency translation exposure, the
Group seeks to denominate borrowings in the currencies of
our principal assets and cash flows. These are primarily
denominated in US Dollars, Euros and Sterling. Borrowings
can be swapped into other currencies as required.
Borrowings denominated in, or swapped into, foreign
currencies that match investments in overseas Group assets
may be treated as a hedge against the relevant assets. Forward
contracts in major currencies are also used to reduce exposure
to the Group’s investment in overseas assets (see ‘Net
investment hedges’ section of this note for further details).
Credit risk
Credit risk is the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group
and arises on cash and cash equivalents and favourable
derivative financial instruments held with banks and financial
institutions as well as credit exposures to wholesale and retail
customers, including outstanding receivables.
The Group considers its maximum credit risk at 31 December
2021 to be £11,417 million (31 December 2020 – £12,572
million) which is the total of the Group’s financial assets with
the exception of ’Other investments’ (comprising equity
investments) which bear equity risk rather than credit risk.
See page 232 for details on the Group’s total financial assets.
At 31 December 2021, GSK’s greatest concentration of
credit risk was £0.9 billion with a wholesaler in the US
(2020 - £1.4 billion with Legal and General Investment
Management Class 4 GBP liquidity fund (AAA/Aaa)).
See page 230 for further information on the Group’s credit
risk exposure in respect of the three largest US wholesaler
customers.
There has been no change in the estimation techniques or
significant assumptions made during the current reporting
period in assessing the loss allowance for financial assets at
amortised cost or at FVTOCI since the adoption of IFRS 9 at
the start of the 2018 reporting period.
Treasury-related credit risk
GSK sets global counterparty limits for each of GSK’s banking
and investment counterparties based on long-term credit
ratings from Moody’s and Standard and Poor’s. Usage of these
limits is actively monitored.
GSK actively manages its exposure to credit risk, reducing
surplus cash balances wherever possible. This is part of GSK’s
strategy to regionalise cash management and to concentrate
cash centrally as much as possible. The table below sets out
the credit exposure to counterparties by rating for liquid
investments, cash and cash equivalents and derivatives.
The gross asset position on each derivative contract is
considered for the purpose of this table, although, under ISDA
agreements, the amount at risk is the net position with each
counterparty. Table (e) on page 240 sets out the Group’s
financial assets and liabilities on an offset basis.
43. Financial instruments and related disclosures
continued
230
GSK Annual Report 2021
Notes to the financial statements
continued
GSK’s centrally managed cash reserves amounted to
£2.9 billion at 31 December 2021, all available within three
months. This includes £1.7 billion of cash managed by the
Group for ViiV Healthcare, a 78.3% owned subsidiary and
£0.7 billion of cash managed by the Group for GSK Consumer
Healthcare, a 68% owned subsidiary. The Group has invested
centrally managed liquid assets in bank deposits, Aaa/AAA
rated US Treasury and Treasury repo only money market funds
and Aaa/AAA rated liquidity funds.
Wholesale and retail credit risk
Outside the US, no customer accounts for more than 5% of
the Group’s trade receivables balance.
In the US, in line with other pharmaceutical companies, the
Group sells its products through a small number of wholesalers
in addition to hospitals, pharmacies, physicians and other
groups. Sales to the three largest wholesalers amounted to
approximately 75% (2020 – 79%) of the sales of the US
Pharmaceuticals and Vaccines businesses in 2021.
At 31 December 2021, the Group had trade receivables due
from these three wholesalers totalling £2,430 million or 39% of
total trade receivables (2020 – £2,362 million or 43%). The
Group is exposed to a concentration of credit risk in respect of
these wholesalers such that, if one or more of them encounters
financial difficulty, it could materially and adversely affect the
Group’s financial results.
The Group’s credit risk monitoring activities relating to these
wholesalers include a review of their quarterly financial
information and Standard & Poor’s credit ratings, development
of GSK internal risk ratings, and establishment and periodic
review of credit limits.
All new customers are subject to a credit vetting process and
existing customers will be subject to a review at least annually.
The vetting process and subsequent reviews involve obtaining
information including the customer’s status as a government or
private sector entity, audited financial statements, credit bureau
reports, debt rating agency (e.g. Moody’s, Standard & Poor’s)
reports, payment performance history (from trade references,
industry credit groups) and bank references.
43. Financial instruments and related disclosures
continued
At 31 December 2021, £54 million (2020 – £47 million) of cash is categorised as held with unrated or sub-investment grade rated
counterparties (lower than BBB-/Baa3) of which £7 million (2020 – £1 million) is cash in transit. The remaining exposure is
concentrated in overseas banks used for local cash management or investment purposes, including: £19 million in Nigeria held with
United Bank for Africa, Zenith Bank, Access Bank and Stanbic IBTC Bank; £14 million with Halk Bank in the UK; £2 million with BTV
in Austria; £2 million in Argentina held with Banco de la Nacion and Banco de la Provincia; £2 million with J Trust Royal Bank in
Cambodia; £1 million with Produbanco in Ecuador; £1 million with Banco Central de Honduras in Honduras; £1 million with BAC
San Jos
é
in Panama and £1 million with Banco Popular in Puerto Rico. Of the £77 million of bank balances and deposits held with
BBB/Baa rated counterparties, £25 million was held with BBB-/Baa3 rated counterparties, including balances or deposits of
£24 million with HDFC Bank in India. These banks are used for local investment purposes.
GSK measures expected credit losses over cash and cash equivalents as a function of individual counterparty credit ratings and
associated 12 month default rates. Expected credit losses over cash and cash equivalents and third-party financial derivatives are
deemed to be immaterial and no such loss has been experienced during 2021.
Credit ratings are assigned by Standard & Poor’s and Moody’s respectively. Where the opinions of the two rating agencies differ,
GSK assigns the lower rating of the two to the counterparty. Where local rating agency or Fitch data is the only source available,
the ratings are converted to global ratings equivalent to those of Standard & Poor’s or Moody’s using published conversion tables.
These credit ratings form the basis of the assessment of the expected credit loss on Treasury-related balances held at amortised
cost being bank balances and deposits and Government securities.
2021
AAA/Aaa
£m
AA/Aa
£m
A/A
£m
BBB/Baa
£m
BB+/Ba1
and below
/unrated
£m
Total
£m
Bank balances and deposits
– 7
2,687
77
54
2,825
US Treasury and Treasury repo only money market funds
54
– – – –
54
Liquidity funds
1,395
– – – –
1,395
Government securities
– 1 –
60
–61
3rd party financial derivatives
– –
200
– –
200
Total 1,449
67
2,88778
54
4,535
2020
AAA/Aaa
£m
AA/Aa
£m
A/A
£m
BBB/Baa
£m
BB+/Ba1
and below
/unrated
£m
Total
£m
Bank balances and deposits
–
10
2,575
368
3,00047
US Treasury and Treasury repo only money market funds
317
– – – –
317
Liquidity funds
2,975
– – – –
2,975
Government securities
– 1 –
77
–78
3rd party financial derivatives
– –
134 12
–
146
Total 3,292
87
3812,709
47
6,516GSK Annual Report 2021
231
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationTrade receivables consist of amounts due from a large number
of customers, spread across diverse industries and
geographical areas. Ongoing credit evaluation is performed
on the financial condition of accounts receivable and, where
appropriate, credit insurance is purchased or factoring
arrangements put in place.
The amount of information obtained is proportional to the level
of exposure being considered. The information is evaluated
quantitatively (i.e. credit score) and qualitatively (i.e. judgement)
in conjunction with the customer’s credit requirements to
determine a credit limit.
Trade receivables are grouped into customer segments that
have similar loss patterns to assess credit risk while other
receivables and other financial assets are assessed individually.
Historical and forward-looking information is considered to
determine the appropriate expected credit loss allowance.
The Group believes there is no further credit risk provision
required in excess of the allowance for expected credit losses
(see Note 25, ‘Trade and other receivables’).
Credit enhancements
The Group uses credit enhancements including factoring
and credit insurance to minimise the credit risk of the trade
receivables in the Group. At 31 December 2021, £315 million
(2020 – £386 million) of trade receivables were insured in
order to protect the receivables from loss due to credit risks
such as default, insolvency and bankruptcy.
Each Group entity assesses the credit risk of its private
customers to determine if credit insurance is required.
Factoring arrangements are managed locally by entities and
are used to mitigate risk arising from large credit risk
concentrations. All factoring arrangements are non-recourse.
Fair value of financial assets and liabilities excluding
lease liabilities
The table on page 232 presents the carrying amounts and the
fair values of the Group’s financial assets and liabilities
excluding lease liabilities at 31 December 2021 and
31 December 2020.
The fair values of the financial assets and liabilities are included
at the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date.
The following methods and assumptions are used to measure
the fair values of significant financial instruments carried at fair
value on the balance sheet:
–
Other investments – equity investments traded in an active
market determined by reference to the relevant stock
exchange quoted bid price; other equity investments
determined by reference to the current market value of similar
instruments, recent financing rounds or the discounted cash
flows of the underlying net assets
–
Trade receivables carried at fair value – based on invoiced
amount
–
Interest rate swaps, foreign exchange forward contracts,
swaps and options – based on the present value of
contractual cash flows or option valuation models using
market sourced data (exchange rates or interest rates) at the
balance sheet date
–
Cash and cash equivalents carried at fair value – based on
net asset value of the funds
–
Contingent consideration for business acquisitions and
divestments – based on present values of expected future
cash flows.
The following methods and assumptions are used to estimate
the fair values of significant financial instruments which are not
measured at fair value on the balance sheet:
–
Receivables and payables, including put options, carried at
amortised cost – approximates to the carrying amount
–
Liquid investments – approximates to the carrying amount
–
Cash and cash equivalents carried at amortised cost –
approximates to the carrying amount
–
Long-term loans – based on quoted market prices (a level 1
fair value measurement) in the case of European and US
Medium Term Notes; approximates to the carrying amount in
the case of other fixed rate borrowings and floating rate bank
loans
–
Short-term loans, overdrafts and commercial paper –
approximates to the carrying amount because of the short
maturity of these instruments.
43. Financial instruments and related disclosures
continued
232
GSK Annual Report 2021
Notes to the financial statements
continued
2021
2020
Notes
Carrying
value
£m
Fair
value
£m
Carrying
value
£m
Fair
value
£m
Financial assets measured at amortised cost:
b
21 21
37 37
b
4,830 4,830
3,990 3,990
61 61
78 78
2,825 2,825
3,000 3,000
Financial assets measured at fair value through other comprehensive
income (FVTOCI):
a
1,927 1,927
2,939 2,939
a,b 1,942
1,943 1,943
1,942Financial assets mandatorily measured at fair value through profit or loss (FVTPL):
a
199 199
121 121
a,b
23 23
30 30
a,b
59 59
46 46
a,d,e
83 83
68 68
a
1,449 1,449
3,292 3,292
Derivatives designated and effective as hedging instruments (fair value movements
through Other comprehensive income)
a,d,e
123
123
89
89
Total financial assets
13,543 13,543
15,632 15,632
Financial liabilities measured at amortised cost:
d
(4,982) (5,311)
(7,681) (8,171)
(17,373) (20,746)
(17,205) (21,966)
(550) (550)
(1,110) (1,110)
(252) (252)
(17) (17)
(1) (1)
(20) (20)
f
(23,158) (26,860)
(26,033) (31,284)
c
(15,431) (15,431)
(13,748) (13,748)
c
(113) (113)
(232) (232)
c
(52) (52)
(72) (72)
Financial liabilities mandatorily measured at fair value through profit or loss (FVTPL):
a,c
(6,076) (6,076)
(5,869) (5,869)
a,d,e
(171) (171)
(200) (200)
Derivatives designated and effective as hedging instruments (fair value movements
through Other comprehensive income)
a,d,e
(57)
(57)
(31)
(31)
Total financial liabilities excluding lease liabilities
(45,058) (48,760)
(46,185) (51,436)
Net financial assets and financial liabilities excluding lease liabilities
(31,515) (35,217)
(30,553) (35,804)
The valuation methodology used to measure fair value in the above table is described and categorised on page 231.
Trade and other receivables, Other non-current assets, Trade and other payables, Other provisions, Contingent consideration
liabilities and Other non-current liabilities are reconciled to the relevant Notes on pages 234 and 235.
43. Financial instruments and related disclosures
continued
GSK Annual Report 2021
233
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationFair value of investments in GSK shares
At 31 December 2021, the Employee Share Ownership Plan (ESOP) Trusts held GSK shares with a carrying value of £28 million
(2020 – £195 million) and a market value of £373 million (2020 – £657 million) based on quoted market price. The shares are held
by the ESOP Trusts to satisfy future exercises of options and awards under employee incentive schemes. In 2021, the carrying
value, which is the lower of cost or expected proceeds, of these shares has been recognised as a deduction from other reserves.
At 31 December 2021, GSK held Treasury shares at a cost of £4,969 million (2020 – £4,969 million) which has been deducted
from retained earnings.
(a) Financial instruments held at fair value
The following tables categorise the Group’s financial assets and liabilities held at fair value by the valuation methodology applied in
determining their fair value. Where possible, quoted prices in active markets are used (Level 1). Where such prices are not available,
the asset or liability is classified as Level 2, provided all significant inputs to the valuation model used are based on observable
market data. If one or more of the significant inputs to the valuation model is not based on observable market data, the instrument is
classified as Level 3. Other investments classified as Level 3 in the tables below comprise equity investments in unlisted entities
with which the Group has entered into research collaborations and also investments in emerging life science companies.
At 31 December 2021
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets at fair value
Financial assets measured at fair value through other comprehensive income (FVTOCI):
Other investments designated at FVTOCI
1,736
–
191
1,927
Trade and other receivables
–
1,943
–
1,943
Financial assets mandatorily measured at fair value through profit or loss (FVTPL):
Other investments
– –
199
199
Other non-current assets
– –
23
23
Trade and other receivables
–
59
–59
Held for trading derivatives that are not in a designated and effective hedging relationship
–
77
683
Cash and cash equivalents
1,449
– –
1,449
Derivatives designated and effective as hedging instruments (fair value movements through OCI)
–
123
–
123
3,185 2,202 419
5,806
Financial liabilities at fair value
Financial liabilities mandatorily measured at fair value through profit or loss (FVTPL):
Contingent consideration liabilities
– –
(6,076)
(6,076)
Held for trading derivatives that are not in a designated and effective hedging relationship
–
(171)
–
(171)
Derivatives designated and effective as hedging instruments (fair value movements through OCI)
–
(57)
–
(57)
–
(228) (6,076)
(6,304)
At 31 December 2020
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Financial assets at fair value
Financial assets measured at fair value through other comprehensive income (FVTOCI):
Other investments designated at FVTOCI
2,281
–
658 2,939
Trade and other receivables
–
1,942
–
1,942
Financial assets mandatorily measured at fair value through profit or loss (FVTPL):
Other investments
– –
121 121
Other non-current assets
– –
30 30
Trade and other receivables
–
46
–46
Held for trading derivatives that are not in a designated and effective hedging relationship
–
63
5
68
Cash and cash equivalents
3,292
– –
3,292
Derivatives designated and effective as hedging instruments (fair value movements through OCI)
–
89
–89
5,573
2,140 814 8,527
Financial liabilities at fair value
Financial liabilities mandatorily measured at fair value through profit or loss (FVTPL):
Contingent consideration liabilities
– –
(5,869) (5,869)
Held for trading derivatives that are not in a designated and effective hedging relationship
–
(191) (9) (200)
Derivatives designated and effective as hedging instruments (fair value movements through OCI)
–
(31)
–
(31)
–
(222) (5,878) (6,100)
43. Financial instruments and related disclosures
continued
234
GSK Annual Report 2021
Notes to the financial statements
continued
Movements in the year for financial instruments measured using Level 3 valuation methods are presented below:
2021
£m
2020
£m
At 1 January
(5,064)
(4,722)
Net losses recognised in the income statement
(1,024)
(1,269)
Net gains recognised in other comprehensive income
189
160
Settlement of contingent consideration liabilities
856
885
Additions
99
126Disposals and settlements
(19)
(172)
Transfers from Level 3
(694)
(72)
At 31 December
(5,657)
(5,064)
Net losses of £1,024 million (2020 – £1,269 million) attributable to Level 3 financial instruments which were recognised in the
income statement were all in respect of financial instruments which were held at the end of the year and were reported in Other
operating income. Charges of £1,026 million (2020 – £1,114 million) arose from remeasurement of the contingent consideration
payable for the acquisition of the former Shionogi-ViiV Healthcare joint venture and £32 million (2020 – £161 million) arose from
remeasurement of the contingent consideration payable for the acquisition of the Novartis Vaccines business. Net gains of £195
million (2020 – net gains of £39 million) attributable to Level 3 financial instruments reported in Other comprehensive income as
Fair value movements on equity investments arose prior to transfer from Level 3 on equity investments which transferred to a Level
1 valuation methodology as a result of listing on a recognised stock exchange during the year. Net gains and losses include the
impact of exchange movements.
Financial liabilities measured using Level 3 valuation methods at 31 December included £5,559 million (2020 – £5,359 million) in
respect of contingent consideration payable for the acquisition in 2012 of the former Shionogi-ViiV Healthcare joint venture. This
consideration is expected to be paid over a number of years and will vary in line with the future performance of specified products
and movements in certain foreign currencies. They also included £479 million (2020 – £477 million) in respect of contingent
consideration for the acquisition in 2015 of the Novartis Vaccines business. This consideration is expected to be paid over a
number of years and will vary in line with the future performance of specified products, the achievement of certain milestone
targets and movements in certain foreign currencies. Sensitivity analysis on these balances is provided in Note 32, ‘Contingent
consideration liabilities’.
(b) Trade and other receivables and Other non-current assets in scope of IFRS 9
The following table reconciles financial instruments within Trade and other receivables and Other non-current assets which fall
within the scope of IFRS 9 to the relevant balance sheet amounts. The financial assets are predominantly non-interest earning.
Non-financial instruments include tax receivables, pension surplus balances and prepayments, which are outside the scope of
IFRS 9.
2021
2020
At
FVTPL
£m
At
FVTOCI
£m
Amortised
cost
£m
Financial
instruments
£m
Non-
financial
instruments
£m
Total
£m
At
FVTPL
£m
At
FVTOCI
£m
Amortised
cost
£m
Financial
instruments
£m
Non-
financial
instruments
£m
Total
£m
Trade and other receivables
(Note 25)
59
1,943
4,830
6,832
1,028
7,860
46
1,942
3,990
5,978
974
6,952
Other non-current assets
(Note 23)
23
–
21
44
1,632
1,676
30
–
37
67
974
1,041
82 1,943 4,851 4,027 6,045 1,948 7,993
6,876
2,660 9,536
76
1,942Trade and other receivables include trade receivables of £6,246 million (2020 – £5,549 million). The Group has portfolios in each
of the three business models under IFRS 9: £59 million (2020 – £46 million), measured at FVTPL, is held to sell the contractual
cash flows as the receivables will be sold under a factoring arrangement, £1,943 million (2020 – £1,942 million), measured at
FVTOCI, is held to either collect or sell the contractual cash flows as the receivables may be sold under a factoring agreement,
and £4,244 million (2020 – £3,561 million), measured at amortised cost, is held to collect the contractual cash flows and there is
no factoring agreement in place.
43. Financial instruments and related disclosures
continued
GSK Annual Report 2021
235
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information(c) Trade and other payables, Other provisions, Contingent consideration liabilities and Other non-current
liabilities in scope of IFRS 9
The following table reconciles financial instruments within Trade and other payables, Other provisions, Contingent consideration
liabilities and Other non-current liabilities which fall within the scope of IFRS 9 to the relevant balance sheet amounts. The financial
liabilities are predominantly non-interest bearing. Non-financial instruments include payments on account, tax and social security
payables and provisions which do not arise from contractual obligations to deliver cash or another financial asset, which are outside
the scope of IFRS 9.
2021
2020
At FVTPL
£m
Amortised
cost
£m
Financial
instruments
£m
Non-
financial
instruments
£m
Total
£m
At FVTPL
£m
Amortised
cost
£m
Financial
instruments
£m
Non-
financial
instruments
£m
Total
£m
Trade and other payables
(Note 28)
–
(15,431)
(15,431)
(2,123)
(17,554)
–
(13,748)
(13,748)
(2,092)
(15,840)
Other provisions
(Note 31)
–
(113)
(113)
(1,358)
(1,471)
–
(232)
(232)
(1,527)
(1,759)
Contingent consideration
liabilities (Note 32)
(6,076)
–
(6,076)
–
(6,076)(5,869)
–
(5,869)–
(5,869)Other non-current liabilities
(Note 33)
–
(52)
(52)
(869)
(921)
–
(72)
(72)
(731)
(803)
(6,076) (15,596) (14,052) (19,921) (4,350) (24,271)
(21,672) (4,350) (26,022)
(5,869)(d) Derivative financial instruments and hedging programmes
Derivatives are only used for economic hedging purposes and not as speculative investments and are classified as ‘held for trading’,
other than designated and effective hedging instruments, and are presented as current assets or liabilities if they are expected to be
settled within 12 months after the end of the reporting period, otherwise they are classified as non-current. The Group has the
following derivative financial instruments:
2021
Fair value
2020
Fair value
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Non-current
Cash flow hedges – Interest rate swap contracts
(principal amount – £1,996 million (2020 – £nil))
12
(1)
– –
Current
Cash flow hedges – Interest rate swap contracts
(principal amount – £nil (2020 – £899 million))
– –
–
(1)
Net investment hedges – Cross currency swaps
(principal amount – £nil (2020 – £549 million))
– –
–
(18)
Cash flow hedges – Foreign exchange contracts
(principal amount – £160 million (2020 – £24 million))
–
(3)
– –
Net investment hedges – Foreign exchange contracts
(principal amount – £5,469 million (2020 – £11,193 million))
111
(53)
89
(12)
Derivatives designated and effective as hedging instruments
123
(57)
89
(31)
Non-current
Embedded and other derivatives
6 –
5
(10)
Current
Foreign exchange contracts
(principal amount – £9,728 million (2020 – £13,563 million))
77
(169)
57
(190)
Embedded and other derivatives
–
(2)
6 –
Derivatives classified as held for trading
83 (171)
68
(200)
Total derivative instruments
206 (228)
157
(231)
Fair value hedges
At 31 December 2021 and 31 December 2020, the Group had no designated fair value hedges.
43. Financial instruments and related disclosures
continued
236
GSK Annual Report 2021
Notes to the financial statements
continued
Net investment hedges
At 31 December 2021, certain foreign exchange contracts were designated as net investment hedges in respect of the foreign
currency translation risk arising on consolidation of the Group’s net investment in its European (Euro) and Japanese (JPY) foreign
operations as shown in the table above.
The carrying value of bonds on page 232 included £4,982 million (2020 – £7,681 million) that were designated as hedging
instruments in net investment hedges.
Cash flow hedges
During 2018-2021, the Group entered into forward foreign exchange contracts which have been designated as cash flow hedges.
These were entered into to hedge the foreign exchange exposure arising on cash flows from Euro denominated coupon payments
relating to notes issued under the Group’s European Medium Term Note programme, on the buyout of Novartis’
non-controlling interest in the Consumer Healthcare Joint Venture in 2018, on the divestment of Horlicks and other nutrition brands
which took place in 2020 and on refinancing existing debt maturities.
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. In addition, the Group carries a
balance in reserves that arose from pre-hedging fluctuations in long-term interest rates when pricing bonds issued in prior years in
the current year, and in the future. The balance is reclassified to finance costs over the life of these bonds.
Foreign exchange risk
In the current year, the Group has designated certain foreign exchange forward contracts and swaps as cash flow and net
investment hedges. Foreign exchange derivative financial assets and liabilities are presented in the line ‘Derivative financial
instruments’ (either as assets or liabilities) on the Consolidated balance sheet. The following tables detail the foreign exchange
forward contracts and swaps outstanding at the end of the reporting period, as well as information on the related hedged items.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Group enters
into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so
a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that
the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical
derivative method to assess effectiveness.
The main source of hedge ineffectiveness in these hedging relationships is the effect of the counterparty and the Group’s own
credit risk on the fair value of the foreign exchange forward contracts and swaps, which is not reflected in the fair value of the
hedged item attributable to changes in foreign exchange rates and ineffectiveness on rolling the cash flow hedges of the
divestments mentioned above. No other sources of ineffectiveness emerged from these hedging relationships. Ineffectiveness
to be recorded from cash flow hedges amounted to £nil in 2021 (2020 – gain of £7 million). No ineffectiveness was recorded from
net investment hedges (2020 – £nil).
Included in the 2020 table below under ‘Borrowings’ are bonds with notional value of US$750 million that have been swapped to
fixed interest rate EUR debt with a cross currency interest rate swap.
2021
Hedging instruments
Average
exchange rate
Foreign
currency
Notional
value
£m
Carrying
value
£m
Periodic
change in value
for calculating
hedge
ineffectiveness
£m
Cash flow hedges
Foreign exchange contracts
Buy foreign currency:
Less than 3 months
1.32
USD 89
(2)–
3 to 6 months
1.17 (1)
EUR
(1)48
Over 6 months
1.17
EUR
23– –
160 (3) (1)
43. Financial instruments and related disclosures
continued
GSK Annual Report 2021
237
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information2021
Hedging instruments
Average
exchange rate
Foreign
currency
Notional
value
£m
Carrying
value
£m
Periodic
change in value
for calculating
hedge
ineffectiveness
£m
Net investment hedges
Foreign exchange contracts
Sell foreign currency:
Less than 3 months
1.18
EUR
5,34858
578
SGD
– –
55
155.19 JPY 121
–
15Borrowings
Less than 3 months
EUR
252 (252) 11
Over 6 months
EUR
4,998 (4,982) 459
10,719 (5,176) 1,118
2021
Hedged items
Periodic change in value
for calculating hedge
ineffectiveness
£m
Cumulative balance in cash
flow hedge reserve/foreign
currency translation reserve
for continuing hedges
£m
Cash flow hedges
Variability in cash flows from foreign exchange exposure arising on
Euro denominated coupon payments relating to debt issued
1
(1)
Net investment hedges
Net investment in foreign operations
(1,117)
(873)
2020
Hedging instruments
Average
exchange rate
Foreign
currency
Notional
value
£m
Carrying
value
£m
Periodic
change in value
for calculating
hedge
ineffectiveness
£m
Cash flow hedges
Foreign exchange contracts
Buy foreign currency:
3 to 6 months
1.12 0.1
EUR
24–
24 0.1
–
2020
Hedging instruments
Average
exchange rate
Foreign
currency
Notional
value
£m
Carrying
value
£m
Periodic
change in value
for calculating
hedge
ineffectiveness
£m
Net investment hedges
Foreign exchange contracts
Sell foreign currency:
Less than 3 months
1.10
EUR
9,66360
(370)
Less than 3 months
1.79
SGD
1,387 13 32
Less than 3 months
139.41 JPY 143
4
(30)
Borrowings (including cross currency interest rate swaps):
3 to 6 months
EUR
549
(550) (34)
Over 6 months
EUR
7,117 (7,131) (501)
18,859 (7,604) (903)
43. Financial instruments and related disclosures
continued
238
GSK Annual Report 2021
Notes to the financial statements
continued
2020
Hedged items
Periodic change in value
for calculating hedge
ineffectiveness
£m
Cumulative balance in cash
flow hedge reserve/foreign
currency translation reserve
for continuing hedges
£m
Cash flow hedges
Variability in cash flows from a highly probable forecast transaction
– –
Variability in cash flows from foreign exchange exposure arising on
Euro denominated coupon payments relating to debt issued
–
–
Net investment hedges
Net investment in foreign operations
903 (1,983)
£19 million (2020 – £19 million) of balances in the cash flow hedge reserve arise from hedging relationships for which hedge
accounting is no longer applied.
The following table details the effectiveness of the hedging relationships and the amounts reclassified from the hedging reserve to
profit or loss:
2021
Amount reclassified to profit or loss
Hedging
gains/(losses)
recognised in
reserves
£m
Amount
of hedge
ineffectiveness
gains/(losses)
recognised in
profit or loss
£m
Line item
in profit or
loss in
which hedge
ineffectiveness
is included
Hedged
future cash
flows
no longer
expected to
occur
£m
As hedged
item affects
profit or loss
£m
Line item
in which
reclassification
adjustment
is included
Cash flow hedges
Variability in cash flows from a highly probable forecast transaction
7 –
Other
operating
income/
(expense)
–
(7) Other
operating
income/
(expense)
Variability in cash flows from foreign exchange exposure arising on
Euro denominated coupon payments relating to debt issued
(1)
–
Finance income/
(expense)
– –
Finance
income/
(expense)
Net investment hedges
Net investment in foreign operations
1,117
–
Finance income/
(expense)
–
(7) Finance
income/
(expense)
The following table details the effectiveness of the hedging relationships and the amounts reclassified from the hedging reserve to
profit or loss:
2020
Amount reclassified to profit or loss
Hedging
gains/(losses)
recognised in
reserves
£m
Amount
of hedge
ineffectiveness
gains/(losses)
recognised in
profit or loss
£m
Line item
in profit or
loss in
which hedge
ineffectiveness
is included
Hedged
future cash
flows
no longer
expected to
occur
£m
As hedged
item affects
profit or loss
£m
Line item
in which
reclassification
adjustment
is included
Cash flow hedges
Variability in cash flows from a highly probable forecast transaction
(15)
7
Other
operating
income/
(expense)
–
51 Other
operating
income/
(expense)
Variability in cash flows from foreign exchange exposure arising on
Euro denominated coupon payments relating to debt issued
– –
Finance
income/
(expense)
– –
Finance
income/
(expense)
Net investment hedges
Net investment in foreign operations
(903)
–
Finance
income/
(expense)
– –
Finance
income/
(expense)
43. Financial instruments and related disclosures
continued
GSK Annual Report 2021
239
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationInterest rate risk
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps, where at quarterly intervals the
difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal
amounts are exchanged.
There are none of these swaps outstanding as 31 December 2021, however, the interest rate risk on an element of future debt
issuance has been managed by entering into forward starting interest rate swaps, effectively to lock in the interest rates on the debt
in advance. These will be closed out at the time of issuing the debt, and the resulting gain or loss held in OCI and recycled to
income statement as the interest payments on the debt impact the income statement.
Forward starting interest rate swaps
The forward starting interest rate contracts, exchanging floating interest for fixed interest, have been designated as cash flow
hedges to hedge the interest variability of the interest cash flows associated with the future fixed rate debt.
Interest rate swaps
The interest rate swap contracts, exchanging floating rate interest for fixed interest, have been designated as cash flow hedges to
hedge the variability of the interest cash flows associated with floating rate debt relating to notes issued under the Group’s European
Medium Term Note programme. The interest rate swaps and the interest payments on the loan occur simultaneously and the amount
accumulated in equity is reclassified to profit or loss over the period that the floating rate interest payments affect profit or loss.
The critical terms of the interest rate swap and forward starting interest rate swap contracts and their corresponding hedged items
are materially the same. A qualitative assessment of effectiveness is performed and it is expected that the value of the interest rate
swap contracts and the value of the corresponding hedged items will systematically change in opposite directions in response to
movements in the underlying interest rates. The main sources of ineffectiveness in these hedge relationships are the effects of the
Group’s own credit risk on the fair value of the interest rate swap contracts, which are not reflected in the fair value of the hedged item
attributable to the change in interest rates. No other material sources of ineffectiveness emerged from these hedging relationships.
The following tables provide information regarding interest rate swap and forward starting interest rate swap contracts outstanding
and the related hedged items at 31 December 2021 and 31 December 2020. Interest rate swap contract assets and liabilities are
presented in the line ‘Derivative financial instruments’ (either as assets or liabilities) on the Consolidated balance sheet.
2021
Hedging instruments
Average
contracted fixed
rate
%
Notional
principal
value
£m
Change in
fair value for
recognising
hedge
ineffectiveness
£m
Fair value
assets/
(liabilities)
£m
5-10 years
1.1038
668
4 4
10-30 years
1.3385 935
3 3
More than 30 years
1.4515 393
4 4
2021
Hedged items
Change in value
used for
calculating
hedge
ineffectiveness
£m
Balance in cash
flow hedge
reserve for
continuing
hedges
after tax
£m
Pre-hedging of long-term interest rate
(11) (8)
£11 million (2020 – £11 million) of balances in the cash flow hedge reserve arise from hedge relationships for which hedge
accounting is no longer applied.
2020
Hedging instruments
Average
contracted fixed
rate
%
Notional
principal
value
£m
Change in
fair value for
recognising
hedge
ineffectiveness
£m
Fair value
assets/
(liabilities)
£m
Less than 1 year
0.17 1,449
3
(19)1 to 2 years
– – – –
2020
Hedged items
Change in value
used for
calculating
hedge
ineffectiveness
£m
Balance in cash
flow hedge
reserve for
continuing
hedges
after tax
£m
Variable rate borrowings
(3)
1
43. Financial instruments and related disclosures
continued
240
GSK Annual Report 2021
Notes to the financial statements
continued
The following table details the effectiveness of the hedging relationships and the amounts reclassified from the hedging reserve to
profit or loss:
2021
Amount reclassified to profit or loss
Hedging
gains/(losses)
recognised in
reserves
£m
Amount
of hedge
ineffectiveness
recognised in
profit or loss
£m
Line item
in profit or
loss in
which hedge
ineffectiveness
is included
Hedged
future cash
flows
no longer
expected to
occur
£m
As hedged
item affects
profit or loss
£m
Line item
in which
reclassification
adjustment is
included
Cash flow hedges
Variability in cash flows
(11)
–
Finance
income/
(expense)
–
17
Finance
income/
(expense)
Pre-hedging of long-term interest rates:
Matured in the past
– –
Finance
income/
(expense)
– 2
Finance
income/
(expense)
5-10 years
4 – – –
10-30 years
3 – – –
>30 years
4 – – –
2020
Amount reclassified to profit or loss
Hedging
gains/(losses)
recognised in
reserves
£m
Amount
of hedge
ineffectiveness
recognised in
profit or loss
£m
Line item
in profit or
loss in
which hedge
ineffectiveness
is included
Hedged
future cash
flows
no longer
expected to
occur
£m
As hedged
item affects
profit or loss
£m
Line item
in which
reclassification
adjustment is
included
Cash flow hedges
Variability in cash flows
3 –
Finance
income/
(expense)
– –
Finance
income/
(expense)
Pre-hedging of long-term interest rates
(7)
–
Finance
income/
(expense)
– 3
Finance
income/
(expense)
(e) Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount reported in the balance sheet where there is a legally enforceable right
to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability
simultaneously. There are also arrangements that do not meet the criteria for offsetting but still allow for the related amounts to be
offset in certain circumstances, such as bankruptcy or the termination of a contract.
The following tables set out the financial assets and liabilities that are offset, or subject to enforceable master netting arrangements
and other similar agreements but not offset, as at 31 December 2021 and 31 December 2020. The column ‘Net amount’ shows the
impact on the Group’s balance sheet if all offset rights were exercised.
At 31 December 2021
Gross
financial
assets/
(liabilities)
£m
Financial
(liabilities)/
assets
offset
£m
Net financial
assets/
(liabilities)
£m
Related
amounts not
offset
£m
Net
amount
£m
Financial assets
Trade and other receivables
6,851 (19) 6,829
6,832
(3)Derivative financial instruments
206
–
206
(192) 14
Financial liabilities
Trade and other payables
(15,450) 19
(15,431)
3
(15,428)
Derivative financial instruments
(228)
–
(228)
192 (36)
43. Financial instruments and related disclosures
continued
GSK Annual Report 2021
241
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationAt 31 December 2020
Gross
financial
assets/
(liabilities)
£m
Financial
(liabilities)/
assets
offset
£m
Net financial
assets/
(liabilities)
£m
Related
amounts not
offset
£m
Net
balance
£m
Financial assets
Trade and other receivables
5,997 (19) 5,950
5,978
(28)Derivative financial instruments
157
–
157
(142) 15
Financial liabilities
Trade and other payables
(13,767) 19 (13,748) 28 (13,720)
Derivative financial instruments
(231)
–
(231) 142 (89)
Amounts which do not meet the criteria for offsetting on the balance sheet but could be settled net in certain circumstances
principally relate to derivative transactions under ISDA (International Swaps and Derivatives Association) agreements where each
party has the option to settle amounts on a net basis in the event of default of the other party. As there is presently not a legally
enforceable right of offset, these amounts have not been offset in the balance sheet, but have been presented separately in the
table above.
(f) Debt interest rate repricing table
The following table sets out the exposure of the Group to interest rates on debt, including commercial paper. The maturity analysis
of fixed rate debt is stated by contractual maturity and of floating rate debt by interest rate repricing dates. For the purpose of this
table, debt is defined as all classes of borrowings other than lease liabilities.
2021
2020
Total
debt
£m
Total
£m
Floating and fixed rate debt less than one year
(3,398)
(3,495)
Between one and two years
(4,030)
(2,561)
Between two and three years
(1,576)
(4,061)
Between three and four years
(1,365)
(1,622)
Between four and five years
(1,425)
(1,398)
Between five and ten years
(4,411)
(5,981)
Greater than ten years
(6,953)
(6,915)
Total
(23,158)
(26,033)
Original issuance profile:
Fixed rate interest
(22,355)
(23,002)
Floating rate interest
(803)
(3,031)
(23,158)
(26,033)
In addition to the above, forward starting interest rate swaps have been entered into, which affect the pricing of debt to be raised in
the future. See Section (d) Interest Rate Risk for further details.
43. Financial instruments and related disclosures
continued
242
GSK Annual Report 2021
Notes to the financial statements
continued
(g) Sensitivity analysis
The tables below illustrate the estimated impact on the income statement and equity as a result of hypothetical market movements
in foreign exchange and interest rates in relation to the Group’s financial instruments. The range of variables chosen for the
sensitivity analysis reflects management’s view of changes which are reasonably possible over a one-year period.
Foreign exchange sensitivity
The Group operates internationally and is primarily exposed to foreign exchange risk in relation to Sterling against movements in US
Dollar, Euro and Japanese Yen. Foreign exchange risk arises from the translation of financial assets and liabilities which are not in
the functional currency of the entity that holds them. Based on the Group’s net financial assets and liabilities as at 31 December, a
weakening and strengthening of Sterling against these currencies, with all other variables held constant, is illustrated in the tables
below. The tables exclude financial instruments that expose the Group to foreign exchange risk where this risk is fully hedged with
another financial instrument.
2021
2020
Income statement impact of non-functional currency foreign exchange exposures
Increase/(decrease) in
income
£m
Increase/(decrease) in
income
£m
10 cent appreciation of the US Dollar
5
20
10 cent appreciation of the Euro
(26)
(25)
10 yen appreciation of the Yen
–
(1)
2021
2020
Income statement impact of non-functional currency foreign exchange exposures
Increase/(decrease) in
income
£m
Increase/(decrease) in
income
£m
10 cent depreciation of the US Dollar
(4)
(17)
10 cent depreciation of the Euro
22
21
10 yen depreciation of the Yen
–
1
The equity impact, shown below, for foreign exchange sensitivity relates to derivative and non-derivative financial instruments
hedging the Group’s net investments in its European (Euro) foreign operations and cash flow hedges of its foreign exchange
exposure arising on Euro denominated coupon payments relating to notes issued under the Group’s European Medium Term
Note programme.
2021
2020
Equity impact of non-functional currency foreign exchange exposures
Increase/(decrease)
in equity
£m
Increase/(decrease)
in equity
£m
10 cent appreciation of the Euro
(964)
(1,711)
2021
2020
Equity impact of non-functional currency foreign exchange exposures
Increase/(decrease)
in equity
£m
Increase/(decrease)
in equity
£m
10 cent depreciation of the Euro
814
1,429
43. Financial instruments and related disclosures
continued
GSK Annual Report 2021
243
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationThe tables below present the Group’s sensitivity to a weakening and strengthening of Sterling against the relevant currency based
on the composition of net debt as shown in Note 29 adjusted for the effects of foreign exchange derivatives that are not part of net
debt but affect future foreign currency cash flows.
2021
2020
Impact of foreign exchange movements on net debt
(Increase)/decrease
in net debt
£m
(Increase)/decrease
in net debt
£m
10 cent appreciation of the US Dollar
(767)
(782)
10 cent appreciation of the Euro
444
286
10 yen appreciation of the Yen
17
23
2021
2020
Impact of foreign exchange movements on net debt
(Increase)/decrease
in net debt
£m
(Increase)/decrease
in net debt
£m
10 cent depreciation of the US Dollar
661
675
10 cent depreciation of the Euro
(375)
(239)
10 yen depreciation of the Yen
(15)
(20)
Interest rate sensitivity
The Group is exposed to interest rate risk on its outstanding borrowings and investments where any changes in interest rates will
affect future cash flows or the fair values of financial instruments.
The majority of debt is issued at fixed interest rates and changes in the floating rates of interest do not significantly affect the
Group’s net interest charge, although the majority of cash and liquid investments earn floating rates of interest.
The table below hypothetically shows the Group’s sensitivity to changes in interest rates in relation to Sterling, US Dollar and Euro
floating rate financial assets and liabilities. If the interest rates applicable to floating rate financial assets and liabilities were to have
increased by 1% (100 basis points), and assuming other variables had remained constant, it is estimated that the Group’s finance
income for 2021 would have decreased by approximately £11 million (2020 – £14 million increase). A 1% (100 basis points)
movement in USD interest rates would cause an increase of £197 million to equity (2020 - £nil). A 1% (100 basis points)
movement in interest rates EUR or Sterling is not deemed to have a material effect on equity.
2021
2020
Income statement impact of interest rate movements
Increase/(decrease)
in income
£m
Increase/(decrease)
in income
£m
1% (100 basis points) increase in Sterling interest rates
(25)
8
1% (100 basis points) increase in US Dollar interest rates
11
28
1% (100 basis points) increase in Euro interest rates
3
(22)
43. Financial instruments and related disclosures
continued
244
GSK Annual Report 2021
Notes to the financial statements
continued
(h) Contractual cash flows for non-derivative financial liabilities and derivative instruments
The following tables provide an analysis of the anticipated contractual cash flows including interest payable for the Group’s non-
derivative financial liabilities on an undiscounted basis. For the purpose of this table, debt is defined as all classes of borrowings
except for lease liabilities. Interest is calculated based on debt held at 31 December without taking account of future issuance.
Floating rate interest is estimated using the prevailing interest rate at the balance sheet date. Cash flows in foreign currencies are
translated using spot rates at 31 December.
At 31 December 2021
Debt
£m
Interest
on debt
£m
Lease
liabilities
£m
Finance
charge
on lease
liabilities
£m
Trade payables
and other
liabilities not
in net debt
£m
Total
£m
Due in less than one year
(3,399) (686) (203) (25) (16,432)
(20,745)
Between one and two years
(4,042) (620) (185) (22) (935)
(5,804)
Between two and three years
(1,582) (574) (120) (19) (893)
(3,188)
Between three and four years
(1,372) (538) (93) (16) (919)
(2,938)
Between four and five years
(1,428) (500) (73) (14) (924)
(2,939)
Between five and ten years
(4,440) (2,046) (205) (44) (2,703)
(9,438)
Greater than ten years
(7,033) (2,639) (136) (13) (1,571)
(11,392)
Gross contractual cash flows
(23,296) (7,603) (1,015) (153) (24,377)
(56,444)
At 31 December 2020
Debt
£m
Interest
on debt
£m
Lease
liabilities
£m
Finance
charge
on lease
liabilities
£m
Trade payables
and other
liabilities not
in net debt
£m
Total
£m
Due in less than one year
(3,493) (725) (230) (34) (14,554) (19,036)
Between one and two years
(2,566) (686) (207) (28) (995) (4,482)
Between two and three years
(4,078) (621) (126) (22) (897) (5,744)
Between three and four years
(1,632) (18) (867) (3,189)
(576)
(96)Between four and five years
(1,407) (539) (86) (15) (883) (2,930)
Between five and ten years
(6,018) (2,177) (239) (47) (3,169) (11,650)
Greater than ten years
(6,997) (2,985) (133) (16) (1,529) (11,660)
Gross contractual cash flows
(26,191) (8,309) (1,117) (180) (22,894) (58,691)
The table below provides an analysis of the anticipated contractual cash flows for the Group’s derivative instruments excluding
equity options which do not give rise to cash flows, and other embedded derivatives, which are not material, using undiscounted
cash flows. Cash flows in foreign currencies are translated using spot rates at 31 December. The gross cash flows of foreign
exchange contracts are presented for the purpose of this table although, in practice, the Group uses standard settlement
arrangements to reduce its liquidity requirements on these instruments.
2021
2020
Gross cash inflows Gross cash ouflows
Gross cash inflows Gross cash outflows
Forward
starting
interest rate
swaps
£m
Foreign
exchange
forward
contracts
and swaps
£m
Forward
starting
interest rate
swaps
£m
Foreign
exchange
forward
contracts
and swaps
£m
Cross
currency
interest rate
swaps
£m
Foreign
exchange
forward
contracts
and swaps
£m
Cross
currency
interest rate
swaps
£m
Foreign
exchange
forward
contracts
and swaps
£m
Less than one year
–
41,252 (13) (41,290)
551 32,451 (569) (32,508)
Between one and two years
12
– – – – –
(26)
–Between two and three years
24
–
(26)– – – – –
Between three and four years
28
–
(26)– – – – –
Between four and five years
28
–
(26)– – – – –
Greater than five years
259
–
(220)–
– – – –
Gross contractual cash flows
351 41,252 (337) (41,290)
551 32,451 (569) (32,508)
43. Financial instruments and related disclosures
continued
GSK Annual Report 2021
245
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information44. Employee share schemes
GSK operates several employee share schemes, including the Share Value Plan, whereby awards are granted to employees to
acquire shares or ADS in GlaxoSmithKline plc at no cost after a three-year vesting period and the Performance Share Plan,
whereby awards are granted to employees to acquire shares or ADS in GlaxoSmithKline plc at no cost, subject to the achievement
by the Group of specified performance targets. The granting of these restricted share awards has replaced the granting of options
to employees as the cost of the schemes more readily equates to the potential gain to be made by the employee. The Group also
operates savings related share option schemes, whereby options are granted to employees to acquire shares in GlaxoSmithKline
plc at a discounted price.
Grants of restricted share awards are normally exercisable at the end of the three-year vesting or performance period. Awards are
normally granted to employees to acquire shares or ADS in GlaxoSmithKline plc but in some circumstances may be settled in cash.
Grants under savings-related share option schemes are normally exercisable after three years’ saving. In accordance with UK
practice, the majority of options under the savings-related share option schemes are granted at a price 20% below the market price
ruling at the date of grant. Options under historical share option schemes were granted at the market price ruling at the date of grant.
The total charge for share-based incentive plans in 2021 was £404 million (2020 – £393 million; 2019 – £432 million). Of this
amount, £303 million (2020 – £313 million; 2019 – £302 million) arose from the Share Value Plan. See Note 9, ‘Employee Costs’
for further details.
GlaxoSmithKline share award schemes
Share Value Plan
Under the Share Value Plan, share awards are granted to certain employees at no cost. The awards vest after two and a half to
three years and there are no performance criteria attached. The fair value of these awards is determined based on the closing share
price on the day of grant, after deducting the expected future dividend yield of 3.8% (2020 – 5.0%; 2019 – 4.2%) over the duration
of the award.
Number of shares and ADS issuable
Shares
Number (000)
Weighted
fair value
ADS
Number (000)
Weighted
fair value
At 1 January 2019
34,068
17,387
Awards granted
12,814 £15.85 7,008 $37.90
Awards exercised
(11,709) (6,079)
Awards cancelled
(1,704)
(976)
At 31 December 2019
33,469
17,340
Awards granted
13,223 £13.60 7,411 $34.42
Awards exercised
(11,402) (5,746)
Awards cancelled
(1,418) (1,015)
At 31 December 2020
33,872
17,990
Awards granted
13,681 £13.30 7,280 $36.68
Awards exercised
(11,440) (5,726)
Awards cancelled
(1,776) (1,705)
At 31 December 2021
34,337 17,839
Performance Share Plan
Under the Performance Share Plan, share awards are granted to Directors and senior executives at no cost. The percentage of
each award that vests is based upon the performance of the Group over a defined measurement period with dividends reinvested
during the same period. For awards granted from 2016 to 2019, the performance conditions are based on three equally weighted
measures over a three-year performance period. These were adjusted free cash flow, TSR and R&D new product performance.
For awards granted from 2020, the performance conditions are based on four measures over a three-year performance period.
These are adjusted free cash flow (30%), TSR (30%), R&D new product performance (20%) and pipeline progress (20%).
The fair value of the awards is determined based on the closing share price on the day of grant. For TSR performance elements,
this is adjusted by the likelihood of that condition being met, as assessed at the time of grant.
During 2021, awards were made of 4.9 million shares at a weighted fair value of £10.69 and 1.6 million ADS at a weighted fair value
of $29.40. At 31 December 2021, there were outstanding awards over 13.7 million shares and 3.8 million ADS.
246
GSK Annual Report 2021
Notes to the financial statements
continued
Share options and savings-related options
For the purposes of valuing savings-related options to arrive at the share-based payment charge, a Black-Scholes option pricing
model has been used. The assumptions used in the model are as follows:
2021 Grant
2020 Grant 2019 Grant
Risk-free interest rate
0.74%
(0.07)% 0.44%
Dividend yield
3.8%
6.2% 4.5%
Volatility
27%
22%27%
Expected life 3 years
3 years
3 yearsSavings-related options grant price (including 20% discount)
£12.07
£10.34 £14.15
Options outstanding
Savings-related
share option schemes
Number
000
Weighted
exercise
price
At 31 December 2021
7,165 £11.58
Range of exercise prices on options outstanding at year end
£10.34
– £14.15
Weighted average market price on exercise during year
£13.30
Weighted average remaining contractual life 2.1 years
Options over 1.9 million shares were granted during the year under the savings-related share option scheme at a weighted average
fair value of £3.22. At 31 December 2021, 5.3 million of the savings-related share options were not exercisable.
There has been no change in the effective exercise price of any outstanding options during the year.
Employee Share Ownership Plan Trusts
The Group sponsors Employee Share Ownership Plan (ESOP) Trusts to acquire and hold shares in GlaxoSmithKline plc to satisfy
awards made under employee incentive plans and options granted under employee share option schemes. The trustees of the
ESOP Trusts purchase shares with finance provided by the Group by way of loans or contributions. The costs of running the ESOP
Trusts are charged to the income statement. Shares held by the ESOP Trusts are deducted from other reserves and amortised
down to the value of proceeds, if any, receivable from employees on exercise by a transfer to retained earnings. The trustees have
waived their rights to dividends on the shares held by the ESOP Trusts. On 10 February 2022, 50.3 million treasury shares were
transferred to the ESOP Trusts after which the Trusts held 72.9 million shares against the exercise of share options and share
rewards.
Shares held for share award schemes
2021
2020
Number of shares (000)
23,065
48,835
£m
£m
Nominal value
6
12
Carrying value
27
194
Market value
371
655
Shares held for share option schemes
2021
2020
Number of shares (000)
139
139
£m
£m
Nominal value
–
–
Carrying value
1
1
Market value
2
2
44. Employee share schemes
continued
GSK Annual Report 2021
247
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information45. Principal Group companies
The following represent the principal subsidiaries and their countries of incorporation of the Group at 31 December 2021. The
equity share capital of these entities is shown in the percentage columns. All companies are incorporated in their principal country
of operation except where stated.
England
%
US
%
Glaxo Group Limited
Glaxo Operations UK Limited
GlaxoSmithKline Capital plc
GlaxoSmithKline Consumer Healthcare Holdings Limited*
GlaxoSmithKline Consumer Healthcare (UK) Trading Limited
GlaxoSmithKline Consumer Trading Services Limited
GlaxoSmithKline Export Limited
GlaxoSmithKline Finance plc
GlaxoSmithKline Holdings Limited*
GlaxoSmithKline Research & Development Limited
GlaxoSmithKline Services Unlimited*
GlaxoSmithKline UK Limited
GlaxoSmithKline US Trading Limited
Glaxo Wellcome UK Limited
Setfirst Limited
SmithKline Beecham Limited
ViiV Healthcare Finance Limited
ViiV Healthcare Limited
ViiV Healthcare UK Limited
100.00
100.00
100.00
100.00
68.00
68.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
78.30
78.30
78.30
Alacer Corp
Block Drug Company, Inc.
Corixa Corporation
GlaxoSmithKline Capital Inc.
GlaxoSmithKline Consumer Healthcare Holdings (US) LLC
GlaxoSmithKline Consumer Healthcare, L.P.
GlaxoSmithKline Holdings (Americas) Inc.
GlaxoSmithKline LLC
Human Genome Sciences, Inc.
GSK Consumer Health, Inc.
GSK Equity Investments, Limited
Stiefel Laboratories, Inc.
Tesaro, Inc.
ViiV Healthcare Company
68.00
68.00
100.00
100.00
68.00
59.84
100.00
100.00
100.00
68.00
100.00
100.00
100.00
78.30
Europe
%
Others
%
GlaxoSmithKline Biologicals SA (Belgium)
GlaxoSmithKline Santé Grand Public (France)
Laboratoire GlaxoSmithKline (France)
ViiV Healthcare SAS (France)
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG (Germany)
GlaxoSmithKline GmbH & Co. KG (Germany)
GSK Vaccines GmbH (Germany)
GlaxoSmithKline Consumer Healthcare S.r.l (Italy)
GlaxoSmithKline S.p.A. (Italy)
GSK Vaccines S.r.l. (Italy)
ViiV Healthcare S.r.l. (Italy)
Pfizer Consumer Manufacturing Italy S.r.l. (Italy)
GSK Services Sp z o.o. (Poland)
GlaxoSmithKline Trading Services Limited (Republic of Ireland)**
GlaxoSmithKline Healthcare AO (Russia)
JSC GlaxoSmithKline Trading (Russia)
GlaxoSmithKline S.A. (Spain)
Laboratorios ViiV Healthcare, S.L. (Spain)
GSK Consumer Healthcare SARL (Switzerland)
100.00
68.00
100.00
78.30
68.00
100.00
100.00
68.00
100.00
100.00
78.30
68.00
100.00
100.00
68.00
100.00
100.00
78.30
68.00
GlaxoSmithKline Australia Pty Ltd (Australia)
GlaxoSmithKline Consumer Healthcare Australia Pty Ltd (Australia)
GlaxoSmithKline Brasil Limitada (Brazil)
GlaxoSmithKline Consumer Healthcare ULC/GlaxoSmithKline Soins
De Sante Aux Consommateurs SRI (Canada)
GlaxoSmithKline Inc. (Canada)
ID Biomedical Corporation of Quebec (Canada)
PF Consumer Healthcare Canada ULC/PF Soins De Sante
SRI (Canada)
GlaxoSmithKline Limited (China (Hong Kong))
Sino-American Tianjin Smith Kline & French Laboratories Ltd (China)
Wyeth Pharmaceutical Co. Ltd (China)
GlaxoSmithKline Asia Private Limited (India)
GlaxoSmithKline Pharmaceuticals Limited (India)
GlaxoSmithKline Consumer Healthcare Japan K.K. (Japan)
GlaxoSmithKline K.K. (Japan)
GlaxoSmithKline Pakistan Limited (Pakistan)
Glaxo Wellcome Manufacturing Pte Ltd. (Singapore)
GlaxoSmithKline Korea Limited (Republic of Korea)
100.00
68.00
100.00
68.00
100.00
100.00
68.00
100.00
37. 4 0
68.00
100.00
75.00
68.00
100.00
82.60
100.00
100.00
* Directly held wholly-owned subsidiary of GlaxoSmithKline plc.
** Head office in England.
The subsidiaries and associates listed above principally affect the figures in the Group’s financial statements. Each of
GlaxoSmithKline Capital Inc., GlaxoSmithKline Capital plc and GlaxoSmithKline LLC, is a wholly-owned finance subsidiary of the
company, and the company has fully and unconditionally guaranteed the securities issued by each of GlaxoSmithKline Capital Inc.,
GlaxoSmithKline Capital plc and GlaxoSmithKline LLC.
See pages 299 to 310 for a complete list of subsidiary undertakings, associates and joint ventures, which form part of these
financial statements.
248
GSK Annual Report 2021
Notes to the financial statements
continued
The Group is involved in significant legal and administrative
proceedings, principally product liability, intellectual property,
tax, anti-trust, consumer fraud and governmental investigations.
The most significant of these matters, other than tax matters,
are described below. The Group makes provision for these
proceedings on a regular basis as summarised in Note 2,
‘Accounting principles and policies’ and Note 31, ‘Other
provisions’. Note 2 also describes when disclosure is made of
proceedings for which there is no provision. Legal expenses
incurred and provisions related to legal claims are charged to
selling, general and administration costs. The Group does not
believe that information about the amount sought by plaintiffs,
if that is known, would be meaningful with respect to those
legal proceedings. This is due to a number of factors, including,
but not limited to, the stage of proceedings, the entitlement of
parties to appeal a decision and clarity as to theories of liability,
damages and governing law.
At 31 December 2021, the Group’s aggregate provision for legal
and other disputes (not including tax matters described in Note
14, ‘Taxation’) was £196 million. There can be no assurance that
any losses that result from the outcome of any legal proceedings
will not exceed by a material amount the amount of the provisions
reported in the Group’s financial statements. If this were to
happen, it could have a material adverse impact on the results
of operations of the Group in the reporting period in which the
judgements are incurred or the settlements entered into.
Intellectual property
Intellectual property claims include challenges to the validity
and enforceability of the Group’s patents on various products
or processes as well as assertions of non-infringement of those
patents. A loss in any of these cases could result in loss of
patent protection for the product at issue. The consequences
of any such loss could be a significant decrease in sales of that
product and could materially affect future results of operations
for the Group.
Coreg
In 2014, GSK initiated suit against Teva for inducing
infringement of its patent relating to the use of carvedilol
(Coreg) in decreasing mortality caused by congestive heart
failure. In June 2017, the case proceeded to a jury trial in the
US District Court for the District of Delaware. The jury returned
a verdict in GSK’s favour, awarding GSK lost profits and
reasonable royalties for a total award of $235.51 million. On 29
March 2018, the trial judge ruled on post-trial motions filed by
Teva and found that substantial evidence at trial did not support
the jury’s finding of induced infringement, overturning the jury
award. GSK appealed, and on 2 October 2020, a divided panel
of the Court of Appeals for the Federal Circuit reversed the
district court’s ruling and reinstated the jury award in GSK’s
favour. On 2 December 2020, Teva filed a petition for rehearing
en banc. The court granted Teva’s petition, but only for a
rehearing by the three-member panel that issued the original
decision. On 5 August 2021, the original panel issued its
rehearing opinion where the majority again reinstated the jury’s
damages award of $235.51 million in GSK’s favour. Teva again
filed a petition for rehearing en banc which was rejected by the
Court of Appeals for the Federal Circuit on 11 February 2022.
Dolutegravir Proceedings
–
Tivicay/Triumeq
In 2017, ViiV Healthcare received patent challenge letters under
the Hatch-Waxman Act from Cipla, Dr. Reddy’s Labs and Apotex
for
Triumeq
and
Tivicay
Triumeq; letters from Lupin and Mylan for
;
and a letter from Sandoz for
Tivicay
. ViiV Healthcare lists two
patents in the FDA Orange Book for
Tivicay
and Triumeq
.
One patent covers the molecule dolutegravir and expires on
5 October 2027. The second patent claims a crystal form of
dolutegravir and expires on 8 December 2029. All the letters
challenged only the later-expiring crystal form patent. Several of
the generic companies allege only that the crystal form patent is
invalid, while others claim the crystal form patent is both invalid
and not infringed by their proposed products. In 2017, ViiV
Healthcare filed patent infringement suits against all six generic
companies. Settlements have been reached in all litigations.
In September 2021, ViiV Healthcare received a paragraph IV
letter from Lupin relating to the
Tivicay
5mg dosage for oral
suspension, challenging only the crystal form patent. On 2
November 2021, ViiV Healthcare filed suit against Lupin in the
US District Court for the District of Delaware. No trial date has
yet been set.
–
Dovato
In September 2019, ViiV Healthcare received a paragraph IV
letter from Cipla relating to
Dovato
and challenging only the
crystal form patent. On 4 November 2019, ViiV Healthcare filed
suit against Cipla in the US District Court for the District of
Delaware. No trial date has yet been set.
–
Juluca
In January 2020, ViiV Healthcare received a paragraph IV letter
from Lupin relating to
Juluca
and challenging the crystal form
patent as well as a patent relating to the combination of
dolutegravir and rilpivirine that expires on 24 January 2031. On
28 February 2020, ViiV Healthcare filed suit against Lupin on
both patents. Additionally, on 12 June 2020, Cipla sent ViiV
Healthcare a paragraph IV letter related to
Juluca
, and on 22 July 2020, ViiV Healthcare filed suit against Cipla in federal court in
Delaware. The court has yet to set a trial date in either matter.
–
Litigation Against Gilead Sciences, Inc.
On 7 February 2018, ViiV Healthcare filed patent infringement
litigation regarding bictegravir against Gilead Sciences, Inc.
(Gilead) in the US District Court for the District of Delaware
and Canadian federal court. ViiV Healthcare alleged that
Gilead’s triple combination HIV drug containing the HIV
integrase inhibitor bictegravir infringes ViiV Healthcare’s patent
covering dolutegravir and other compounds that include
dolutegravir’s unique chemical scaffold. ViiV Healthcare also
commenced actions in the UK, France, Germany, Japan, Ireland,
South Korea and Australia against Gilead, alleging that Gilead’s
Biktarvy infringes certain of ViiV Healthcare’s HIV integrase
inhibitor patents. ViiV Healthcare has agreed to settle the global
patent infringement litigation between GSK, Shionogi (a
shareholder of ViiV Healthcare) and Gilead concerning ViiV
Healthcare’s patents relating to dolutegravir. Details regarding
the global settlement and licensing agreement can be found in
Note 47, ‘Post balance sheet events’.
46. Legal proceedings
GSK Annual Report 2021
249
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor informationProduct liability
The Group is currently a defendant in a number of product
liability lawsuits.
Avandia
There are two pending US class actions brought by third-party
payers which assert claims under the Racketeer Influenced
and Corrupt Organizations Act (RICO) and state consumer
protection laws. In December 2019, the Third Circuit Court of
Appeals reversed the summary judgements granted in favour
of the Group and remanded the third-party payer cases back
to district court. Discovery is underway in the district court but
no trial dates have yet been set. It is possible that a class
certification hearing will be held in early 2023.
PPI litigation
Certain members of the Group are defendants in the ongoing
proton pump inhibitor (PPI) litigation, in which plaintiffs allege
that their use of PPIs caused serious bodily injuries, including
acute kidney injury, chronic kidney disease and end-stage
renal failure. As of January 2022, there are approximately 1,500
Prevacid 24HR personal injury lawsuits and approximately
2,300 Nexium 24HR cases pending against the Group, nearly
all of which are pending in a Multidistrict Litigation (MDL)
proceeding in the District of New Jersey. Manufacturers of other
PPIs, including both prescription and OTC products, also are
named as co-defendants in the MDL. The Group has filed
motions to dismiss several hundred cases, but the MDL court
has not yet ruled on those motions. The first PPI bellwether
trial was delayed due to the ongoing COVID-19 pandemic
and is now set for October 2022 but will not involve the Group.
In addition to the MDL cases, a small number of cases are
pending in state courts.
Zantac
In 2019, the Group was contacted by several regulatory
authorities regarding the detection of N-Nitroso-dimethylamine
(NDMA) in
Zantac
(ranitidine) products. Based on information
available at the time and correspondence with regulators, the
Group made the decision to suspend the release, distribution
and supply of all dose forms of
Zantac
to all markets pending the outcome of the ongoing tests and investigations. Also, as
a precautionary action, the Group made the decision to initiate
a voluntary pharmacy/retail level recall of
Zantac
products
globally.
On 30 April 2020, the European Medicines Agency (EMA)
recommended the suspension of ranitidine medicines.
Following the publication of the EMA’s recommendation,
the Company communicated a decision not to re-enter the
market. In the US, FDA requested that all manufacturers
withdraw ranitidine products from the market.
The Group has been named as a defendant in approximately
2,150 US personal injury claims and numerous unfiled claims
registered in a census required by the Court presiding over the
Zantac
Multidistrict Litigation (MDL) proceeding. Class actions
alleging economic injury and a third-party payer class action
also have been filed in federal court. Outside the US, there
are three class actions pending against the Group in Canada,
along with a class action in Israel. Among the state court cases
naming the Group, the first bellwether trial in California is
currently scheduled to begin 10 October 2022 and a trial
has been scheduled in Madison County, Illinois to proceed
on 22 August 2022.
On 6 February 2020, the US product liability litigation was
assigned MDL status in the Southern District of Florida. The
Group has filed several rounds of Motions to Dismiss in the
MDL resulting in the following position: 1) the Court ruled in
favour of the Group’s motion on innovator liability; that issue
is on appeal; 2) the Court ruled in favour of Defendants with
respect to the Third Party Payor Class Action; Plaintiffs opted
not to replead their action and these issues are now on appeal;
3) the Court dismissed RICO claims from the Economic Loss
Class Action but allowed the class to move forward on plaintiffs
misbranding theory; and 4) the Medical Monitoring and
Economic Loss class actions are allowed to move forward.
Generics, retailers and packagers have been dismissed from
the cases.
In the MDL, plaintiffs were required to identify the types of
cancer that they wished to pursue and identified 10 different
types. In November 2021, plaintiffs withdrew from consideration
breast cancer and kidney cancer, reducing the number of types
of cancer from 10 to 8. In January 2022, plaintiffs withdrew from
consideration colorectal, prostate and lung and will proceed
only as to the following five types of cancer: bladder,
esophageal, gastric, liver and pancreatic.
In addition to the class action litigation, on 20 March 2020,
the Department of Justice (DOJ) sent the Group notice of a civil
investigation it had opened into allegations of False Claims Act
violations by the Group related to
Zantac
. On 18 June 2020,
the DOJ served a Civil Investigative Demand on the Group,
formalizing its request for documents. On the same day, the
New Mexico Attorney General filed a lawsuit against multiple
defendants, including the Group, alleging violations of state
consumer protection and false advertising statutes, among
other claims.
46. Legal proceedings
continued
250
GSK Annual Report 2021
Notes to the financial statements
continued
46. Legal proceedings
continued
Zofran
The Group was a defendant in over 400 product liability cases
involving Zofran pending in a Multidistrict Litigation (MDL)
proceeding in the District of Massachusetts. The cases alleged
that children suffered birth defects due to their mothers’
ingestion of Zofran and/or generic ondansetron for pregnancy-
related nausea and vomiting. Plaintiffs asserted that the Group
sold Zofran knowing it was unsafe for pregnant women, failed
to warn of the risks and illegally marketed Zofran “off-label” for
use by pregnant women.
On 1 June 2021, the MDL Court granted the Group’s motion for
summary judgment on federal pre-emption grounds. The Court
found that the FDA was fully informed of all relevant safety
information regarding Zofran and had repeatedly rejected any
attempt to add a birth defect warning to the label. The Court
granted judgment for the Group in all cases pending in the MDL
and closed the MDL proceeding. On 1 July 2021, Plaintiffs filed
an appeal of the preemption decision to the United States
Court of Appeals for the First Circuit. The appeal is pending.
The Group is also a defendant in two state court cases and
four proposed class actions in Canada.
Sales and marketing and regulation
The Group’s marketing and promotion of its Pharmaceutical
and Vaccine products are the subject of certain governmental
investigations and private lawsuits brought by litigants under
various theories of law.
GSK Korea – Proceedings under Fair Trade Laws
In August 2020, GSK Korea was indicted under Korea’s
Monopoly Regulation and Fair Trade laws in relation to
government tenders of HPV (
Cervarix
) and PCV
(Synflorix)
vaccines in 2018 and 2019. The prosecutor has alleged that
GSK Korea, through the actions of at least one of its
employees, interfered with the tender process under the
National Immunisation Programme by using “straw bidders.”
One employee also has been charged in his individual capacity
by the prosecutor in relation to the same matter. Further, a
number of wholesalers are co-defendants in the proceedings.
The Korea Fair Trade Commission also has commenced an
investigation of GSK Korea regarding the same matter. GSK
Korea is cooperating with the authorities on these matters.
Proceedings are ongoing.
Anti-trust/competition
Certain governmental actions and private lawsuits have been
brought against the Group alleging violation of competition or
anti-trust laws.
UK Competition and Markets Authority investigation
On 12 February 2016, the UK Competition and Markets
Authority (CMA) issued a decision fining the Group £37.6
million for infringement of the Competition Act, in connection
with agreements to settle patent disputes the Group entered
into in 2001 and 2002 with potential suppliers of generic
paroxetine formulations.
The Group appealed to the Competition Appeal Tribunal (CAT),
which delivered its initial judgement on 8 March 2018 but
referred certain questions of law to the European Union Court
of Justice (ECJ). On 30 January 2020, the ECJ issued its
judgement endorsing, in general, the approach undertaken by
the CMA in its original decision. On 10 May 2021, the CAT
delivered its final judgement and held that GSK had infringed
applicable competition law but reduced the fine imposed on
the Group from £37.6 million to £22.2 million. This litigation is
now closed.
Lamictal
Purported classes of direct purchasers filed suit in the US
District Court for the District of New Jersey alleging that the
Group and Teva Pharmaceuticals unlawfully conspired to delay
generic competition for
Lamictal
, resulting in overcharges to
the purchasers, by entering into an allegedly anti-competitive
reverse payment settlement to resolve patent infringement
litigation. A separate count accuses the Group of monopolising
the market.
On 13 December 2018, the trial judge granted plaintiffs’ class
certification motion, certifying a class of direct purchasers. The
Group filed a Rule 23(f) motion in the Court of Appeals for the
Third Circuit, challenging the class certification decision. On
22 April 2020, the Court of Appeals vacated the lower court’s
grant of class certification and remanded the issue back to the
lower court for further analysis.
On 9 October 2020, the district court heard argument on
plaintiffs’ renewed motion for class certification after remand.
On 9 April 2021, the district court denied Plaintiffs’ motion for
class certification of the putative direct purchaser class, leaving
a potential class of brand-only purchasers. Plaintiffs moved to
supplement their expert report and seek additional discovery
to support the addition of certain generic purchasers. On 21
January 2022, the district court denied Plaintiffs’ motion to
supplement their expert report and seek additional discovery
and held that the issue of generic purchasers had already been
decided and denied in the court’s ruling on decertification. The
parties will now move to briefing on class certification as to the
remaining brand-only purchasers.
GSK Annual Report 2021
251
Notes to the financial statements
continued
Strategic report Governance and remuneration
Financial statements
Investor information47. Post balance sheet events
.
On 1 February 2022, ViiV Healthcare reached agreement with Gilead to settle the global patent infringement litigation relating to
the commercialisation of Gilead’s Biktarvy concerning ViiV Healthcare’s patents relating to dolutegravir, an anti-retroviral medication
used, together with other medicines, to treat human immunodeficiency virus (HIV). Under the terms of the global settlement and
licensing agreement, Gilead made an upfront payment of $1.25 billion to ViiV Healthcare on 15 February 2022. In addition, Gilead
will also pay a 3% royalty on all future US sales of Biktarvy and in respect of the bictegravir component of any other future
bictegravir-containing products sold in the US. These royalties will be payable by Gilead to ViiV Healthcare from 1 February 2022
until the expiry of ViiV Healthcare’s US Patent No. 8,129,385 on 5 October 2027. Gilead’s obligation to pay royalties does not
extend into any period of regulatory paediatric exclusivity, if awarded.
The settlement resulted in a re-measurement of the existing liabilities for contingent consideration and the Pfizer put option at the
2021 year end. The upfront payment is a contingent asset at the balance sheet date as its receipt was not considered virtually
certain at that date and therefore it will be recognised in Q1 2022 as Other operating income. As a result of the settlement, patent
infringement cases in the US, UK, France, Ireland, Germany, Japan, South Korea, Australia, and Canada will be discontinued.
252
GSK Annual Report 2021
Notes
2021
£m
2021
£m
2020
£m
2020
£m
Fixed assets – investments
E
54,995
54,992
Current assets:
Trade and other receivables
F
2,720
1,689
Cash at bank
17
14
Total current assets
2,737
1,703
Trade and other payables
G
(598)
(531)
Total current liabilities
(598)
(531)
Net current assets
2,139
1,172
Total assets less current liabilities
5 7, 13 4
56,164
Provisions for liabilities
H
(12)
(7)
Other non-current liabilities
I
(458)
(457)
Net assets
56,664
55,700
Capital and reserves
Share capital
J
1,347
1,346
Share premium account
J
3,301
3,281
Other reserves
K
1,420
1,420
Retained earnings:
At 1 January
49,653
49,206
Profit/(loss) for the year
4,942
3,893
Other changes in retained earnings
(3,999)
(3,446)
K
50,596
49,653
Equity shareholders’ funds
56,664
55,700
The financial statements on pages 252 to 256 were approved by the Board on 28 February 2022 and signed on its behalf by
Sir Jonathan Symonds
Chairman
GlaxoSmithKline plc
Registered number: 3888792
Company statement of changes in equity
for the year ended 31 December 2021
Share
capital
£m
Share premium
account
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2020
1,346 3,174 1,420 49,206
55,146
Profit and Total comprehensive income attributable to shareholders
– – –
3,893
3,893
Dividends to shareholders
– – –
(3,977)
(3,977)
Shares issued under employee share schemes
–
29
– –
29
Treasury shares transferred to the ESOP Trusts
–
78
–531
609
At 31 December 2020
1,346 3,281 1,420 49,653
55,700
Profit and Total comprehensive income attributable to shareholders
– – –
4,942
4,942
Dividends to shareholders
– – –
(3,999)
(3,999)
Shares issued under employee share schemes
1
20
– –
21
At 31 December 2021
1,347 3,301 1,420
50,596
56,664
Company balance sheet – UK GAAP
(including FRS 101 ‘Reduced Disclosure Framework’) as at 31 December 2021
GSK Annual Report 2021
253
Strategic report Governance and remuneration
Financial statements
Investor informationA) Presentation of the financial statements
Description of business
GlaxoSmithKline plc is the parent company of GSK, a major
global healthcare group which is engaged in the creation
and discovery, development, manufacture and marketing of
pharmaceutical products, including vaccines, over-the-counter
(OTC) medicines and health-related consumer products.
Preparation of financial statements
The financial statements, which are prepared using the
historical cost convention (as modified to include the revaluation
of certain financial instruments) and on a going concern basis,
are prepared in accordance with Financial Reporting Standard
101 ‘Reduced Disclosure Framework’ and with UK accounting
presentation and the Companies Act 2006 as at 31 December
2021, with comparative figures as at 31 December 2020.
As permitted by section 408 of the Companies Act 2006, the
income statement of the company is not presented in this
Annual Report.
The company is included in the Group financial statements of
GlaxoSmithKline plc, which are publicly available.
The following exemptions from the requirements of IFRS have
been applied in the preparation of these financial statements,
in accordance with FRS 101:
–
Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share-based
payment’
–
IFRS 7, ‘Financial Instruments – Disclosures’
–
Paragraphs 91-99 of IFRS 13, ‘Fair value measurement’
–
Paragraph 38 of IAS 1, ‘Presentation of financial statements’
comparative information requirements in respect of
paragraph 79(a) (iv) of IAS 1
–
Paragraphs 10(d), 10(f), 16, 38(A), 38 (B to D), 40 (A to D),
111 and 134 to 136 of IAS 1, ‘Presentation of financial
statements’
–
IAS 7, ‘Statement of cash flows’
–
Paragraph 30 and 31 of IAS 8, ‘Accounting policies, changes
in accounting estimates and errors’
–
Paragraph 17 of IAS 24, ‘Related party disclosures’ and the
further requirement in IAS 24 to disclose related party
transactions entered into between two or more members
of a Group.
Accounting convention and standards
The balance sheet has been prepared using the historical
cost convention and complies with applicable UK accounting
standards.
Accounting principles and policies
The preparation of the balance sheet in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the balance sheet. Actual
amounts could differ from those estimates.
The balance sheet has been prepared in accordance with the
company’s accounting policies approved by the Board and
described in Note B. These policies have been consistently
applied, unless otherwise stated.
Key accounting judgements and estimates
No key accounting judgements or estimates were required in
the current year.
B) Accounting policies
Foreign currency transactions
Foreign currency transactions are recorded at the exchange
rate ruling on the date of transaction. Foreign currency assets
and liabilities are translated at rates of exchange ruling at the
balance sheet date.
Dividends paid and received
Dividends paid and received are included in the financial
statements in the period in which the related dividends are
actually paid or received.
Expenditure
Expenditure is recognised in respect of goods and services
received when supplied in accordance with contractual terms.
Provision is made when an obligation exists for a future liability
in respect of a past event and where the amount of the
obligation can be reliably estimated.
Investments in subsidiary companies
Investments in subsidiary companies are held at cost less any
provision for impairment and also includes a capital contribution
in relation to movements in contingent consideration.
Impairment of investments
The carrying value of investments are reviewed for impairment
when there is an indication that the investment might be
impaired. One of the assessment methods used is to compare
the carrying value of each investment against its share of the
net assets value of the investment or against its share of the
valuation of the subsidiary based on expected discounted cash
flows. The total amount of investments is also evaluated against
the Group’s valuation on the basis of overall market
capitalisation. Any impairment charge is recognised in the
income statement in the year concerned.
Share-based payments
The issuance by the company to its subsidiaries of a grant
over the company’s shares, represents additional capital
contributions by the company in its subsidiaries. An additional
investment in subsidiaries results in a corresponding increase
in shareholders’ equity. The additional capital contribution is
based on the fair value of the grant issued, allocated over the
underlying grant’s vesting period.
Notes to the company balance sheet –
UK GAAP
(including FRS 101 ‘Reduced Disclosure Framework’)
254
GSK Annual Report 2021
E) Fixed assets – investments
2021
£m
2020
£m
Shares in GlaxoSmithKline Services Unlimited
637
637
Shares in GlaxoSmithKline Holdings (One) Limited
18
18
Shares in GlaxoSmithKline Holdings Limited
17,888
17,888
Shares in GlaxoSmithKline Consumer Healthcare Holdings Limited
34,800
34,800
Shares in GlaxoSmithKline Mercury Limited
33
33
53,376
53,376
Capital contribution relating to share-based payments
1,139
1,139
Contribution relating to contingent consideration
480
477
54,995
54,992
F) Trade and other receivables
2021
£m
2020
£m
Amounts due within one year:
UK Corporation tax recoverable
9
10
Amounts owed by Group undertakings
2,319
1,231
2,328
1,241
Amounts due after more than one year:
Amounts owed by Group undertakings
392
448
2,720
1,689
The movement in the Amounts owed by Group undertakings in the period, as reflected within Notes 7 and 8, primarily reflects the
receipt of dividend income from subsidiaries and utilisation of the company’s current account to fund the payment of the third and
fourth interim 2020 dividends as well as the first and second interim dividends for 2021.
Taxation
Current tax is provided at the amounts expected to be paid
applying tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial
statements. Deferred tax assets are only recognised to the
extent that they are considered recoverable against future
taxable profits.
Deferred tax is measured at the average tax rates that are
expected to apply in the periods in which the temporary
differences are expected to be realised or settled. Deferred
tax liabilities and assets are not discounted.
Financial guarantees
Liabilities relating to guarantees issued by the company on
behalf of its subsidiaries are initially recognised at fair value
and amortised over the life of the guarantee.
C) Operating profit
A fee of £12,600 (2020 – £12,600) relating to the audit of the
company has been charged in operating profit.
D) Dividends
The directors declared four interim dividends resulting in a
dividend for the year of 80 pence, in line with the dividend for
2020. For further details, see Note 16 to the Group financial
statements, ‘Dividends’.
Notes to the company balance sheet – UK GAAP
(including FRS 101 ‘Reduced Disclosure Framework’) continued
GSK Annual Report 2021
255
Strategic report Governance and remuneration
Financial statements
Investor informationG) Trade and other payables
2021
£m
2020
£m
Amounts due within one year:
Other creditors
457
511
Contingent consideration payable
22
20
Amounts owed to Group undertakings
119
–
598
531
The company has guaranteed debt issued by its subsidiary companies from one of which it receives fees. In aggregate, the company
has outstanding guarantees over £22.4 billion of debt instruments (2020 – £24.9 billion). The amounts due from the subsidiary
company in relation to these guarantee fees will be recovered over the life of the bonds and are disclosed within ‘Trade and other
receivables’ (see Note F).
H) Provisions for liabilities
2021
£m
2020
£m
At 1 January
7
4
Charge for the year
24
15
Utilised
(19)
(12)
At 31 December
12
7
The provisions relate to a number of legal and other disputes in which the company is currently involved.
I) Other non-current liabilities
2021
£m
2020
£m
Contingent consideration payable
458
457
The contingent consideration relates to the amount payable for the acquisition in 2015 of the Novartis Vaccines portfolio. The
current year liability is included within ‘Trade and other payables’. For further details, see Note 32 to the Group financial statements,
‘Contingent consideration liabilities’.
Notes to the company balance sheet – UK GAAP
(including FRS 101 ‘Reduced Disclosure Framework’) continued
256
GSK Annual Report 2021
J) Share capital and share premium account
Ordinary Shares of 25p each
Share
premium
account
Number £m £m
Share capital issued and fully paid
At 1 January 2020
5,383,102,231 1,346 3,174
Issued under employee share schemes
2,087,386
–
29Ordinary shares acquired by ESOP trusts
– –
78
At 31 December 2020
5,385,189,617 1,346 3,281
Issued under employee share schemes
1,825,442
1
20
At 31 December 2021
5,387,015,059 1,347 3,301
31 December
2021
000
31 December
2020
000
Number of shares issuable under employee share schemes
75,210
48,205
Number of unissued shares not under option
4,537,775
4,566,605
At 31 December 2021, of the issued share capital, 23,205,289 (2020 – 48,975,304) shares were held in the ESOP Trusts,
355,205,950 (2020 – 355,205,950) shares were held as Treasury shares and 5,008,603,820 (2020 – 4,981,008,363) shares
were in free issue. All issued shares are fully paid. The nominal, carrying and market values of the shares held in the ESOP Trusts
are disclosed in Note 44, ‘Employee share schemes’. On 10 February 2022, 50.3 million treasury shares were transferred to the
ESOP Trusts after which the Trusts held 72.9 million shares against the exercise of share options and share rewards.
K) Retained earnings and other reserves
The profit of GlaxoSmithKline plc for the year was £4,942 million (2020 – £3,893 million profit). After dividends paid of £3,999
million (2020 – £3,977 million), and the effect of £nil Treasury shares transferred to a subsidiary company (2020 – £531 million)
retained earnings at 31 December 2021 stood at £50,596 million (2020 – £49,653 million), of which £38,896 million was
unrealised (2020 – £38,896 million). Dividends to shareholders are paid out of the realised profits of the company, which at
31 December 2021 amounted to £11,700 million (2020 – £10,757 million).
Other reserves includes a capital redemption reserve and a reserve reflecting historical contributions of shares in the company
which were issued to satisfy share option awards granted to employees of subsidiary companies.
L) Group companies
See pages 299 to 310 for a complete list of subsidiaries, associates, joint ventures and other significant shareholdings, which forms
part of these financial statements.
Notes to the company balance sheet – UK GAAP
(including FRS 101 ‘Reduced Disclosure Framework’) continued
GSK Annual Report 2021
257
Strategic report Governance and remuneration Financial statements
Investor information
Investor
information
GSK Annual Report 2021
257
In this section
Quarterly trend 258
Pharmaceuticals turnover
260
Vaccines turnover
262
Five year record
263
Product development pipeline
269
Products, competition and intellectual property 272
Principal risks and uncertainties 275
Share capital and control 288
Dividends 290
Financial calendar 2022 291
Annual General Meeting 2022 291
Tax information for shareholders 292
Shareholder services and contacts 294
US law and regulation 296
Group companies 299
Glossary of terms 311
Strategic report Governance and remuneration Financial statements
Investor information
258
GSK Annual Report 2021
Quarterly trend
An unaudited analysis of the Group results is provided by quarter in Sterling for the financial year 2021.
Income statement – Total
12 months 2021 Q4 2021 Q3 2021 Q2 2021 Q1 2021
£m
Reported
£m
Reported
£m
Reported
£m
Reported
£m
Reported
£% CER% £% CER% £% CER% £% CER% £% CER%
Turnover
Pharmaceuticals
17,729
4
10
5,221 20 25 4,397 3,882 (12) (8)
5
4,22910
3
12Vaccines
6,778
(3) (10) (7) 2,174 1,571 (32) (30)
2
1,8097
1339 49
1,224Consumer Healthcare
9,607 (4)
–
2,497 (4) (19) (16)
6
2,50610
3 8
2,2923
2,312Total turnover
34,114 (18) (15)
– 5
9,5279
8,09213
59,077
10
6
7,41815
Cost of sales
(11,603) (1)
2
(3,680) 16 19 (2,889)
- 3
(2,554)
4 9
(2,480) (22) (21)
Selling, general and administration
(10,975) (4) (1) (2) (17) (15)
–
(3,260)3 6
(2,646)4
(2,642)3
(2,427)Research and development
(5,278) (2) 31 (6) (6) (3)
4 7
(1,448)1
(1,490)34
(1,222)–
(1,118)Royalty income
419 32 32 135
48 46
11636 40
77
3 –
91
36 39
Other operating income/(expense)
(476) (379)
(230) (76) 209
Operating profit
6,201 (20) (9) (41) (30) 1,693 (16) (8)
895
(16)1
1,9384
1,67515
Net finance costs
(756) (187) (193) (185) (191)
Loss on disposal of interest in associates
(36)
– –
(36)
_
Share of after-tax profits/(losses) of associates and joint ventures
33 (2)
3
16 16
Profit before taxation
5,442 (22) (10) (32) 1,518 (17) (9)
706
(14)8
161,748
51,470
(44)Taxation (346) 224 (380)
68
(258)Tax rate %
6.4% (31.7)% 21.7% (4.6)% 17.0%
Profit after taxation for the period
5,096 (20) (9) 930 (4)
11
1,36830
6
1,538 (37) (26) 1,260 (25) (17)
Profit attributable to non-controlling interests
711 181 200 143
187
Profit attributable to shareholders
4,385 1,395
749
1,1681,073
Basic earnings per share (pence)
87.6p (24) (13) 15.0p 23.3p (7) (39) (28) 21.5p (32) (25)
10
313
27.9pDiluted earnings per share (pence)
86.6p 14.7p 23.1p 27.6p 21.3p
Income statement – Adjusted
Total turnover
34,114
– 5
9,527
9
13
9,077
5
10
8,092
6
15 7,418 (18) (15)
Cost of sales
(10,726) 25 28 (2,646) (14) (13)
5 8
(3,496)4 7
(2,348)4 9
(2,236)Selling, general and administration
(10,225) (5) (1) (2,908) (1) (1) (17) (15)
2
(2,504)1 7
(2,498)5
(2,315)Research and development
(4,776) 11 15 (1,165) (1) (1)
4 8
(1,365)5 7
(1,169)6
(1,077)3
Royalty income
419 32 32 135
48 46
11636 40
77
3 –
91
36 39
Operating profit
8,806 (1)
9
1,893
4
15
2,874 23 43 1,881 (30) (23)
8
2,15816
Net finance costs
(753) (186) (192) (185) (190)
Share of after-tax profits/(losses) of associates and joint ventures
33 (2)
3
16 16
Profit before taxation
8,086
–
11
81,705
20 2,685
8
16
1,989 29 (25)
50
(32)1,707
Taxation (1,415) (366) (318)
(177)
(554)Tax rate %
17.5% 10.4% 20.6% 18.4% 18.6%
Profit after taxation for the period
6,671 (2) 2,131 32 (36) (29)
9
1,52813
253
1,62311
54
1,389Profit attributable to non-controlling interests
1,006 248 296 216 246
Profit attributable to shareholders
5,665 1,280 1,835 1,407 1,143
Adjusted earnings per share (pence)
113.2p (2) 36.6p 22.9p (39) (33)
9
25.6p9
223
28.1p10
46
71 The calculation of Adjusted results is described on page 56.
Financial record
GSK Annual Report 2021
259
Strategic report Governance and remuneration Financial statements
Investor information
Quarterly trend
An unaudited analysis of the Group results is provided by quarter in Sterling for the financial year 2021.
Income statement – Total
12 months 2021 Q4 2021 Q3 2021 Q2 2021 Q1 2021
£m
Reported
£m
Reported
£m
Reported
£m
Reported
£m
Reported
£% CER% £% CER% £% CER% £% CER% £% CER%
Turnover
Pharmaceuticals
17,729
4
10
5,221 20 25 4,397 3,882 (12) (8)
5
4,22910
3
12Vaccines
6,778
(3) (10) (7) 2,174 1,571 (32) (30)
2
1,8097
1339 49
1,224Consumer Healthcare
9,607 (4)
–
2,497 (4) (19) (16)
6
2,50610
3 8
2,2923
2,312Total turnover
34,114 (18) (15)
– 5
9,5279
8,09213
59,077
10
6
7,41815
Cost of sales
(11,603) (1)
2
(3,680) 16 19 (2,889)
- 3
(2,554)
4 9
(2,480) (22) (21)
Selling, general and administration
(10,975) (4) (1) (2) (17) (15)
–
(3,260)3 6
(2,646)4
(2,642)3
(2,427)Research and development
(5,278) (2) 31 (6) (6) (3)
4 7
(1,448)1
(1,490)34
(1,222)–
(1,118)Royalty income
419 32 32 135
48 46
11636 40
77
3 –
91
36 39
Other operating income/(expense)
(476) (379)
(230) (76) 209
Operating profit
6,201 (20) (9) (41) (30) 1,693 (16) (8)
895
(16)1
1,9384
1,67515
Net finance costs
(756) (187) (193) (185) (191)
Loss on disposal of interest in associates
(36)
– –
(36)
_
Share of after-tax profits/(losses) of associates and joint ventures
33 (2)
3
16 16
Profit before taxation
5,442 (22) (10) (32) 1,518 (17) (9)
706
(14)8
161,748
51,470
(44)Taxation (346) 224 (380)
68
(258)Tax rate %
6.4% (31.7)% 21.7% (4.6)% 17.0%
Profit after taxation for the period
5,096 (20) (9) 930 (4)
11
1,36830
6
1,538 (37) (26) 1,260 (25) (17)
Profit attributable to non-controlling interests
711 181 200 143
187
Profit attributable to shareholders
4,385 1,395
749
1,1681,073
Basic earnings per share (pence)
87.6p (24) (13) 15.0p 23.3p (7) (39) (28) 21.5p (32) (25)
10
313
27.9pDiluted earnings per share (pence)
86.6p 14.7p 23.1p 27.6p 21.3p
Income statement – Adjusted
Total turnover
34,114
– 5
9,527
9
13
9,077
5
10
8,092
6
15 7,418 (18) (15)
Cost of sales
(10,726) 25 28 (2,646) (14) (13)
5 8
(3,496)4 7
(2,348)4 9
(2,236)Selling, general and administration
(10,225) (5) (1) (2,908) (1) (1) (17) (15)
2
(2,504)1 7
(2,498)5
(2,315)Research and development
(4,776) 11 15 (1,165) (1) (1)
4 8
(1,365)5 7
(1,169)6
(1,077)3
Royalty income
419 32 32 135
48 46
11636 40
77
3 –
91
36 39
Operating profit
8,806 (1)
9
1,893
4
15
2,874 23 43 1,881 (30) (23)
8
2,15816
Net finance costs
(753) (186) (192) (185) (190)
Share of after-tax profits/(losses) of associates and joint ventures
33 (2)
3
16 16
Profit before taxation
8,086
–
11
81,705
20 2,685
8
16
1,989 29 (25)
50
(32)1,707
Taxation (1,415) (366) (318)
(177)
(554)Tax rate %
17.5% 10.4% 20.6% 18.4% 18.6%
Profit after taxation for the period
6,671 (2) 2,131 32 (36) (29)
9
1,52813
253
1,62311
54
1,389Profit attributable to non-controlling interests
1,006 248 296 216 246
Profit attributable to shareholders
5,665 1,280 1,835 1,407 1,143
Adjusted earnings per share (pence)
113.2p (2) 36.6p 22.9p (39) (33)
9
25.6p9
223
28.1p10
46
71 The calculation of Adjusted results is described on page 56.
Quarterly trend
continued
Financial record
continued
260
GSK Annual Report 2021
Therapeutic area/major products
Total US Europe International
2021
2020 Growth
2021Growth
2021Growth
2021Growth
£m
£m £% CER%
£m£% CER%
£m£% CER%
£m£% CER%
Respiratory
2,863 2,360 21 28 1,822 23 33 42
30
435606
11
13
Anoro Ellipta
504
547
(8) (3)
278 (15) (9) 149
775 8
(1)
3
Trelegy Ellipta
1,217 819 52 62 200 19 21 163 81 92
49
854 57
Nucala
1,142 22 23 195 23
994
15 690
15 257
11 8
34
HIV (4) (2)
4,777
(2)4,876
3
2,898 3
1,1941
685
4 11
Dolutegravir products
4,567 4,702 (3) (1)
2
(6)2,774
–
1,1511
6427
14 Tivicay
1,381 1,527 (10) (4) (7) 286 (22) (20) 332 15 24
763
(12) Triumeq
1,882 2,306 (18) (14) 1,190 (18) (13) 452 (20) (18) 240 (15) (12)
Juluca
517
495 14 18 13 18
4
393 10
2 8
11127
Dovato
787
374
>100 >100 428 >100 >100 >100
87
30299
57
>100 Rukobia
45 11 >100 >100 43 >100 >100 >100
2
>100– – –
Cabenuva
38
–
>100 >100 32 (>100)
– – 5 – – 1
>100Other (22) (18) (4) (26) 42 (30) (23)
127
16349
(8) 36
(28) Immuno-inflammation 29 25 63
885
22 727
727
26 19
68
21 90
53 Benlysta
874
719 22 29 26 25
727
19 68
21 79
55 67
Oncology >100 >100
489
31 372
37
26 274
19
195
43 46
20Zejula
395 339 212 >100 >100
17
22 3
16310
27
2030
Blenrep
89
33 >100 >100 61 >100 >100 28 >100 >100
– – –
Jemperli
5 –
>100 >100 >100
2 – – 3
>100– – –
Pandemic
958
602– – –
– – – –
69
–287
–Xevudy
958
– – –
602– – – –
69
–287
–New and Specialty
Pharmaceuticals
9,972
8,335
20
26
6,323
19
26
2,132
9
12
1,517
45
54
Established pharmaceuticals
7,757
8,721 (11) (6) 2,119 (16) (14) 3,836 (14) (8)
– 6
1,802Established Respiratory
4,327 4,640 (7) (2)
1,788
7
13 995 (12) (10) 1,544 (16) (10)
Arnuity Ellipta
47
45 (13)
4
11 40 8
16 – – – 7
(12)Avamys/Veramyst
298 (2)
297
65– 7 – – –
2
2331 8
Flixotide/Flovent
444
419 (11) (32)
6
12 275
(14)50 60
69
100
(36) Incruse Ellipta
205 220 (7) (3) (2) (3) 26 (10) (7)
109
(7)70
(5) Relvar/Breo Ellipta
1,121 1,124 (9) (2)
– 5 9
334488
3 4 6
299Seretide/Advair
1,357 1,535 (12) (7) 19 322 (28) (27) (11)
486
12 549
(16)Ventolin
718 (4) (3) (5) 220 (8) (3)
785
(9)390
(9)10 8
(7) Other Respiratory
137
215 (36) (31)
– – – –
27
– 110
(41) (36)
Dermatology (6) (1) (1) >(100) >(100) 131 (6) (4) 269 (5)
399
4252
Augmentin
426 (7) (14) (12) 302 (12) (4)
490
(13)– – –
124Avodart
332 (25) (80) 118 (25) (23) 213 (30) (25)
466
(29)1
(80)Imigran/Imitrex
105
118 (11) (8) 29 (31) (31) 51
– 2
25– 8
Lamictal
478 537
(11) (6) 232 (14) (9) 112 (7) (5) 134 (9) (3)
Seroxat/Paxil
128 146 (12) (6) (5) (5) 93 (15) (6)
– – –
35Valtrex
92 (5) 11 (27) (20) 33 (5)
103
(11)3 3
(14)48
Other (13) (40) 203 (39) (37) 1,208 (11) (5)
1,470
(18)1,796
59
(46)Pharmaceuticals
17,7 2 9
17,056
4
10
48,442 3,934 (4) (2) 5,353 (3)
13
21Pharmaceutical turnover by therapeutic area 2021
Financial record
continued
GSK Annual Report 2021
261
Strategic report Governance and remuneration Financial statements
Investor information
Therapeutic area/major products
Total US Europe International
2020
2019 Growth
2020
Growth2020
Growth2020
Growth£m
£m £% CER%
£m£% CER%
£m£% CER%
£m£% CER%
Respiratory 2,360 1,800 31 32 1,486 28 53
30
28 548
27
32656
Anoro Ellipta
547 78
514 18
17 6 8 2
142327
1 11
17 Trelegy Ellipta
819 518 65 65 >100
58 59
56147
16848
90
>100 Nucala
994
768
29 33 238 16 15 158 45
30
32 598
46
HIV (1)
4,876
4,854– 1
3,005– 1
1,2135 4
(5)658
Dolutegravir products
4,702 4,633
1 2
2,941– 1
1,1637 6
(2)598
3
Tivicay
1,527 1,662 (8) (7) (10) (8) 288 (1)
871
(11)368
(7)5
Triumeq
2,306 2,549 (10) (9) 1,454 (10) (9) (10) 284 (9) (6)
568
(9) Juluca
495 29 11
366
35 36
28 387
97 73
71 57
71 Dovato
374
56
>100 >100 229 >100 >100 130 >100 >100 15 >100 >100
Rukobia
11
– – –
11–
>100– – – – – –
Cabenuva
– – – – – – – – – – – – –
Other 163 221 (26) (25) 53 (20) (18) (27) (28)
50
(29) 60
(29) Immuno-inflammation 20 59
727
20 613
19
612
22 14
16
56
84
91 Benlysta
719 613 612 14 16 20 51
17
19 56
22 59 66
Oncology 62 62 231
372
23072
42 74
136
40 5 – –
Zejula
339 229 128 35 33
48 48
20654
55 5 – –
Blenrep
33
– – –
25– – 8 – – – – –
New and Specialty
Pharmaceuticals
8,335
7, 4 97
11
12
5,334
10
12
1,953
13
12
1,048
12
16
Established pharmaceuticals
8,721 10,057 (13) (12) 2,117 (18) (17) 2,151 (10) (11) 4,453 (12) (9)
Established Respiratory
4,640 5,181
(10) (9) (15) (3) (6)
1,676
(16)1,134
(2)1,830
(9) Arnuity Ellipta
45 (6)
48
(6)37
(10)
(7)
– – – 8
14 –
Avamys/Veramyst
297
324 (8) (6) (4) 231 (10) (7)
– – –
(4)66
Flixotide/Flovent
419 629 (33) (32) 183 (50) (50) (10) 156 (10) (5)
80
(9) Incruse Ellipta
220 262 (16) (15) (27)
117
(27)74
291 1
4 7
Relvar/Breo Ellipta
1,124 25 322 14 13 328
971
16 17
24 474
6 9
Seretide/Advair
1,535 (10) 434 (14) (13) (11) 652 (10) (7)
1,730
(11)449
(11)Ventolin
785
938 (16) (14) 430 (21) (20) 116 (3) (4) 239 (12) (7)
Other Respiratory
215 (23)
279
(23)1
>100 >100 (26)
27
(4)–
(25)187
Dermatology 425 445 (4) (1) (67) 140 (12) (13) 284
1
(67)– 6
Augmentin
490
602 (19) (15) (16) (16) 345 (20) (15)
– – –
145Avodart
466
574
(19) (17) 25 158 (24) (25) 303 (16) (13)
5
25 Imigran/Imitrex
118 138 (14) (14) 42 (29) (29) 51 (2) (4) 25 (7) (4)
Lamictal
537
566
(5) (4) 269 (5) (5) 120 (13) (9)
7 6
148Seroxat/Paxil
146 160 (9) (6) (7)
– – –
(3)37
– 109
(11)Valtrex
103 107
(4) (2) 15 (5)
7 7
323 –
(10)56
Other (21) (20) (47) 334 (28) (28) 1,353 (16) (14)
1,796
2,28410 9
(48)Pharmaceuticals
17,056 17,554
(3) (1) 7,451 (1) (1) 5,501 (9) (5)
1 2
4,104Pharmaceutical turnover by therapeutic area 2020
Financial record
continued
262
GSK Annual Report 2021
Vaccines turnover 2021
Major products
Total US Europe International
2021
2020 Growth
2021Growth
2021Growth
2021Growth
£m
£m £% CER%
£m£% CER%
£m£% CER%
£m£% CER%
Meningitis 961 1,029 (7) (2) 453 (30)
5
(1)11
354
2
(36)154
Bexsero
650 650 (3)
– 5
2533
3281 4
20 69
5 Menveo
272
265 16 23 21 (19) (15) 51 (23) (18)
3 9
200Other (66) (65) (17) (68)
39
114– – – 5
(17)34
(69)Influenza (2) (9) 28
679 733
(7)456
(15)101
22 3 6
122
Fluarix, FluLaval
679 733
(7) (2) 456 (15) (9) 22 28
101
1223 6
Shingles 1,721 1,989 (13) (9) 1,344 (20) (15) 281 51 (23)
54
(25)96
Shingrix
1,721 1,989 (13) (9) 1,344 (20) (15) 281 51 (23)
54
(25)96
Established vaccines
2,970 3,231 (8) (4) (1) (10) 1,293 (6) (3)
977
(7)700
(13)Infanrix, Pediarix
543 629 (14) (9) 303 (3) (33) (32) 124 (14) (10)
4
116Boostrix
521 140 41
476
14 9
270
12 5
– 2
11144
Hepatitis (16) 269 (19) (14) (21) 82 (20) (17)
460
(20)576
109
(22)Rotarix
541 559 (3) (10) (4) 118 (1) (2)
1
1112
3123
Synflorix
357
402 (11) (8) (15) (13) 312 (11) (7)
– – –
45Priorix, Priorix Tetra, Varilrix
260 261 (1)
– 4 – – –
1252
135– 5
Cervarix
138 139 (1) (17) (17) 113
– – – –
254 5
Other 150 189 (21) (19) 24 (20) (13) 22 16 26 (26)
10 4
(26)Vaccines excluding pandemic
6,331 6,982 (9) (5) 3,230 (13) (7) 1,436 (10) (6)
– 2
1,665Pandemic vaccines
447
– – –
242
– – – – –
205
– –
Pandemic adjuvant
444
– – –
242
– – – – –
202
– –
Total vaccines
6,778
6,982 (3)
2
3,472 (6)
–
1,436– 2 5
1,870
1£% represents growth at actual exchange rates. CER% represents growth at constant exchange rates.
Vaccines turnover 2020
Major products
Total US Europe International
2020
2019 Growth
2020
Growth2020
Growth2020
Growth£m
£m £% CER%
£m£% CER%
£m£% CER%
£m£% CER%
Meningitis 1,029 1,018 (2)
1 3
4331 2 3
240356
4 4
Bexsero
650 (2) 260 (20)
679
(4)– 1
3242 1
(34)66
Menveo
265 (13)
267
(1)1 3
26173
2 44 39
(16)66
Other 114
72
62 58
57 – – – 6 – –
108
64 Influenza
733
54135
53537
30
31 98
42 75
73
37 100
Fluarix, FluLaval
733
541 35
37535
73 30
31 98
75 100
37 42
Shingles 1,989 1,810 >100
10
1,67511
– 1
>100 186
128
47
49
Shingrix
1,989 1,810 1,675 >100 >100 128
10
11 – 1
18647
49
Established vaccines
3,231 (14) 1,054 (24) (24) (23)
3,788
(15)801
(23)1,376
1 3
Infanrix, Pediarix
629 (13) 311 (14) (13) (19) 144 (10) (6)
733
(14)174
(18)Boostrix
476
584
(18) (18) (13) 140 (10) (11) (36)
257
(14)79
(39)Hepatitis (33) 333 (37) (36) 140 (39) (39) (6)
576
(34)874
103
(10)Rotarix
559 558 (12) (11) 119
– 1
1236 6 5
317
4 Synflorix
402 (14) (2) (2) (15)
468
(14)– – –
53349
(16)Priorix, Priorix Tetra, Varilrix
261 232 13 14 26 25 135
– – –
1262 5
Cervarix
139 >100 43 >100
50
>100 – – –
43 30
109
>100 Other 189 289 (35) (35) (56) 19 (87) (87) 140
30
(55)87
85 Total vaccines
6,982 (1) 3,697 (5) (4) 1,441 (3) (4) 1,844
7, 15 7
(2)5 7
£% represents growth at actual exchange rates. CER% represents growth at constant exchange rates.
Financial record
continued
GSK Annual Report 2021
263
Strategic report Governance and remuneration Financial statements
Investor information
A record of financial performance is provided, analysed in accordance with current reporting practice. The information included in
the Five year record is prepared in accordance with IFRS as adopted by the European Union and also with IFRS as issued by the
International Accounting Standards Board.
Group turnover by geographic region
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
US
15,093
14,556 13,890 11,982 11,263
Europe
7,838
8,164 8,069
7,973
7,943
International
11,183
11,379 11,795 10,866 10,980
34,114
34,099
33,754 30,821 30,186
Group turnover by segment
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Pharmaceuticals 17,554 17,269
17, 7 2 9
17,05617,276
Vaccines 7,157 5,894 5,160
6,778
6,982Consumer Healthcare
9,607
10,033 8,995 7,658
7,7 5 0
Segment turnover
34,114
34,071 33,706 30,821 30,186
Corporate and other unallocated turnover
–
28
48
– –
34,114
34,099
33,754 30,821 30,186
Pharmaceuticals turnover
2021
£m
2020
(revised)
£m
2019
(revised)
£m
2018
(revised)
£m
2017
(revised)
£m
Respiratory 1,800 1,195
2,863
2,360688
HIV 4,722 4,350
4,777
4,8544,876
Immuno-inflammation
885
727
613472 377
Oncology
489
372
230– –
Pandemic
958
– – – –
New and Specialty
9,972
8,335 5,415
7, 4 97
6,389Established Pharmaceuticals
7,757
8,721 10,057 10,880 11,861
17,72 9
17,056 17,554 17,269
17,276
Vaccines turnover
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Meningitis 1,018 881
961
1,029890
Influenza 523
679
541733
488
Shingles
1,721
1,989 1,810
784
22Established Vaccines
2,970
3,231
3,788 3,706 3,760
6,331
6,982 7,157 5,894 5,160
Pandemic Vaccines
447
– – – –
6,778
6,982 7,157 5,894 5,160
Consumer Healthcare turnover
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Oral health
2,732
2,753 2,466
2,673
2,496Pain relief
2,276
2,219 1,781 1,440 1,465
Vitamins, minerals and supplements
1,512
1,506 611
103 105
Respiratory health
1,133
1,209 1,186 1,085 1,057
Digestive health and other
1,803
1,824 1,646 1,435 1,447
Sub-total
9,456
9,511 6,540
7, 8 97
6,559Brands divested/under review
151
522 1,098 1,099 1,210
9,607
10,033 8,995 7,658
7,7 5 0
Five year record
Financial record
continued
264
GSK Annual Report 2021
Financial results – Total
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Turnover
34,114
34,099
33,754 30,821 30,186
Operating profit
6,201
7,78 3
6,961 5,483 4,087
Profit before taxation
5,442
6,968 6,221 4,800 3,525
Profit after taxation
5,096
6,388 5,268 4,046 2,169
pence
pence pence pence pence
Basic earnings per share
8 7. 6
115.5 93.9
73.7
31.4Diluted earnings per share
86.6
114.1 92.6 72.9 31.0
2021
millions
2020
millions
2019
millions
2018
millions
2017
millions
Weighted average number of shares in issue:
Basic
5,003
4,976
4,947 4,914 4,886
Diluted
5,065
5,038 5,016 4,971 4,941
Financial results – Adjusted
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Turnover
34,114
34,099
33,754 30,821 30,186
Operating profit
8,806
8,906
8,972
8,5688,745
Profit before taxation
8,086
8,095 8,236
8,078
7,924Profit after taxation
6,671
6,800 6,918 6,543 6,257
pence
pence pence pence pence
Adjusted earnings per share
113.2
115.9 123.9 119.4 111.8
%
% % % %
Return on capital employed
25.8
35.6 56.5 134.0 83.4
Return on capital employed is calculated as total profit before taxation as a percentage of average net assets over the year.
Five year record
continued
Financial record
continued
GSK Annual Report 2021
265
Strategic report Governance and remuneration Financial statements
Investor information
Balance sheet
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
Non-current assets
60,429
60,184 60,201 41,139 40,474
Current assets
18,674
20,247 19,491 16,927 15,907
Total assets
79,103
80,431 79,692
58,066
56,381Current liabilities
(23,670)
(22,148) (24,050) (22,491) (26,569)
Non-current liabilities
(34,091)
(37,475) (37,285) (31,903) (26,323)
Total liabilities
(57,761)
(59,623) (61,335) (54,394) (52,892)
Net assets
21,342
20,808 18,357
3,672
3,489Shareholders’ equity
15,055
14,587 11,405 3,781 (68)
Non-controlling interests
6,287
6,221 6,952 (109) 3,557
Total equity
21,342
20,808 18,357
3,672
3,489Number of employees
2021
2020 2019 2018
2017
US
14,289
15,706 16,676 13,804 14,526
Europe
38,809
40,711 40,524 41,943 43,002
International
36,998
37,649
42,237
39,743
40,93490,096
94,066
99,437 95,490 98,462
Manufacturing 36,925 36,527 38,245
32,141
33,848Selling
34,846
36,391 39,184 36,351
37,374
Administration
11,014
11,730 11,249
10,76 8
11,307Research and development
12,095
12,097 12,079 11,844 11,536
90,096
94,066
99,437 95,490 98,462
The geographic distribution of employees in the table above is based on the location of GSK’s subsidiary companies. The number
of employees is the number of permanent employed staff at the end of the financial period. It excludes those employees who are
employed and managed by GSK on a contract basis.
Exchange rates
As a guide to holders of ADS, the following tables set out, for the periods indicated, information on the exchange rate of US Dollars
for Sterling as reported by the Bank of England (4pm buying rate).
The average rate for the year is calculated as the average of the 4pm buying rates for each day of the year.
2021
2020 2019 2018
2017
Average 1.28 1.34 1.29
1.38
1.292022
Feb
2022
Jan
2021
Dec
2021
Nov
2021
Oct
2021
Sep
High 1.36 1.37 1.35 1.37 1.38
1.39
Low 1.33 1.34 1.32 1.32 1.35 1.34
The 4pm buying rate on 25 February was £1= US$1.34.
Five year record
continued
Financial record
continued
266
GSK Annual Report 2021
Adjusted results reconciliation
31 December 2021
Total
results
£m
Intangible
asset
amortisation
£m
Intangible
asset
impairment
£m
Major
restructuring
£m
Transaction-
related
£m
Divestments,
significant
legal and
other items
£m
Separation
costs
£m
Adjusted
results
£m
Turnover 34,114 34,114
Cost of sales
(11,603) 154 28
701
(33)27
(10,726)Gross profit
22,511 154 28
701
(33)27
23,388Selling, general and administration
(10,975) 426 25 (10,225)
17
282Research and development
(5,278)
101
35546
(4,776)Royalty income
419 419
Other operating (expense)/income
(476)
1,106 (662) 32
–
Operating profit
6,201 802 322 626 1,159 (618) 314 8,806
Net finance costs
(756)
2 1
(753)
Loss on disposal of interest in associates
(36)
36
–
Share of after-tax profits of associates and joint ventures
33 33
Profit before taxation
5,442 802 322 628 1,159 (581) 314 8,086
Taxation (346) (159) (81) (114) (196) (1,415)
(470)
(49)Tax rate
6.4% 17.5%
Profit after taxation
5,096 643 241 514 963 (1,051) 265 6,671
Profit attributable to non-controlling interests
711 295 1,006
Profit attributable to shareholders
4,385 643 241 514 265 5,665
668
(1,051)Earnings per share
87.6p 12.9p 4.8p 10.3p 13.3p (21.0)p 5.3p 113.2p
Weighted average number of shares (millions)
5,003 5,003
Adjusted results reconciliation
31 December 2020
Total
results
£m
Intangible
asset
amortisation
£m
Intangible
asset
impairment
£m
Major
restructuring
£m
Transaction-
related
£m
Divestments,
significant
legal and
other items
£m
Separation
costs
£m
Adjusted
results
£m
Turnover
34,099 34,099
Cost of sales
(11,704) (10,191)
699
31667
116Gross profit
22,395 23,908
699
31667
116Selling, general and administration
(11,456)
1
18 659 (23) 16
68
(10,717)Research and development
(5,098) 75 214 206 (4,603)
Royalty income
318 318
Other operating (expense)/income
1,624 1,215 (2,839)
–
Operating profit
7,78 3
775
263 1,532 1,308 (2,823)
68
8,906Net finance costs
(848)
2 2
(844)
Share of after-tax profits of associates and joint ventures
33 33
Profit before taxation
6,968 1,534 1,308 (2,821)
775
26368
8,095Taxation (580) (150) (47) (292) (229) (1,295)
17
(14)Tax rate
8.3% 16.0%
Profit after taxation
6,388 625 216 1,242
1,079
(2,804)54
6,800Profit attributable to non-controlling interests
639 392 1,031
Profit attributable to shareholders
5,749
625 216 1,242
687
(2,804)54
5,769
Earnings per share
115.5p 12.6p 4.4p 25.0p 13.8p (56.5)p 1.1p 115.9p
Weighted average number of shares (millions)
4,976 4,976
Five year record
continued
Financial record
continued
GSK Annual Report 2021
267
Strategic report Governance and remuneration Financial statements
Investor information
Adjusted results reconciliation
31 December 2019
Total
results
£m
Intangible
asset
amortisation
£m
Intangible
asset
impairment
£m
Major
restructuring
£m
Transaction-
related
£m
Divestments,
significant
legal and
other items
£m
Adjusted
results
£m
Turnover 33,754 33,754
Cost of sales
(11,863) 713 383 (10,079)
30
658Gross profit
21,891 713 383 23,675
30
658Selling, general and administration
(11,402)
4
332
104
(10,715)247
Research and development
(4,568)
64 49
1142
(4,339)
Royalty income
351 351
Other operating (expense)/income
689
1
(142) (548)
–
Operating profit
6,961 1,105 345 (299)
777
838,972
Net finance costs
(814)
5
(1) (810)
Share of after-tax profits of associates and joint ventures
74 74
Profit before taxation
6,221 1,110 345 (300) 8,236
777
83Taxation (953) (156) (17) (208) (124) 140 (1,318)
Tax rate
15.3% 16.0%
Profit after taxation
5,268 621 221 (160) 6,918
66
902Profit attributable to non-controlling interests
623 164
787
Profit attributable to shareholders
4,645 621 6,131
66
90257
(160)Earnings per share
93.9p 12.6p 1.3p 18.2p 1.2p (3.3)p 123.9p
Weighted average number of shares (millions)
4,947 4,947
Adjusted results reconciliation
31 December 2018
Total
results
£m
Intangible
asset
amortisation
£m
Intangible
asset
impairment
£m
Major
restructuring
£m
Transaction-
related
£m
Divestments,
significant
legal and
other items
£m
Adjusted
results
£m
Turnover 30,821 30,821
Cost of sales
(10,241) 536 15 (9,178)
69
443Gross profit
20,580 536 15 21,643
69
443Selling, general and administration
(9,915)
2
315
98 38
(9,462)Research and development
(3,893) (3,735)
44
4549
20Royalty income
299 299
Other operating (expense)/income
(1,588)
2
1,864 (278)
–
Operating profit
5,483
580
116809
(220)1,977
8,745
Net finance costs
(717) 18 (698)
4
(3)Profit on disposal of associates
3
(3)
–
Share of after-tax profits of associates and joint ventures
31 31
Profit before taxation
4,800 813 1,974 (205)
580
1168,078
Taxation (754) (109) (19) (244) (1,535)
(170)
(239)Tax rate
15.7% 19.0%
Profit after taxation
4,046 1,735 (449) 6,543
471 97
643Profit attributable to non-controlling interests
423 251
674
Profit attributable to shareholders
3,623 1,484 (449) 5,869
471 97
643Earnings per share
73.7p 9.6p 2.0p 13.1p 30.2p (9.2)p 119.4p
Weighted average number of shares (millions)
4,914 4,914
Five year record
continued
Financial record
continued
268
GSK Annual Report 2021
Adjusted results reconciliation
31 December 2017
Total
results
£m
Intangible
asset
amortisation
£m
Intangible
asset
impairment
£m
Major
restructuring
£m
Transaction-
related
£m
Divestments,
significant
legal and
other items
£m
US tax
reform
£m
Adjusted
results
£m
Turnover 30,186 30,186
Cost of sales
(10,342) 545
546
40080
(8,771)Gross profit
19,844 545
546
40080
21,415Selling, general and administration
(9,672) 248 83 (9,341)
Research and development
(4,476) 45 288 263 18 (3,862)
Royalty income
356 356
Other operating (expense)/income
(1,965) 1,519 (220)
666
–
Operating profit
4,087 591 1,599 (119)
688
1,056666
8,568Net finance costs
(669)
4 8
(657)
Profit on disposal of associates
94
(94)
–
Share of after-tax profits of associates
and joint ventures
13 13
Profit before taxation
3,525 591 1,599 (205)
688
1,060666
7,924Taxation (1,356) (134) (619) (251)
(176)
(209)1,078
(1,667)Tax rate
38.5% 21.0%
Profit after taxation
2,169 851
457
512980
(456)1,744
6,257Profit attributable to non-controlling interests
637
42 114
793
Profit attributable to shareholders
1,532 851 938 (456) 1,630 5,464
457
512Earnings per share
31.4p 9.4p 10.5p 17.4p 19.2p (9.4)p 33.3p 111.8p
Weighted average number of shares (millions)
4,886 4,886
Five year record
continued
Financial record
continued
GSK Annual Report 2021
269
Strategic report Governance and remuneration Financial statements
Investor information
MAA and NDA/BLA regulatory review milestones shown in the table below are those that have been achieved. Future filing dates are not included in this list.
Achieved regulatory
review milestones
Compound
Mechanism of Action/Vaccine Type
Indication Phase MAA
NDA/BLA
Oncology
Jemperli
(dostarlimab)
†
Anti-Programmed Cell Death protein 1 receptor
(PD-1) antibody
2L dMMR/MSI-H endometrial cancer
2L dMMR solid tumours
1L endometrial cancer
1L endometrial cancer combination with niraparib
Non-small cell lung cancer
1
Approved
Approved
III
III
II
A: Jun21 A: Apr21
A: Aug21
Zejula
(niraparib)
†
Poly (ADP-ribose) polymerase (PARP) 1/2 inhibitor 1L maintenance ovarian cancer combination
with dostarlimab
1L maintenance non small cell lung cancer
(NSCLC) combination with pembrolizumab
Pre-metastatic, select biomarker population
Breast Cancer
III
III
III
B
lenrep
(
belantamab
mafodotin)
†
ADC targeting B-cell maturation antigen 3L multiple myeloma
2L+ multiple myeloma combination with Pomalyst
and dexamethasone
2L+ multiple myeloma combination with Velcade
and dexamethasone
Multiple myeloma in combination with anti-cancer
treatments (platform study)
1L multiple myeloma combination with Velcade,
Revlimid and dexamethasone
III
III
III
II
I
letetresgene-
autoleucel
(3377794)
†
Engineered TCR T-cells targeting NY-ESO-1 2L+ synovial sarcoma and myxoid/round cell
liposarcoma
2L+ non-small cell lung cancer
II (pivotal)
II
cobolimab
(4069889)
†
Anti-T-cell immunoglobulin and mucin domain-3
(TIM-3) antibody
Non-small cell lung cancer combination with
Jemperli (dostarlimab) and docetaxel
II
4074386
†
Anti-lymphocyte activation gene-3 (LAG-3)
antibody
Cancer
I
3745417
STING cytosolic DNA pathway agonist
Cancer
I
6097608
CD96 antagonist
Cancer
I
3901961
†
Engineered TCR T-cells, co-expressing the CD8a
cell surface receptor, targeting NY-ESO-1
Cancer
I
3845097
†
Engineered TCR T-cells, co-expressing the
dnTGF-βRII cell surface receptor, targeting
NY-ESO-1
Cancer
I
4362676
†
Methionine adenosyltransferase 2A (MAT2A)
inhibitor
Cancer
I
4428859
(EOS-448)
†
TIGIT antagonist
Cancer
I
Footnotes
1 non-registrational
2 transition activities underway to enable further progression by partner
3 GSK has exclusive option to co-develop post Ph2
4 Ph3 trial in patients with progranulin gene mutation
5 GSK is contributing pandemic adjuvant to COVID-19 vaccines collaborations
6 Submitted in Canada
7 Enrolment and vaccination stopped in February 2022. Further analysis to better understand safety data from these trials is ongoing
† In-license or other alliance relationship with third party
^ ViiV Healthcare, a global specialist HIV company with
GSK, Pfizer, Inc. and Shionogi Limited as shareholders,
is responsible for developing and delivering HIV medicines.
BLA Biological Licence Application
MAA Marketing Authorisation Application (Europe)
NDA New Drug Application (US)
A Approved
S Submitted
EUA Emergency Use Authorisation
Phase I Evaluation of clinical pharmacology, usually conducted
in volunteers
Phase II Determination of dose and initial evaluation of efficacy,
conducted in a small number of patients
Phase III Large comparative study (compound versus placebo
and/or established treatment) in patients to establish
clinical benefit and safety
Pipeline, products and competition
Pharmaceuticals and Vaccines product development pipeline
Key
270
GSK Annual Report 2021
Achieved regulatory
review milestones
Compound
Mechanism of Action/Vaccine Type
Indication Phase MAA
NDA/BLA
HIV^
Apretude
(cabotegravir)
HIV integrase strand transfer inhibitor
(long-acting)
HIV pre-exposure prophylaxis
HIV (400 mg/ml formulation)
Approved
I
A: Dec21
3640254
HIV maturation inhibitor
HIV infection
II
3810109
†
HIV broadly neutralising antibody HIV infection
II
3739937
HIV maturation inhibitor HIV infection
I
4004280
HIV capsid protein inhibitor HIV infection
I
Infectious Diseases
Xevudy
(sotrovimab)
†
Anti-spike protein antibody
COVID-19 Approved A:Dec21
EUA:
May21
gepotidacin
†
Triazaacenaphthylene bacterial type II
topoisomerase inhibitor
Uncomplicated urinary tract infection (uUTI) and
gonorrhea (GC)
III
3036656
†
Leucyl t-RNA synthetase inhibitor
Tuberculosis
II
bepirovirsen
†
HBV antisense Hepatitis B
II
3882347
†
FimH antagonist Uncomplicated urinary tract infection (uUTI)
I
3186899
† 2
CRK-12 inhibitor Visceral leishmaniasis
I
3494245
†
Proteasome inhibitor Visceral leishmaniasis
I
2556286
†
Mtb cholesterol dependent inhibitor
Tuberculosis
I
BVL-GSK098
†
Ethionamide booster
Tuberculosis
I
4182137 (
VIR7832
)
†
Anti-spike protein Antibody
COVID-19
I
VIR-2482
† 3
Neutralizing monoclonal antibody
Influenza
I
3923868
PI4K beta inhibitor Viral COPD exacerbations
I
Priorix
(MMR vaccine) Live attenuated Measles, mumps, rubella prophylaxis (US)
Registration
S: Jun21Menveo
vaccine Conjugated-liquid formulation Meningococcal A,C,W and Y disease prophylaxis
in adolescents
Registration
S: Sep21
Rotarix
vaccine Live attenuated, PCV (Porcine circovirus)
free
Rotavirus prophylaxis (US)
Registration
S Dec21Bexsero
vaccine Recombinant protein Meningococcal B disease prophylaxis in infants (US)
III
Men ABCWY vaccine Recombinant protein – conjugated Meningococcal A,B,C,W and Y disease prophylaxis
in adolescents
III
RSV vaccine Recombinant protein
Recombinant protein – adjuvanted
Respiratory syncytial virus prophylaxis in pregnant
woman population to prevent respiratory syncitial virus
lower respiratory tract illness in infants during first
Months of life by transfer of maternal antibodies
†7
Respiratory syncytial virus prophylaxis in older adult
population
†
III
III
COVID-19 plant-
derived virus-like
particles vaccine
(Medicago)
† 5
Recombinant protein-adjuvanted vaccine
COVID-19 Registration
6
COVID-19 vaccine
(Sanofi)
† 5
Recombinant protein-adjuvanted vaccine
COVID-19
III
COVID-19 vaccine
(SK Bioscience)
† 5
Recombinant protein nanoparticle-
adjuvanted vaccine
COVID-19
III
SAM vaccine
(COVID-19 model)
Self-Amplifying mRNA vaccine
COVID-19
I
Footnotes
1 non-registrational
2 transition activities underway to enable further progression by partner
3 GSK has exclusive option to co-develop post Ph2
4 Ph3 trial in patients with progranulin gene mutation
5 GSK is contributing pandemic adjuvant to COVID-19 vaccines collaborations
6 Submitted in Canada
7 Enrolment and vaccination stopped in February 2022. Further analysis to better understand safety data from these trials is ongoing
Pharmaceuticals and Vaccines product development pipeline
continued
Pipeline, products and competition
continued
GSK Annual Report 2021
271
Strategic report Governance and remuneration Financial statements
Investor information
Achieved regulatory
review milestones
Compound
Mechanism of Action/Vaccine Type
Indication Phase MAA
NDA/BLA
Infectious Diseases
continued
Malaria next
generation vaccine
†
(fractional dose)
Recombinant protein – adjuvanted
vaccine
Malaria prophylaxis (Plasmodium falciparum)
II
Shigella vaccine
†
Bioconjugated (tetravalent) vaccine Shigella diarrhea prophylaxis
II
Therapeutic HBV
vaccine
†
Prime-boost with viral vector vaccines
co- or sequentially administrated with
adjuvanted recombinant proteins
Treatment of chronic Hepatitis B infections – aims
at functional cure by controlling and resolving the
infection and reducing the need for further treatment
II
S. aureus vaccine
†
Recombinant protein – bioconjugated –
adjuvanted vaccine
Active immunization for the prevention of primary
and recurrent Soft-Skin-Tissue Infections caused
by S. aureus
II
Men ABCWY
vaccine (2nd Gen)
Recombinant protein – conjugated
vaccine
Meningococcal A, B, C, W,Y disease prophylaxis in
adolescents and infants
II
Varicella New Strain Live attenuated vaccine Active immunization for the prevention of varicella in
individuals from 12 months of age and older
II
C. difficile vaccine
†
Recombinant protein – adjuvanted vaccine Active immunization for the prevention of the primary
C. Diff diseases and for prevention of recurrences
I
SAM vaccine
(Rabies model)
Self-Amplifying mRNA Rabies prophylaxis
I
Klebsiella
pneumoniae
Recombinant protein – bioconjugated –
adjuvanted vaccine
Klebsiella pneumoniae prophylaxis
I
CMV
Recombinant subunit – adjuvanted
vaccine
Cytomegalovirus (CMV) infection prophylaxis in
females 16-49 years of age
I
Immunology and Respiratory
Nucala
(mepolizumab)
Interleukin 5 (IL5) antagonist Hypereosinophilic syndrome
Nasal polyposis
EGPA
COPD
Approved
Approved
Approved
III
A: Nov21
A: Nov21
A: Nov21
A: Jul21
otilimab
†
Granulocyte macrophage colony-
stimulating factor inhibitor
Rheumatoid arthritis
III
depemokimab
†
Interleukin 5 (IL5) antagonist (long-acting)
Asthma
III
4527223 (AL001)
†
Anti-Sortilin monoclonal antibody Frontotemporal dementia (FTD)
4
Amyotrophic Lateral Sclerosis (ALS)
III
II
3858279
†
Anti-CCL17 antibody Osteoarthritis pain
I
3915393
†
Transglutaminase 2 (TG2) inhibitor Celiac disease
I
4527226 (AL101)
†
Anti-sortilin monoclonal antibody Neurodegenerative disease
I
1070806
Anti-IL18 antibody Atopic dermatitis
I
3888130
†
Anti-IL7 antibody Multiple sclerosis (MS)
I
4532990
†
HSD17B13 silencer Non-alcoholic steatohepatitis (NASH)
I
Opportunity Driven
daprodustat
HIF Prolyl hydroxylase inhibitor Anaemia of chronic kidney disease III (RoW)
linerixibat
Ileal bile acid transporter (IBAT) inhibitor Cholestatic pruritus in PBC (primary biliary cholangitis)
III
2798745
†
TRPV4 channel blocker Diabetic macular edema (DME)
I
3884464
†
Novel mechanism Heart failure
I
Brand names appearing in italics are trade marks owned by or licensed to the GSK group of companies.
Footnotes
1 non-registrational
2 transition activities underway to enable further progression by partner
3 GSK has exclusive option to co-develop post Ph2
4 Ph3 trial in patients with progranulin gene mutation
5 GSK is contributing pandemic adjuvant to COVID-19 vaccines collaborations
6 Submitted in Canada
7 Enrolment and vaccination stopped in February 2022. Further analysis to better understand safety data from these trials is ongoing
Pharmaceuticals and Vaccines product development pipeline
continued
Pipeline, products and competition
continued
272
GSK Annual Report 2021
Major
Patent expiry dates
1
Products Compounds Indication(s)
competitor brands
US
EU
Respiratory
Anoro Ellipta
umeclidinium bromide/
vilanterol trifenatate
COPD
Stiolto Respimat,
Utibron/Ultibro
Breezhaler,
Duaklir Genuair
Bevespi Aerosphere,
Brimica Genuair
2027
(NCE)
2027-2030
(device)
2029
(NCE)
2022-2026
(device)
Arnuity Ellipta
fluticasone furoate
asthma
Beclazone, Pulmicort, Budesonide Gx,
Asmanex, Alvesco
2021
(NCE)
2027-2030
(device)
2023
(NCE)
2022-2026
(device)
Avamys/Veramyst
fluticasone furoate
rhinitis
Dymista, Xhance, Nasonex, Fluticasone Gx
expired 2023
Flixotide/Flovent
fluticasone propionate
asthma/COPD
Beclazone, Pulmicort, Budesonide Gx,
Asmanex, Alvesco
expired
(
Diskus
device)
2023-2026
(HFA-device)
expired
(
Diskus
device)
expired
(HFA-device)
Incruse Ellipta
umeclidinium bromide
COPD
Spiriva Handihaler/ Respimat, Yupelri,
Braltus, Seebri
Breezhaler, Bretaris
Genuair
2027
(NCE)
2027-2030
(device)
2029
(NCE)
2022-2026
(device)
Nucala
mepolizumab
severe eosinophilic asthma, EGPA
hypereosinophilic syndrome, chronic
rhinosinusitis with nasal polyps
Xolair, Cinqair,
Fasenra, Dupixent
expired
2
expired
2
Relvar/Breo Ellipta
fluticasone furoate/
vilanterol trifenatate
asthma/COPD
Symbicort, Foster,
Budesonide/Formetrol Gx
Sirdupla, Dulera
2025
(NCE)
2027-2030
(device)
2027
(NCE)
2022-2026
(device)
Seretide/Advair
salmeterol xinafoate/
fluticasone propionate
asthma/COPD
Symbicort, Foster,
Budesonide/Formetrol Gx
Sirdupla, Dulera
expired
(
Diskus
device)
2023-2026
(HFA-device)
expired
(
Diskus
device)
expired
(HFA-device)
Trelegy Ellipta
fluticasone furoate/
vilanterol trifenatate
umeclidinium bromide
COPD
Trimbow,
Breztri Aerosphere,
Trixeo Aerosphere,
Enerzair Breezhaler
2027
(NCE)
2027-2030
(device)
2029
(NCE)
2022-2026
(device)
Ventolin
HFA
albuterol sulphate
asthma/COPD
generic companies2023-2026
(HFA-device)
expired
(HFA-device)
Xevudy
sotrovimab
Early treatment of COVID-19
REGEN-COV,
bamlanivimab/etesevimab,
Evusheld
2041
(NBE)
NA
Anti-virals
Valtrex
valaciclovir
genital herpes, coldsores, shingles Prevymis, Valacyclovir Gx,
Valcyte
expired expired
Central nervous system
Lamictal
lamotrigine
epilepsy, bipolar disorder Vimpat, Trokendi XR,
Inovelon
expired expired
Imigran/Imitrex
sumatriptan migraine expired
Zomig, Maxalt, Relpax
expiredSeroxat/Paxil
paroxetine
depression, various anxiety
disorders
Trintellix, Aplenzin Viibryd,
Zoloft
expired expired
Cardiovascular and urogenital
Avodart
dutasteride expired
benign prostatic hyperplasia Harnal, Vesomni, Urorec
expiredAnti-bacterials
Augmentin
amoxicillin/clavulanate
potassium
common bacterial
infections
generic products
NA expired
1 Includes Supplementary Protection Certificates which were granted in multiple countries in EU (including the UK) and patent term extensions granted in the US.
2 Data exclusivity expires 2026 (EU) and 2027 (US).
Pharmaceutical products, competition and intellectual property
Pipeline, products and competition
continued
GSK Annual Report 2021
273
Strategic report Governance and remuneration Financial statements
Investor information
Major
Patent expiry dates
1
Products Compounds Indication(s)
competitor brands
US
EU
Oncology
Zejula
niraparib
ovarian cancer Lynparza, Rubraca
2031
(NCE)
2028
(NCE)
Blenrep
belantamab mafodotin relapsed/refractory multiple
myeloma
Sarclisa, Xpovio
2032
2032
Jemperli
dostarlimab
dMMR recurrent or advanced
endometrial cancer, solid tumours
Keytruda
2034
(NBE)
2034
(NBE)
Immuno-inflammation
Benlysta, Benlysta
(SC and IV)
belimumab
systemic lupus erythematosus,
lupus nephritis
Lupkynis, Saphnelo
2025 2026
HIV
Apretude
Cabotegravir
HIV
preventionDescovy, Truvada
2026
(NCE)
2026
(NCE)
Cabenuva/Vocabria
+ Rekambys
Cabotegravir, rilpivirine
HIV/AIDS
Descovy, Genvoya,
Odefsey, Biktarvy
2026
(NCE)
2026
(NCE)
Rukobia
Fostemsavir
HIV/AIDS
Trogarzo
2025
(NCE)
2025
(NCE)
Dovato
Dolutegravir, lamivudine
HIV/AIDS
Descovy, Genvoya,
Odefsey, Biktarvy
2027
(NCE)
2029
(NCE)
Juluca
Dolutegravir, rilpivirine
HIV/AIDS
Descovy, Genvoya,
Odefsey, Biktarvy
2027
(NCE)
2029
(NCE)
Triumeq
Dolutegravir, lamivudine and
abacavir
HIV/AIDS
Descovy, Genvoya,
Odefsey, Biktarvy
2027
(NCE)
2029
(NCE)
Tivicay
Dolutegravir
HIV/AIDS
Isentress, Prezista
Symtuza, Reyataz,
Biktarvy
2027
(NCE)
2029
(NCE)
Vaccine products, competition and intellectual property
Major
Patent expiry dates
2
Products Compounds Indication(s)
competitor brands
US
EU
Bexsero
meningococcal group-B vaccine Meningitis group B prevention
Trumenba 2027 2028
Boostrix
diphtheria, tetanus, acellular
pertussis
diphtheria, tetanus, acellular
Pertussis booster vaccination
Adacel expired expired
Infanrix Hexa/Pediarix
diphtheria, tetanus, pertussis, Prophylaxis against diphtheria, Pentacel, Pediacel,
expired expired
polio, hepatitis B, Haemophilus
influenzae type B (EU)
tetanus, pertussis, polio,
hepatitis B, Haemophilus
influenzae type B (EU)
Pentaxim, Pentavac,
Hexaxim, Hexyon
Vaxelis
Cervarix
HPV 16 & 18 virus like
particles (VLPs), AS04
adjuvant (MPL + aluminium
hydroxide)
human papilloma virus
type 16 and 18
Gardasil (Silgard)
2028 2022
Fluarix Tetra
split inactivated influenza
antigens
(2 virus subtypes A
and 2 subtype B)
seasonal influenza prophylaxis Intenza, Flumist QIV,
Vaxigrip QIV,
Fluzone QIV,
Fluzone High Dose
2022 2022
FluLaval
split inactivated influenza
antigens
(2 virus subtypes A
and 2 subtype B)
seasonal influenza prophylaxis Vaxigrip, Mutagrip,
Fluzone, Influvac,
Aggripal, Fluad,
Intenza, Flumist
2022 2022
Menveo
meningococcal group A, C, W-
135 and Y conjugate vaccine
Meningitis group A, C, W-135
and Y prophylaxis
Nimenrix, Menactra
2025 2025
Priorix,
Priorix Tetra
a,b
Varilrix
b
live attenuated measles,
mumps,
rubella and varicella vaccine
measles, mumps, rubella and
chickenpox prophylaxis
MMR II (M-M-RVaxPro)
Proquad, Varivax
expired expired
Rotarix
Human rotavirus RIX4414 strain Rotavirus prophylaxis
Rotateq 2022 2026
Synflorix
conjugated pneumococcal
polysaccharide
Prophylaxis against invasive
disease, pneumonia,
acute otitis media
Prevenar (Prevnar)
NA 2026
Shingrix
zoster vaccine
recombinant, adjuvanted
herpes zoster
(shingles)
Zostavax 2029 2031
1 See Note 46 to the financial statements, ‘Legal proceedings’.
2 Includes Supplementary Protection Certificates which were granted in multiple countries in EU (including the UK), and patent term extensions granted in the US.
a Related compounds/indications are measles, mumps and rubella vaccine/prophylaxisb.
b Related compound is varicella vaccine.
Pharmaceutical products, competition and intellectual property
continued
Pipeline, products and competition
continued
274
GSK Annual Report 2021
Brand Products Application Markets Competition
Oral health
Sensodyne,
Pronamel
toothpastes, toothbrushes,
mouth rinse
relief of dentinal hypersensitivity.
Pronamel
additionally protects
against acid erosion
global
Colgate Sensitive Pro-Relief,
Colgate-Palmolive
Elmex, Colgate-Palmolive
Oral B, Procter & Gamble
parodontax/
Corsodyl
toothpaste, daily/medicated
mouthwash, gel and spray
helps stop and prevent
bleeding gums, treats and
prevents gingivitis
global
Colgate Total Gum Health,
Colgate-Palmolive
Oral B Gum & Enamel Repair,
Crest Gum Detoxify, Procter & Gamble
Polident,
Poligrip,
Corega
denture adhesive, denture
cleanser, wipes
improve retention and comfort
of dentures, cleans dentures
global
Fixodent and Kukident,
Procter & Gamble,
Steradent, Reckitt Benckiser
Aquafresh
toothpastes, toothbrushes
mouthwashes
aids prevention of dental cavities,
maintains healthy teeth, gums
and fresh breath
global
Colgate, Colgate-Palmolive
Crest, Procter & Gamble
Oral-B, Procter & Gamble
Pain relief
Panadol
tablets, caplets, infant
syrup
paracetamol-based treatment for
headache, joint pain, fever, cold
symptoms
global (except US) Aspirin, Bayer
Tylenol, Johnson & Johnson
Nurofen, Reckitt Benckiser
Voltaren
topical gel, diclofenac
tablets and patches
non-steroidal, diclofenac based
anti-inflammatory
global
Salonpas, Hisamitsu
Aspirin, Bayer
Tylenol, Johnson & Johnson
Nurofen, Reckitt Benckiser
Icy Hot, Sanofi
Advil
non-respiratory
range
tablets, caplets, gel caplets,
liquid filled suspension,
drops (children’s)
ibuprofen based treatment for
headache, toothache, backache,
menstrual cramps, muscular
pains, minor pain of arthritis
US, Canada, Brazil,
Colombia, Mexico
Tylenol, Tylenol PM, Tylenol Children’s
Motrin, Motrin Children’s, Johnson &
Johnson Aleve, Aleve PM, Bayer
Vitamins, minerals and supplements
Centrum
tablets, gummies,
capsules, chewables
vitamin supplement
global
Nutralite, Infinitus Cheong-Kwan-Jung, By-Health, Nature Made, Herbalife, Swisse
Caltrate
tablets, gummies,
soft chews
calcium supplement
global
Citracal, Bayer, OS-Cal, Nature Made and private label
Emergen-C
powder, gummies immune support dietary
supplement
US, Canada Airborne, Reckitt Benckiser
Zicam, Church & Dwight
Nature made, Pharmavite
Sambucol, Healthcare Brands International
Ester-C, American Health
Respiratory health
Otrivin
nasal spray nasal decongestant Germany, Netherlands,
Norway, Russia, Sweden
Afrin, Bayer, Nasivin, Proctor & Gamble,
Tyzine, Johnson & Johnson
Theraflu
hot liquids, tablets, syrups cold and flu relief Russia, Poland, US Tylenol Cold & Flu, Johnson & Johnson
Mucinex, Reckitt Benckiser
Lemsip, Reckitt Benckiser
Advil
Respiratory
Cold and Flu,
Advil
Respiratory Allergy
tablets
allergy relief and cold & flu
relief
Tylenol Cold & Flu, Johnson & Johnson,
Lemsip, Mucinex, Reckit Benckiser
Flixonase/Flonase
nasal spray, tablets allergy relief US, China, UK, Ireland Claritin, Bayer, Allegra, Sanofi
Piriton
Zyrtec, Johnson & Johnson
Robitussin
syrup, tablets
cough/cold
US, Canada, Singapore, Philippines, Australia
Mucinex, Reckitt Benckiser
Dimetapp, Foundation Consumer
Healthcare
Digestive health and other
Nexium 24HR
capsules, clear minis,
tablets
treatment of frequent heartburn
(two or more days a week) in adults
(18 years and older)
US, Canada, Australia Prilosec, Prevacid
Zovirax
Abreva
topical cream and
non-medicated patch
lip care to treat and prevent
the onset of cold sores
global
Compeed, Johnson & Johnson
Carmex, Carma Labs
Blistex, Blistex Incorporated
retail own label
ChapStick
lip balm protect, moisturise, prevent and
soothe chapped lips
global
Blistex, Burt’s Bees, Carmex, Carma Labs,
EOS, Nivea, Beiersdorf, Vaseline, Unilever
ENO
effervescent
immediate relief antacid global (except US) Estomazil, Hypermarca, Gelusil
Tums
chewable tablets immediate relief antacid
US
Alka-Seltzer, BayerGaviscon, Reckitt Benckiser
Rolaids, Sanofi
Nicorette
(US),
NicoDerm
,
Nicotinell(ex. Australia)
lozenges, gum and
trans-dermal patches
treatment of nicotine withdrawal
as an aid to smoking reduction
and cessation
global
Nicorette, Johnson & Johnson
NiQuitin, Perrigo
Consumer Healthcare products and competition
Pipeline, products and competition
continued
GSK Annual Report 2021
275
Strategic report Governance and remuneration Financial statements
Investor information
We outline below the principal risks and uncertainties relevant
to GSK’s business, financial condition and operations that may
affect our performance and ability to achieve our objectives.
These are the risks that we believe could cause our actual
results to differ materially from expected and historical results.
Operating in the pharmaceutical sector carries various inherent
risks and uncertainties that may affect our business.
We must comply with a broad range of laws and regulations
which apply to the research and development, manufacturing,
testing, approval, distribution, sales, and marketing of
pharmaceutical, vaccine and consumer healthcare products.
These affect the cost of product development, the time required
to reach the market and the likelihood of doing so successfully
on an uninterrupted basis.
As rules and regulations change, government interpretation
evolves, and our business activities develop, the nature of a
particular risk may also alter. Changes to regulatory regimes
may be substantial. Any alteration in, and failure to comply with,
applicable laws and regulations could materially and adversely
affect our financial results.
Similarly, our global business exposes us to litigation and
government investigations, including product liability litigation,
patent and antitrust litigation and sales and marketing litigation.
Litigation and government investigations, and the related
provisions we may make for unfavourable outcomes and
increases in related costs such as insurance premiums,
could also materially and adversely affect our financial results.
More detail on the status and various uncertainties in our
significant unresolved disputes and potential litigation is set
out in Note 46, ‘Legal proceedings’.
More details regarding our risk management framework and
how we identify our principal risks can be found on pages
46 to 48.
UK regulations require a description of the principal risks and
uncertainties and explanation for how these are being managed
or mitigated. Below is a description of each of our principal risks
with a summary of the activities that we take to manage each
risk across our businesses. They are not listed in order of
significance and consistent with the principal risks detailed
on pages 47 to 48.
Risk definition
Potential failure to appropriately collect, review, follow up, or
report human safety information (HSI), including adverse events
from all potential sources, and to act on any relevant findings in
a timely manner.
Risk impact
GSK has zero tolerance for an unfavourable benefit-to-risk ratio
for patients who use our products. We collect, review, follow up
and report human safety information from all potential sources,
and use this to conduct robust and timely safety signal
detection and take all appropriate measures to safeguard
patients and consumers. If we do not effectively manage risks
to our patient safety activities, the most serious repercussion
could be harm to patients. If we are not compliant with all
pharmacovigilance (or ‘drug safety’) regulations globally,
consequences could include inspection findings, regulatory
scrutiny, civil or criminal sanctions and either temporary or
permanent loss of product marketing authorisation. Ineffective
management of patient safety risks could also lead to
reputational damage, loss of trust by patients and healthcare
providers, product-related litigation, and loss of shareholder
confidence.
Context
We are fully accountable for safeguarding patients, and our
licence to operate depends on our compliance with increasingly
complex and variable global regulatory requirements. These
include not only pharmacovigilance regulations, but also
stringent privacy protections and information security
considerations. Our compliance depends on employees
and third parties acting on our behalf managing human
safety information in accordance with our internal processes.
We balance routine pharmacovigilance activities against a
variety of business change initiatives. While supporting our
current product portfolio, we are optimising how we perform
pharmacovigilance so we are prepared to deliver our future
strategy, including an increased focus on oncology, vaccines
and specialty medicines and the successful separation of the
Consumer Healthcare business in 2022.
We collect information on the safety and efficacy of our
products in humans during clinical development and gain more
comprehensive information on real-world use once our products
are on the market. In addition to our own safety surveillance
activities, external parties analyse publicly-available clinical trial
results or other data, while new external initiatives use real-world
evidence from sources which are not accessible to GSK, but
may be used by regulatory agencies to supplement and validate
the evidence we use to support the safety and efficacy of our
products.
Extensive news and social media coverage of the safety and
efficacy of COVID vaccines and therapies has increased the
public’s recognition of the importance of pharmacovigilance
in the drug development process and in the product marketing
phase, but a rise in misinformation has also led to distrust and
vaccine hesitancy. This environment could undermine regulatory,
governmental, and public trust in medicines for treating
COVID-19, which could negatively influence healthcare
decisions for other diseases, leading to reputational damage
or product liability lawsuits.
Principal risks and uncertainties
Patient safety
276
GSK Annual Report 2021
Risk definition
Failure by GSK, its contractors or suppliers to ensure:
–
Appropriate controls and governance of quality in product
development;
–
Compliance with good manufacturing practice or good
distribution practice regulations in commercial or clinical trials
manufacture and distribution activities;
–
Compliance with the terms of GSK product licences and
supporting regulatory activities.
Risk impact
A failure to ensure product quality could have far-reaching
implications for patient and consumer safety, cause product
launch delays, drug shortages or product recalls, and have
regulatory, legal, and financial consequences. These could
materially and adversely affect GSK’s reputation and financial
results.
Context
The external environment for product quality remains
challenging, affected by misinformation fuelling vaccine
hesitancy, and increased cyber-attacks and data breaches
across the industry. Cyber-attacks remain a key risk to the
integrity of product quality data and its audit trail.
We are prepared to meet the 2021 European Medicines
Agency (EMA) requirements for licensing of Medical Devices
and continue to prepare for the in Vitro Diagnostic Medical
Device Regulation which becomes effective May 2022. We
continue to plan for the implementation of the New Annex 1
guidance for the manufacture of Sterile Medicinal products in
the first half of 2022.
We are increasingly using new technology to enhance the
manufacture and testing of our products. For example, we
use new electronic documentation systems and advanced
laboratory information management tools.
Significant changes are taking place in GSK as we implement
our new strategy and structure. Our quality organisations
assess these changes to make sure our quality procedures and
governance can facilitate the strategy, while also ensuring that
no unintended consequences increase our product quality risk.
The industry is experiencing an increased regulatory on-site
inspection presence - resumed since the onset of the pandemic
and we are taking steps to ensure our inspection readiness.
Mitigating activities
We align an extensive global network of quality and compliance
professionals, from site-level to senior management with each
business unit to provide oversight and assist with the delivery
of quality performance and operational compliance. We deliver
this management oversight through a hierarchy of quality
councils, an independent chief product quality officer and a
global product quality office that oversees product quality risk
across the company.
We have developed and implemented a single quality
management system that defines the quality standards and
systems for our businesses associated with pharmaceutical,
vaccine and consumer healthcare products, and for clinical
trial materials. This system has a broad scope and is applicable
throughout the product lifecycle, from R&D to mature
commercial supply. A consolidation of regulatory requirements
from markets across the world augments this system, which
means it meets external expectations for product quality in the
markets we supply. Our system is based on the internationally
recognised principles from the ICH Q10 pharmaceutical quality
system framework.
Product quality
Patient safety
continued
Mitigating activities
Our Chief Medical Officer is accountable for the Patient Safety
enterprise risk and human safety matters, in collaboration with
the Head of Global Safety. A cross-enterprise safety governance
board oversees implementation of our control framework,
including risk management. Our Global Safety Board ensures
that we address human safety proactively throughout a product’s
lifecycle. Our global policy on management of human safety
information requires that all employees immediately report issues
relating to the safety of our products. Our Third-Party Oversight
framework ensures that third parties who may encounter human
safety information are identified and trained appropriately. We
manage safety information for all products and from all sources
in compliance with global regulations. This information allows us
to detect safety signals for our products and take timely action
on information that changes a product’s risk/benefit profile.
Any actions are discussed beforehand with regulatory
authorities, and can include updating the prescribing information,
communicating with healthcare providers, restricting product
prescribing/availability to help assure safe use, and carrying out
further clinical trials. In certain cases, it may be appropriate to
stop clinical trials or to withdraw a product (or a specific batch)
from the market.
In 2021, we reinforced requirements for human safety
information management across GSK through a range of
communication efforts including improved internal mechanisms
for adverse event reporting. We also launched an initiative to
automate adverse event case intake, processing, and reporting.
We consolidated governance of pharmacovigilance process-
related activities from two boards into a single governance
forum, and we launched a pilot to optimise delivery and oversight
of Patient Safety activities globally. We will target Core Patient
Safety processes for simplification and/or optimisation in 2021
and 2022.
Principal risks and uncertainties
continued
GSK Annual Report 2021
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Strategic report Governance and remuneration Financial statements
Investor information
Financial controls and reporting
Risk definition
Failure to comply with current tax laws or incurring significant
losses due to treasury activities; failure to report accurate
financial information in compliance with accounting standards
and applicable legislation.
Risk impact
Non-compliance with existing or new financial reporting and
disclosure requirements, or changes to the recognition of income
and expenses, could expose GSK to litigation and regulatory
action and could materially and adversely affect our financial
results. In the current global pandemic, there can be significant
changes at short notice. Failure to comply with changes in the
substance or application of the laws governing transfer pricing,
dividends, tax credits and intellectual property could also
materially and adversely affect our financial results.
Inconsistent application of treasury policies, transactional or
settlement errors, or counterparty defaults could lead to
significant losses.
Context
We are required by the laws of various jurisdictions to publicly
disclose our financial results and events that could materially
affect the Group’s financial results. Regulators routinely review
the financial statements of listed companies for compliance with
new, revised, or existing accounting and regulatory
requirements. We believe that we comply with the appropriate
regulatory requirements concerning our financial statements
and the disclosure of material information, including any
transactions relating to business restructuring such as
acquisitions and divestitures. However, should we be subject to
an investigation into potential non-compliance with accounting
and disclosure requirements, this could lead to restatements of
previously reported results and significant penalties.
Our Treasury group deals daily in high value transactions, mostly
foreign exchange, and cash management transactions. These
transactions involve market volatility and counterparty risk.
The Group’s effective tax rate reflects the locations of our
activities and the value they generate, which determine the
jurisdictions in which profits arise and the applicable tax rates.
These may be higher or lower than the UK statutory rate and
may reflect regimes that encourage innovation and investment
in R&D by providing tax incentives which, if changed, could
affect GSK’s tax rate. In addition, the worldwide nature of
our operations means that our cross-border supply routes,
necessary to ensure supplies of medicines, can result in
conflicting claims from tax authorities as to the profits to be
taxed in individual countries. This can lead to double taxation,
with profits taxed in more than one country. The complexity of
tax regulations also means that we may occasionally disagree
with tax authorities on the technical interpretation of a particular
area of tax law. The tax charge included in our financial
statements is our best estimate of tax liability pending any
audits by tax authorities.
We expect there to be a continued focus on tax reform, driven
by initiatives by the OECD and the EC to address the tax
challenges arising from digitalisation of the economy. Together
with domestic initiatives around the world, these may result in
significant changes to established tax principles and an
increase in tax authority disputes. Regardless of their merit or
outcomes, these may be costly, divert management attention
and adversely impact our reputation and relationship with key
stakeholders.
Product quality
continued
We routinely update our quality management system (QMS) so
it keeps pace with the evolving external regulatory environment
and new scientific understanding of our products and
processes. We have also made our policies and procedures
simpler to understand and implement and adopted innovative
tools to make them more user-friendly. We regularly train staff
in regulatory expectations and learnings from inspections and
existing procedures so they can maintain Current Good
Manufacturing Practice standards.
We have implemented a risk-based approach to assessing and
managing third party suppliers that provide materials used in our
finished products. We expect contract manufacturers that make
our products to comply with GSK standards and regularly
conduct audits to provide us with assurance that they do.
We have product incident committee processes in place to
investigate product issues and make recommendations on
remediation activities including, where necessary, the recall of
products to protect patients and consumers.
Our established complaint process ensures we respond
appropriately to product quality issues raised by patients and
customers. Independent functions review and triage allegations
of noncompliance or misconduct received through formal
and informal ‘Speak Up’ channels. Global disciplinary and
enforcement procedures apply to any breaches of our
standards, and are initiated, as appropriate, following
investigations. We use key risk indicators to support risk
management activities and provide GSK’s Leadership Team
and Risk Oversight and Compliance Council with an
integrated assessment of product quality performance.
We have completed the initial review of manufacturing
processes for all products to identify any potential risks
associated with nitrosamine impurities. We completed the
work in accordance with Health Authority regulatory timelines.
We are continuing our product evaluations and will take any
necessary risk mitigation steps in 2022.
Principal risks and uncertainties
continued
278
GSK Annual Report 2021
Financial controls and reporting
continued
Mitigating activities
Financial results are reviewed and approved by regional
management, before being reviewed by GSK’s Group Financial
Controller and Chief Financial Officer (CFO). This allows our
Financial Controller and CFO to assess the evolution of the
business over time, and to evaluate its performance to plan.
Significant judgements are reviewed and confirmed by senior
management. We integrate technical or organisational
transformation, newly acquired activities and external risks,
such as the COVID-19 pandemic, into our risk assessments,
and apply appropriate controls and reviews.
We maintain a control environment designed to identify material
errors in financial reporting and disclosure. The design and
operating effectiveness of key financial reporting controls are
regularly reviewed by management and tested by external third
parties. A minimum standard control set is in place for all
finance locations, irrespective of size, which is reviewed by
management and monitored independently. This gives us
assurance that controls over key financial reporting and
disclosure processes are operating effectively. Our Global
Finance Risk Management and Controls (FRMC) group
provides extra support during significant transformations,
such as system deployment or management/structural
reorganisations. We add operational resources and adapt
programme timelines to ensure processes and controls are
maintained during significant changes.
The Disclosure Committee, reporting to the Board, reviews
GSK’s quarterly results and annual report. Throughout the year,
in consultation with its legal advisors, the Disclosure Committee
also determines whether it is necessary to disclose publicly
information about the Group through stock exchange
announcements. We keep up to date with the latest
developments in financial reporting requirements by working
with our external auditor and legal advisors.
The Treasury Management Group (TMG) meets regularly
to ensure that liquidity, interest rate, counterparty, foreign
currency transaction and foreign currency translation risks are
all managed in line with the prudent approach detailed in the
risk strategies and policies adopted by our Board.
Counterparty exposure is subject to defined limits approved
by the Board for both credit rating and individual counterparties.
The Middle Office within Treasury monitor the management of
counterparty risk in line with agreed policy with oversight from
a corporate compliance officer, operating independently of
Treasury. Further details on mitigation of Treasury risks can
be found on pages 228 to 244.
We manage tax risk through robust internal policies, processes,
training, and compliance programmes. We maintain open and
constructive relationships with tax authorities worldwide. We
monitor government debate on tax policy in our key jurisdictions,
so that we can understand any potential future changes in tax
law and share an informed point of view. Where relevant, we
provide pragmatic and constructive business input to tax policy
makers, either directly or through industry trade bodies. This
includes advocating reform to support economic growth and
job creation, as well as the needs of our patients and other key
stakeholders. We submit significant tax decisions to our Tax
Governance Board, which meets quarterly comprised of senior
GSK Finance colleagues.
Our tax affairs are managed on a global basis by a team of tax
professionals, led by the Global Head of Tax, who work closely
with the business on a day-to-day basis. The Global Tax team
is suitably qualified for the roles they perform, and we support
their training needs so they can provide up to date technical
advice in line with their responsibilities.
We submit tax returns according to statutory time limits and
engage proactively with tax authorities to ensure our tax affairs
are current, entering into continuous audit programmes and
advance pricing agreements where appropriate. These
arrangements provide long-term certainty for both tax
authorities and GSK over the tax treatment of our business,
based on full disclosure of all relevant facts. We seek to resolve
any differences of interpretation in tax legislation with tax
authorities in a cooperative manner. In exceptional cases, we
may have to resolve disputes through formal proceedings.
Principal risks and uncertainties
continued
GSK Annual Report 2021
279
Strategic report Governance and remuneration Financial statements
Investor information
Risk definition
The bribery and corruption risk is the failure of GSK employees,
consultants and third parties to comply with our Anti-bribery &
corruption (ABAC) principles and standards, as well as with all
applicable legislation.
Risk impact
Failure to mitigate this risk could expose the Group and
associated persons to governmental investigation, regulatory
action, and civil and criminal liability and may compromise the
Group’s ability to supply its products under certain government
contracts. In addition, failure to prevent bribery or corruption
could have substantial implications for GSK’s reputation and the
credibility of senior leaders and might erode investor confidence
in our governance and risk management. It could also lead to
legal and financial penalties.
Context
The overall environment for ABAC continues to be challenging.
Countries are holding individuals, as well as corporations,
accountable by increasing the employer duty of care.
Divergence of legislation, increasing political protectionism,
social inequality and pricing pressures are making compliance
harder. Society is holding corporations to ever higher standards,
with technology providing a rapid and anonymous avenue for
dissemination of previously confidential information and even
for damaging false reports.
Enforcement actions and penalties continued across the globe
with the focus on use of third-party intermediaries. Proposed
EU legislation would require businesses to conduct due
diligence on potential human rights and related environmental
impacts of their operations and supply chains, imposing a legal
standard of care. In addition, the ongoing impact of COVID-19
could increase the risk of bribery and corruption.
Supportive aspects of the external environment include an
increase in transparency and collaboration among enforcement
authorities with the aim of reducing bribery and corruption
globally. Advances in technology and the use of data analytics
are also providing better platforms to streamline processes and
detect potential issues.
Mitigating activities
We have an enterprise wide ABAC programme designed to
ensure compliance with our ABAC policies and mitigate the risk
of bribery and corruption. It builds on our business standards
and culture to form a comprehensive and practical approach to
compliance that is flexible to the evolving nature of our business.
GSK’s ABAC Governance Board oversees and provides
programme governance and enterprise risk management which
includes representation from key functional areas.
We have appropriate controls in place around transactions
and payments to third parties, such as training, awareness
raising and strong monitoring. We plan to continue with pre-
and post-transaction ABAC due diligence, to increase the
capabilities in the business on monitoring, oversight, and red
flag resolution of third parties, and to review controls and
accountabilities of government officials. We continue to assess
and understand our money laundering risk exposure and
mitigate any existing risk.
Our Code of Conduct, values and expectations, and
commitment to zero tolerance towards bribery and corruption
are integral to how we mitigate this risk. In light of the complexity
and geographic breadth of the risk, we constantly evolve our
oversight of activities and data; reinforce to our workforce
GSK’s clear expectations regarding acceptable behaviours; and
maintain regular communications between the centre and local
markets.
We built our ABAC programme based on best in class
principles and is subject to ongoing review and development.
It provides us with the basis from which we seek to manage
the risk from both top down and bottom up. For example, the
programme includes top-level commitment from our Board
and leadership, and a data analytics programme to create and
embed local key risk indicators to enable targeted intervention
and risk management activities.
A global ABAC policy, and other written standards and controls,
which address the business activities that give rise to ABAC
risk underpins the programme. In addition, the programme
mandates enhanced controls over interactions with government
officials and during business development transactions.
Controls in our ABAC policy establish due diligence
requirements for the engagement of third parties.
We have a dedicated team responsible for the implementation
and evolution of the ABAC programme. The ABAC team
continually works with other groups across the enterprise to
address and improve controls and monitoring requirements.
Audit & Assurance and independent business monitoring teams
complement the team’s work and provide added assurance.
We use issues found during oversight and assurance exercises,
and from investigations to identify areas for specific intervention
in the markets and to drive the continuous improvement of the
programme.
We regularly provide mandatory ABAC training to employees
and relevant third parties in accordance with their roles and
responsibilities and the risks they face.
We benchmark our ABAC programme against those of other
large multinational companies and use external expertise and
internal insights to drive improvements.
Formal and informal ‘Speak Up’ channels are available to report
misconduct or non-compliance. The central investigations team
reviews and triages allegations of non-compliance and allocates
for investigation as appropriate.
Anti-bribery and corruption (ABAC)
Principal risks and uncertainties
continued
280
GSK Annual Report 2021
Risk definition
Failure to engage in commercial activities that are consistent
with the letter and spirit of the law, industry regulations, or
the Group’s requirements relating to sales and promotion
of our medicines and vaccines; appropriate interactions with
healthcare professionals/ organisations and patients; legitimate
and transparent transfers of value; and competition (or antitrust)
regulations in commercial practices, including trade channel
activities and tendering business.
Risk impact
Failure to engage in activities that are consistent with the
letter and spirit of the law, industry regulations, or the Group’s
requirements relating to sales and promotion of medicines
and vaccines; with appropriate interactions with healthcare
professionals (HCPs), organisations and patients; with
legitimate and transparent transfers of value; and with pricing
and competition (or antitrust) regulations in commercial
practices, including trade channel activities and business
tendering, could, materially and adversely affect our ability to
deliver our strategy and long-term priorities. Additionally, it may
result in incomplete awareness of the risk/benefit profile of our
products and possibly suboptimal treatment of patients and
consumers; governmental investigation, regulatory action and
legal proceedings brought against the Group by governmental
and private plaintiffs which could result in government
sanctions, and criminal and/or financial penalties. Any practices
that are found to be misaligned with our values and expectations
could also result in reputational harm and dilute trust
established with external stakeholders.
Context
We operate in a highly regulated and extremely competitive
biopharma and consumer industry, amongst peers who make
significant product innovations and technical advances and
intensify price competition. Additional external factors impacting
our business operations include the ongoing COVID-19 global
pandemic, access limitations to our customers, macroeconomic
inflationary dynamics, and pricing pressure across markets.
To achieve our strategic objectives, we must continue to
develop commercially viable new products and deliver
additional uses for existing products that address the needs
of patients, consumers, HCPs and payers. Financially, new
products/indications carry with them an uncertainty with
regards to future success. Product development is costly,
timely, and uncertain, and carries with it the potential for failure
at any stage. Even upon successful product development, we
still face challenges in how we launch and how our competitors’
products or pricing strategies could render our assets less
competitive. Supporting our efforts on product innovation is a
continued focus on creating an omnichannel way of
engagement, with a continued focus on our patient.
Once we have an approved medicine or vaccine, it is our
obligation to provide important information to the healthcare
community in various ways, always in a responsible, legal, and
ethical manner. Appropriate product promotion ensures HCPs
have access to the information they need, that patients and
consumers have the facts about the medicines and vaccines
they require, and prescribed, recommended, or used in a
manner that provides healthcare benefit.
We are committed to the ethical and responsible
commercialisation of our products in support of our purpose to
improve the quality of human life by enabling people to do more,
feel better, and live longer.
Mitigating activities
To achieve our strategic objectives, we must meet price
expectations of payers, HCPs, consumers, and the community.
Our values and behaviours provide a guide for how we lead and
make decisions. We constantly strive to do the right thing and
deliver quality medicines and vaccines and sustain reliable
supply to meet customer needs. In doing so, we seek to ensure
our actions reflect GSK’s values, behaviours, and purpose.
We understand the impact of data on our industry and strive to
become an organisation that makes data-driven decisions; this
approach is aligned to our efforts to become more agile and
work at pace. GSK has acted to enhance and improve our
policies and standards, application of data analytics and our
channel activities. We have developed policies to support the
strong growth of our Consumer Healthcare internet channels
and digital marketing activities, using artificial intelligence-
powered tools to improve the oversight of more than 700
GSK websites.
We have evolved policies and standards in a stepwise approach
to ensure that commercial activities that we undertake or are
conducted on our behalf are executed within our established
governance. We train employees on relevant information with a
focus on interactive learning and elements of behavioural
science. All our commercial activities worldwide must conform
to high ethical, regulatory, and industry standards. Where local
standards differ from global ones, we apply those that are most
stringent. Where the standards of an acquired company or joint
venture partner differ from our global standards, we remediate
legacy policies and implement revisions, so they align.
Our Consumer Healthcare business has harmonised policies
and procedures, to guide regional and global commercial
practice processes, and clarified applicable standards for
operations in the markets in which we operate. In 2021 we have
implemented a specific control framework for our five export
hubs, and embedded our promotional code in China to enable
responsible business growth and employee behaviour.
Commercial practices
Principal risks and uncertainties
continued
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Strategic report Governance and remuneration Financial statements
Investor information
Commercial practices
continued
GSK’s Pharmaceuticals, Consumer Healthcare and Vaccines
businesses continue to use our internal control framework to
support its assessment and management of risks. Business
unit risk management and compliance boards, which manage
risks across global and in-country business activities, oversee
commercial activities and their monitoring programmes. The
recent combination of the Legal and Compliance functions
into one team will result in a stronger, more cohesive support
function for our businesses.
All promotional materials and activities must be reviewed
and approved according to our policies and standards and
conducted in accordance with local laws and regulations; these
requirements seek to ensure that such materials and activities
fairly represent the Group’s products or services. Consumer
Healthcare has deployed a new copy approval tool to improve
controls over important promotional activity. Where necessary,
in the event of misconduct, we have disciplined employees, up
to and including termination of contract, and clawed back
remuneration from senior management.
We have continued to evolve our incentive programme for
Pharmaceuticals and Vaccines sales representatives to better
recognise and reward individual effort. In all mature markets, the
capped variable pay element of representatives’ compensation
is evaluated on the basis of individual sales targets.
We implemented this in a phased and thoughtful approach
supported by a comprehensive training, control, and monitoring
framework to ensure full alignment with GSK’s values-based
approach to HCP engagement.
We allow fair market value payments to be made by GSK to
expert practitioners to speak about our innovative medicines
and vaccines during a restricted period in a product’s lifecycle.
A global end-to-end process and system is currently set to
begin deployment in Q4 2021 and will improve not only the
execution of these activities, but also strengthen controls
through automation and use of data. Where permitted we
report payments to individual HCPs as part of our commitment
to transparency and responsible disclosure.
Consumer Healthcare has been a key driver in the development
of an ethical code for the Global Self-Care Federation, setting
principles for promotion to healthcare practitioners and
pharmacy staff.
GSK is committed to complying with all applicable sanctions
laws and regulations and has deployed a programme to enable
management of sanctions risk. The programme, led by GSK
Finance, is made up of various systems and controls including,
but not limited to, policies and procedures, training and
awareness, screening, monitoring and risk reporting.
Non-promotional engagement
Risk definition
Failure to engage in non-promotional activities that are
consistent with local laws, regulations and guidance, Industry
Codes, internal GSK policies, standards and other controls,
and GSK values, including i) communications to HCP/OHS or
non-HCPs relating to our medicines and/or associated disease
areas; ii) appropriate conduct of non-promotional interactions;
and iii) legitimacy and transparency of non-promotional
interactions.
Risk impact
Without controls in place, the risk could result in real,
perceived, or disguised promotion including off-label and
prior-authorisation promotion, and real or perceived provision of
medical advice. This in turn could lead to criminal investigations
and penalties, civil litigation, or competitor complaints. At the
same time, if we do not engage fully and appropriately, this
could result in patient harm, failure to advance science and
innovation, reputational damage, and financial loss. Such
consequences may reduce the trust of the public, patients,
healthcare professionals, payers, regulators, and governments.
Context
Non-promotional engagements are diverse activities directed
at healthcare professionals, as well as patients, payers, and
external stakeholders. Such engagements are conducted to
improve patient care through the exchange or provision of
knowledge on the use of our products and related diseases.
Non-promotional engagement with external stakeholder groups
is vital to GSK, as a research-based healthcare company, and
necessary for scientific and medical advances. We expect our
non-promotional activities to be scientifically sound and
accurate, conducted ethically and transparently, and compliant
with applicable codes, laws, and regulations. However, non-
promotional engagements are largely unregulated. Therefore,
measured risk-taking, rooted in sound values, and principles-
based decision-making, training, communication, and
monitoring of such activities are key to managing the risk and
enabling full and appropriate engagement.
Mitigating activities
Our Chief Medical Officer (CMO) oversees all non-promotional
engagement as enterprise risk owner. The GSK Code of
Practice is the key internal policy for non-promotional
engagement activities. These activities include scientific
interactions, support of medical education, advice seeking,
gathering insights on unmet needs of patients, scientific
communication of our research, and disease awareness.
Principal risks and uncertainties
continued
282
GSK Annual Report 2021
Privacy
Risk definition
The failure to collect, secure, use, share and destroy Personal
Information (PI) in accordance with data privacy laws can lead
to harm to individuals (e.g. financial, stress, prejudice) and GSK
(e.g. fines, operational, financial and reputational).
Risk impact
Non-compliance with data privacy laws globally could lead to
harm to individuals and GSK. It could also damage trust
between GSK and individuals, communities, business partners
and government authorities. Many countries have increased the
enforcement powers of their data protection authorities by
allowing them to impose significant fines, impact cross-border
data flows, or temporarily ban data processing. Many new
country laws also give individuals the right to bring collective
legal actions against companies like GSK for failure to follow
data privacy laws.
Context
Data privacy legislation is diverse with limited harmonisation
or simplification. It is challenging for multinationals to
standardise their approach to compliance with data privacy
laws. Governments are enforcing compliance with data privacy
laws more rigorously. The focus on the ethical use of personal
information is growing, over and above compliance with data
privacy laws, due to an increase in the volume of data
processed and advances in technology.
Workforce protection and effective privacy controls for research
during the COVID-19 pandemic create unique challenges.
Additionally, new data privacy laws, such as the Personal
Information Protection Law (PIPL) in China, and court decisions
– like the Court of Justice of the European Union ruling for
Schrems II – are invalidating established international data
transfer mechanisms that international companies had relied
on. The increasing trend for data sovereignty affects our ability
to drive medical innovation and to effectively operate
internationally
Mitigating activities
Our General Counsel is also the chair of our Privacy
Governance Board, which oversees GSK’s overall data privacy
operating model. Each GSK business area has appointed a risk
owner accountable for overseeing its privacy risks, supported
by privacy leaders within their business.
In some countries data privacy laws require appointment of a
data protection officer (DPO). GSK appointed a single DPO for
the EU, represented and supported in specific countries by
country privacy advisors.
Our General Counsel is GSK’s enterprise risk owner (ERO).
The ERO has appointed a delegate risk owner, the global
privacy officer (GPO), who has day-to-day accountability for
designing and implementing the control framework. The GPO
co-leads the cross-functional Privacy Centre of Excellence,
together with the Global Privacy Counsel. Privacy officers,
privacy counsel, and multiple country privacy advisors (who are
familiar with local privacy regulations) support these groups.
GSK has evolved the initial control framework implemented for
the EU General Data Protection Regulation into a
comprehensive privacy control framework, based on global
privacy principles common across the global privacy landscape.
This global framework deployed in countries showing a need for
such a comprehensive framework, based on factors like robust
local privacy legislation, established data protection authorities,
and GSK footprint. Beyond those countries, we are deploying a
proportionate control framework to set up minimum privacy
standards irrespective of any applicable legislation.
Our Privacy Centre of Excellence is responsible for:
–
operating and improving the centralised global privacy control
framework;
–
continuously assessing and providing relevant and
proportionate controls and aid to non-deployed markets;
–
monitoring new, or changing, laws and adapting the privacy
framework; accordingly, and
–
deploying a comprehensive training programme to drive
greater awareness and accountability for managing personal
information across the entire organisation.
We certify key GSK privacy network roles with an accredited
international privacy association.
We continuously improve our processes, such as issue
identification, reporting and handling, through monitoring.
The Privacy Centre of Excellence engages in new business
development opportunities at an early stage to ensure we
perform appropriate due diligence and the right steps taken
when onboarding or splitting off a business unit.
Since the pandemic, we have seen a continued increase
in virtual engagements (eg with external experts, advisory
boards, patient advocacy, patient engagements and scientific
congresses). We further developed and modernised our digital
approach to HCPs and insight-gathering and applied our
internal principles and policies to this rapidly changing and
growing environment.
We enhanced our internal networks to foster collaboration and
best practice sharing in risk management. The networks will
identify emerging risks associated with non-promotional
activities early and support staff to conduct activities in
compliance with GSK’s values and policies, local laws, and
regulations. We continue to build effective management
monitoring systems and apply key risk indicators for managing
non-promotional engagement.
Non-promotional engagement
continued
Principal risks and uncertainties
continued
GSK Annual Report 2021
283
Strategic report Governance and remuneration Financial statements
Investor information
Risk definition
Research Practices risk is the failure to adequately conduct
ethical and sound pre-clinical and clinical research. In addition,
it is the failure to engage in scientific activities that are
consistent with the letter and spirit of the law and industry, or
the Group’s requirements. It comprises the following sub-risks:
Data Governance, Laboratory Research, and Human Subject
Research.
Risk impact
The potential impacts of the risk include harm to human subjects,
reputational damage, failure to obtain the necessary regulatory
approvals for our products, governmental investigation, legal
proceedings brought against the GSK by governmental and
private plaintiffs (product liability suits and claims for damages),
loss of revenue due to inadequate patent protection or inability
to supply our products, and regulatory action such as fines,
penalties, or loss of product authorisation. Poor data integrity
and governance could compromise GSK’s R&D efforts and
negatively impact our reputation. Any of these could materially
and adversely affect our financial results and damage the trust
of patients and customers.
Context
Research involving animals can raise ethical concerns. In
many cases, however, research in animals is the only way to
investigate the effects of a potential new medicine in a living
body other than in humans. Animal research provides critical
information about the causes and mechanisms of diseases and
therefore remains a vital part of our research. We continually
seek ways in which we can minimise our use of animals in
research, development, and testing, while complying with
regulatory requirements and reducing the impact on the
animals used.
Human subject research is critical to assessing and
demonstrating the safety and efficacy of our investigational
products or further evaluate our products once they have been
approved. This research includes clinical trials in healthy
volunteers and patients and follows regulations and high ethical,
medical, and scientific standards. We disclose the results of
this research externally regardless of whether they reflect
positively or negatively on our products, so that the scientific
community can learn from the outcomes of our research.
We also work with human biological samples which are
fundamental to the discovery, development, and safety
monitoring of our products. We are committed to managing
human biological samples in accordance with relevant laws,
regulations, and ethical principles, and in a manner that
respects the interests of sample donors.
Data is pivotal to our R&D strategy and we are maximising the
use of data to serve patients. Governing our data in accordance
with relevant laws, regulations, contractual obligations,
expectations, and our culture across privacy, information
security, and data integrity is essential.
We use a wide variety of biological materials in the discovery,
research, and development of our assets. Through the
Convention on Biological Diversity (CBD) and the Nagoya
Protocol, the international community has established a global
framework regulating access to, and use of, genetic resources
of non-human origin in research and development.
We support the principles of access to, and benefit-sharing
of, genetic resources as outlined in the CBD and the Nagoya
Protocol. We also recognise the importance of appropriate,
effective, and proportionate implementation measures at
national and regional levels.
Mitigating activities
The Research Practices risk is overseen by an enterprise
framework that seeks to strengthen governance across R&D
in our Pharmaceuticals, Vaccines and Consumer Healthcare
businesses.
Under the leadership of the Research Practices enterprise risk
owner, management of the risk takes a pragmatic approach to
information sharing, streamlining risk identification and
escalation while ensuring ownership of risk mitigation stays
with the business.
We have an established Office of Animal Welfare, Ethics and
Strategy and Risk (OAWESR), led by our Chief Veterinary
Officer, that supports the humane and responsible care of
animals, carries out ethical reviews and independent scientific
reviews of animal studies, and shares knowledge and advocates
for the application of non-animal alternatives. The OAWESR
provides a framework of animal welfare governance, defines and
provides oversight for training in animal care and, promotes the
replacement, refinement and reduction of animal research,
conducts quality assessments, manages a programme of
external animal diligence, and develops and deploys strategies
for reproducing experiments and translating them to human
clinical end points.
Ensuring we implement and maintain proper data governance
controls remains an important priority, especially as our
scientific strategy is evolving to take advantage of the breath of
our data (for example: genomics and artificial intelligence and
machine learning). We focus on building data integrity as well as
privacy and usage controls into our internal control framework.
Quality assurance teams conduct audits to provide independent
business monitoring of our internal controls.
Our R&D organisation maintains and controls pre-publication
procedures to guard against public disclosure before patent
applications are filed. In addition, because a lack of data
integrity in preparing patent application data and information
can lead to a loss of patent protection, legal experts collaborate
with R&D to support the review process for new patent
applications. Our R&D organisation also collaborates with
legal experts throughout the development of our assets to
take account of any relevant third-party patent rights.
Research practices
Principal risks and uncertainties
continued
284
GSK Annual Report 2021
Environment, health and safety
Risk definition
Failure in management of:
–
execution of hazardous activities;
–
GSK’s physical assets and infrastructure;
–
handling and processing of hazardous chemicals and
biological agents;
–
control of releases of substances harmful to the environment
in both the short and long-term;
leading to incidents which could disrupt our R&D and Supply
activities, harm employees, harm the communities and harm
the local environments in which we operate.
Risk impact
Failure to manage EHS risks could lead to significant harm to
people, the environment and the communities in which we
operate; fines; inability to meet stakeholder expectations and
regulatory requirements; litigation or regulatory action; and
damage to the company’s reputation, which could materially
and adversely affect our financial results.
Context
GSK is subject to the health, safety, and environmental laws
of various jurisdictions. These laws impose duties to protect
people, the environment, and the communities in which we
operate.
Mitigating activities
The Global Leadership Team is responsible for EHS
governance and risk oversight. They ensure there is an effective
control framework ‘in-place’ and ‘in-use’ to manage the EHS
risks, impacts, and legal compliance issues in each of our
business units. This includes assigning responsibility to senior
managers for providing and maintaining our controls, and for
ensuring that tiered monitoring and governance processes are
in place within their business units. Function leaders ensure that
the EHS control framework is implemented effectively in their
respective business area, that it is compliant with applicable
laws and regulations, and that it is adequately resourced,
maintained, communicated, and monitored. Every employee
and qualified contractor acting on behalf of GSK is personally
responsible for ensuring that they follow all applicable local
standard operating procedures.
Our risk-based, proactive approach is articulated in our
global EHS policy and detailed in our global EHS standards,
against which we audit all our operations to ensure compliance.
We ensure hazards are appropriately controlled through the
design of facilities, equipment, and systems. These rigorous
procedures, when applied correctly, put effective barriers in
place to protect employees’ health and safety.
In late 2020 we created a safety improvement plan to
strengthen our corporate safety programmes, focusing on
Life Saving Rules, Safety Leadership and Warehouse Safety.
All significant milestones for these programmes delivered in
2021 and the overall number of significant incidents that have
occurred this year has reduced.
Principal risks and uncertainties
continued
Environmental sustainability
Risk definition
Failure in the management of:
–
Physical climate and environmental risks;
–
Current and future regulatory requirements for environmental
policies and taxes;
–
Delivery and performance of management environmental
objectives;
leading to: reduced supply chain resilience; product life cycle
management issues, loss of trust/reputation with employees,
investors, customers, regulators and other stakeholders;
increased costs; loss of sales or market access; negative
impacts on the environment.
Risk impact
We recognise that the way we respond to climate change and
manage environmental risks affects our ability to supply
products to patients and consumers and could lead to harm to
the environment and our reputation. Failure to meet fast-evolving
regulatory requirements and stakeholder expectations could
result in litigation or regulatory actions, which may have a
material adverse impact on our financial results and longer term
loss of trust, undermining the credibility of the company.
Context
It is increasingly understood that the interconnected effects of
climate change, nature loss, and society’s impact on both are
influencing human health. Internal and external expectations for
companies to address their impact on the environment are
increasing, as are the effects of climate change on operational
resilience, in regard to access to energy, water and the natural
resources used in products, along with potential cost increases
from any regulatory changes or environmental taxes.
GSK Annual Report 2021
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Investor information
Principal risks and uncertainties
continued
Environmental sustainability
continued
Mitigating activities
In November 2020, GSK announced a new commitment to
have net zero climate impact and to be net nature positive by
2030. These goals built on our long-term ambition, set out in
2010, to reduce our impact on the environment.
The GSK Leadership Team (GLT) is responsible for
environmental sustainability governance and risk oversight.
It ensures there is an effective framework in place, and in use,
to manage the risks across each of our businesses and to
deliver on commitments. The GLT’s responsibilities include
appointing dedicated senior leaders and resources to provide
and maintain risk controls and ensure that governance
processes are established and effective within their businesses.
A dedicated environmental sustainability enterprise risk plan
is in place supported by a dedicated programme team and
governance framework to manage transformation activities.
We ensure delivery of reductions in carbon emissions, energy,
water, and waste across our operations. We have mature
programmes for managing performance improvements at our
sites, and we include sustainability considerations in the design
of products and packaging. We are strengthening our
engagement with our suppliers to target where key interventions
or support are most needed.
We continue to monitor and control antibiotic emissions from
manufacturing effluents at all GSK facilities, and those of our
suppliers, following good operational practice and meeting
emission limits as defined by the AMR Alliance Manufacturing
Framework to assess our impact on the environment.
We continuously re-assess our business resilience to climate
change against the Task Force on Climate-related Financial
Disclosures (TCFD) framework guidelines.
Risk definition
Risk in Information Security at GSK is characterised as the
unauthorised disclosure, theft, unavailability or corruption of
GSK’s Information or key information systems that may lead to
harm to our patients, workforce and customers, disruption to
our business and/or loss of commercial or strategic advantage,
regulatory sanction, or damage to our reputation.
Risk impact
Failure to adequately protect our information, or key information
systems, may cause harm to our patients, workforce and
customers, disruption to our business and/or loss of commercial
or strategic advantage, regulatory sanction, or damage to our
reputation.
Context
The overall information security environment is challenging,
because of the difficulty of keeping pace with increasingly
sophisticated cyber threats. This is due to many factors
including, the complexity of large regulated organisations; the
well-resourced nature of hacking activities; and the increasing
demands for accountability of data handled by companies.
Additionally, the GSK separation is a period of significant
change which increases our risk and requires additional
vigilance. We continue to reassess our reliance on
interconnectivity with third party contractors, partners, and
suppliers.
The COVID-19 pandemic continues as another significant
external factor affecting how we manage information security at
GSK. COVID-19-related threats include an increase in
ransomware attacks against the healthcare sector, as hackers
continue to use the opportunity to disrupt critical healthcare
operations and, in some cases, seize healthcare research
related to COVID-19 vaccines and treatments.
We operate a highly connected information network which
holds confidential research and development, manufacturing,
commercial, workforce and financial data. This means that our
systems and information have been and will continue to be the
target of cyberattacks. We continue to consolidate information
systems to reduce attack points and enable more focused
controls. GSK’s strategic approach to digital analytics will
further increase our dependency on digital assets and
distributed data. Our continued analysis and assessment of
our critical data assets and the threats to those assets will
require a continuous re-evaluation of emerging risks to GSK.
Mitigating actions already defined in these areas includes the
secure deployment and operation of our resources in high-risk
markets, the risk posed by GSK having data in the Cloud, and
the potential for complexity resulting from agile business-led IT
development across the enterprise.
Information security
286
GSK Annual Report 2021
Principal risks and uncertainties
continued
Risk definition
Failure to deliver a continuous supply of compliant finished
product; inability to respond effectively to a crisis incident in a
timely manner to recover and sustain critical operations.
Risk impact
We recognise how important the continuity of supply of our
products is to the patients and consumers who rely on them.
Supply disruption can lead to:
–
Product shortages and product recalls
–
Regulatory intervention
–
Reputational harm
–
Lost sales revenue
Consequently, we need sophisticated end-to-end supply chain
management with robust crisis management and business
continuity plans in place to respond.
Context
We run our supply chains in a continually evolving, highly
regulated environment. There is no single set of global
regulations which governs the manufacture and distribution of
medicines and we must adhere to the requirements in all those
markets in which we licence, sell, or manufacture our products.
We rely upon our internal Quality Management System and our
internal Control Framework to ensure we continue to preserve
our licence to operate.
Our complex end-to-end supply chains often involve third party
suppliers, from Active Pharmaceutical Ingredient (API)
manufacturers and raw material suppliers through to Third Party
Logistics Providers and contract engineering firms. We embed
integrated risk management into our sourcing and day to day
business processes, alongside our Third-Party Oversight
programme.
COVID-19 is an exemplar of events in the external environment
which result in unforeseen, significant supply challenges,
including staffing shortages for essential manufacturing
operations, critical raw materials supply pressures (e.g. glass
vials, plastic tubing) and interruptions in distribution.
Cybersecurity remains a significant threat to our supply chain
operations. The global cyber threat has increased during the
global pandemic and we remain hyper-vigilant to data security
breaches and Operational Technology risks.
Mitigating activities
Risk Management:
Our supply chains are set up to ensure sustainable supply
across the GSK portfolio of Pharmaceuticals, Vaccines and
Consumer Healthcare products. The GSK Internal Control
Framework drives our approach to risk management, designed
to identify emerging new risks and support clear decision
making.
Supply continuity
Information security
continued
Mitigating activities
We have a dedicated team and program of activity that supports
our global information security policy and accompanying IT
standards and processes. The GSK Technology, Security and
Risk function provides strategy, direction, and oversight and
we have mirrored these functions in New CH in readiness for
separation. This includes active monitoring of cybersecurity,
while enhancing our global information security capabilities
through an ongoing programme of investment. We continue to
make significant investments in mitigation activities, which we
will continue to advance in the coming year:
–
Modernising cyber operations with consistent evaluation of
our security solutions and deployment of best of class cyber
security technology to ensure the timely detection and
response to information security incidents, with particular
focus on ransomware preparation and awareness.
–
Modernising cyber security within manufacturing and R&D
sites to address the age, complexity, and global footprint of
those environments.
–
Optimising security architecture to mitigate the risk of data
loss intentionally or unintentionally, implementing a cloud
security strategy and ensuring new solution development
includes security by design. We are also continuing to
remediate and improve the control environment for privileged
or elevated user rights across our systems.
–
Transferring third party risk management to a managed
service partner. This organisation will process our critical and
sensitive information and supports the solution that will enable
us to move all third parties that access our IT resources
remotely via a more secure environment.
–
Enabling business performance in high risk markets by
assessing data and information originating in, and flowing to,
international markets where local laws and norms represent a
heightened risk to the confidentiality, integrity, and availability
of our operational systems.
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Strategic report Governance and remuneration Financial statements
Investor information
Principal risks and uncertainties
continued
Supply continuity
continued
Each supply chain manages their risk oversight through a
hierarchy of Risk Management and Compliance Boards to
assure risk mitigation (including identifying new and emerging
threats).
Inventory Management:
Supply chain governance committees within each Business
Unit closely monitor the inventory status and delivery of our
products.
Our core commercial cycle links the supply chain forecasting
with our commercial ambition and designed to reduce the risk
of demand fluctuations and manage temporary shortages in
supply.
We periodically review each node of our supply chains to
ensure we hold adequate safety stocks, whilst balancing
working capital. We particular emphasis on mitigating supply
risks associated with medically critical, high-revenue products
and new product launches, e.g. using dual sourcing for key
products or APIs. We use the monthly Performance
Management Process across the supply chains to monitor
business activity and highlight adverse trends in supply,
operations, budget, and workforce capability.
Business continuity:
Crisis management and business continuity plans are in place
across Pharmaceuticals, Vaccines and Consumer Healthcare,
which include authorised response and recovery strategies, key
areas of responsibility and clear communication routes. Supply
chains regularly use Business Continuity Plans to manage
potential supply disruptions. Our manufacturing sites have crisis
management plans in place tested annually where there is no
occurrence of deployment to ensure maintenance of skills in
crisis management.
Risk definition
Failure to deliver the plan for successful transformation and
separation of GSK into two new, leading companies: one
BioPharma and one Consumer Healthcare.
Risk impact
The failure to manage the macro level risk due to COVID-19 and
a highly competitive labour market, in relation to the delivery of
the separation plan, could materially and adversely affect our
ability to deliver GSK’s strategy and long-term priorities.
Context
In February 2020, GSK announced a new ‘Future Ready’
programme to prepare for its separation into two companies:
new GSK, a pharma company with an R&D approach focused
on science related to the immune system, the use of genetics
and new technologies; and a new leader in consumer
healthcare. As GSK increases investment in R&D and new
product launches, the two-year separation programme aims to
drive a common approach to innovation with improved capital
allocation; to align and improve the capabilities and efficiencies
of global support functions to support new GSK; to further
optimise the supply chain and portfolio, including divesting
non-core assets; and to prepare Consumer Healthcare to
operate as a standalone company. Once complete, the outlook
of both companies will have been fundamentally strengthened,
making them more efficient, modern, and automated, with skills
and capabilities that will serve them into the future.
Mitigating activities
The Future Ready Office (FRO), established in the fourth
quarter of 2019, is accountable for monitoring the progress,
performance and risks associated with creating the two new
companies. It reports monthly to the GSK Leadership Team
(GLT) to ensure there is enterprise oversight of the plan, using
key performance and risk indicators which track programme
resource, programme delivery, talent retention, recruitment,
and onboarding to address COVID and labour market
challenges. In addition, GSK’s Chief Executive Officer (CEO),
Chief Financial Officer, Chief Strategy Officer and Head of FRO
meet the leaders of Consumer Healthcare to gather input and
approval of key design choices for that new company. Overall,
the balance between transformation and separation is upheld
through clear governance, joint coordination between new GSK
and Consumer Healthcare, rigorous progress tracking and the
setting of clear parameters.
The GSK Board is regularly informed of the Future Ready
programme lead indicators through the CEO Board Report
at each Board meeting. At Board level, a Transformation and
Separation Committee supports and advises management’s
work on transforming and separating the Group. This committee
is chaired by the GSK Chairman and includes our Senior
Independent Director and the Chairs of the Audit & Risk,
Remuneration and Corporate Responsibility Committees.
Transformation and separation
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GSK Annual Report 2021
Details of our issued share capital and the number of shares
held in Treasury as at 31 December 2021 can be found in
Note 36 to the financial statements, ‘Share capital and share
premium account’.
Our Ordinary Shares are listed on the London Stock Exchange
(LSE) and are also quoted on the New York Stock Exchange
(NYSE) in the form of American Depositary Shares (ADS). Each
ADS represents two Ordinary Shares. For details of listed debt
and where it is listed refer to Note 29 to the financial statements,
‘Net debt’.
Holders of Ordinary Shares and ADS are entitled to receive
dividends (when declared) and the company’s Annual Report.
They are also entitled to attend, speak, appoint proxies and
exercise voting rights at general meetings of the company.
There are no restrictions on the transfer, or limitations on the
holding, of Ordinary Shares and ADS and no requirements
to obtain approval prior to any transfers. No Ordinary Shares
or ADS carry any special rights with regard to control of the
company and there are no restrictions on voting rights. Major
shareholders have the same voting rights per share as all other
shareholders. There are no known arrangements under which
financial rights are held by a person other than the holder of
the shares and no known agreements on restrictions on share
transfers or on voting rights.
Shares acquired through the Group’s employee share plans
rank equally with the other shares in issue and have no special
rights. The trustees of our Employee Share Ownership Plan
trusts have waived their rights to dividends on shares held by
those trusts.
Exchange controls and other limitations
affecting holders
Other than certain economic sanctions, which may be in
force from time to time, there are currently no applicable laws,
decrees or regulations in force in the UK restricting the import
or export of capital or restricting the remittance of dividends or
other payments to holders of the company’s shares who are
non-residents of the UK. Similarly, other than certain economic
sanctions which may be in force from time to time, there are no
limitations relating only to non-residents of the UK under English
law or the company’s Articles of Association on the right to be a
holder of, and to vote in respect of, the company’s shares.
Interests in voting rights
Other than as stated below, as far as we are aware, there are
no persons with significant direct or indirect holdings in the
company. Information provided to the company pursuant to
the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules (DTR 5) is published on a Regulatory
Information Service and on the company’s website,
www.gsk.com.
The company has received notifications in accordance with
DTR 5 of the following notifiable interests in the voting rights in
the company’s issued share capital:
31 December 2021 27 February 2022
No. of
voting rights
Percentage
of total voting
rights
(1)
No. of
voting rights
Percentage
of total voting
rights
(1)
BlackRock, Inc
332,238,289
(2)
6.40% 332,238,289 6.40%
Dodge & Cox
253,464,108
(3)
5.04% 253,464,108 5.04%
(1) Percentage of total voting rights at the date of notification to the company.
(
2) Comprising an indirect interest in 329,124,508 Ordinary Shares and a
holding of 3,113,781 Qualifying Financial Instruments (Contract for
Difference).
(3) Comprising an indirect interest in 99,377,874 Ordinary Shares and
154,086,234 American Depositary Shares.
The company has not acquired or disposed of any interests
in its own shares during the period under review.
Share buy-back programme
The Board has been authorised to issue and allot Ordinary
Shares under Article 9 of the company’s Articles of Association.
The power under Article 9 and the authority for the company to
make purchases of its own shares are subject to shareholder
authorities which are sought on an annual basis at our Annual
General Meeting (AGM). Any shares purchased by the
company may be cancelled, held as Treasury shares or
used for satisfying share options and grants under the Group's
employee share plans.
Our programme covers purchases of shares for cancellation
or to be held as Treasury shares, in accordance with the
authority renewed by shareholders at the AGM in May 2021,
when the company was authorised to purchase a maximum
of just under 503 million shares. Details of shares purchased,
cancelled, held as Treasury shares and subsequently
transferred from Treasury to satisfy awards under the Group’s
employee share plans are disclosed in Note 36 to the financial
statements, ‘Share capital and share premium account’.
In determining specific share repurchase levels, the company
considers the development of free cash flow during the year.
No shares have been purchased since 2014.
The company confirms that it does not currently intend to make
any market purchases in 2022. The company will review the
potential for future share buy-backs in line with its usual annual
cycle and subject to return and ratings criteria.
Shareholder information
Share capital and control
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Investor information
Nature of trading market
The following table sets out, for the periods indicated, the high and low middle market closing prices for the company’s Ordinary
Shares on the LSE and for the ADS on the NYSE.
Ordinary Shares
ADS
UK£ per share US$ per share
High Low High Low
February 2022*
16.50
15.05
45.70
41.19
January 2022
17.08
15.89
46.82
43.37
December 2021
16.19
15.34
44.44
41.25
November 2021
15.93
15.11
45.53
41.02
October 2021
15.09
13.80
42.33
38.13
September 2021
14.88
13.83
41.61
38.05
Quarter ended 31 December 2021
16.19
13.80
44.44
38.13
Quarter ended 30 September 2021
15.26
13.83
42.33
38.05
Quarter ended 30 June 2021
14.36
12.78
40.66
35.82
Quarter ended 31 March 2021
14.14
11.91
39.24
33.61
Quarter ended 31 December 2020
14.68
12.92
39.17
33.42
Quarter ended 30 September 2020
16.60
14.35
42.16
37.38
Quarter ended 30 June 2020
17.42
14.89
42.74
37.14
Quarter ended 31 March 2020
18.46
13.75
47.89
31.85
Year ended 31 December 2020
14.68
12.92
39.17
33.42
Year ended 31 December 2019
18.19
14.36
47.32 37.83
Year ended 31 December 2018
16.22
12.43
41.94
35.49
Year ended 31 December 2017
17.22
12.76
44.37
34.66
* to 27 February 2022
Share capital and control
continued
Market capitalisation
The market capitalisation, based on shares in issue excluding
Treasury shares, of GSK at 31 December 2021 was £81 billion.
At that date, GSK was the 6th largest company by market
capitalisation in the FTSE index.
Share price
2021
£
2020
£
2019
£
At 1 January
13.42
17.79
14.91
At 31 December
16.07 13.42
17.79
Increase/(decrease)
20% (24.6)%
19.3%High during the year
16.19 18.46
18.19
Low during the year
11.91 12.92
14.36
The table above sets out the middle market closing prices.
The company’s share price increased by 20% in 2021. This
compares with an increase in the FTSE 100 index of 14%
during the year. The middle market closing share price on
27 February 2022 was £15.64.
15
14
13
12
09
UK£ US$
UK
share pr
ice (UK£)
US
ADS pr
ice (US$)
31/12/18 31/12/19 31/12/20 31/12/21
11
16
17
18
30
35
40
45
50
55
60
65
70
75
19
80
Shareholder information
continued
Share price trend in the three years ended
31 December 2021
290
GSK Annual Report 2021
Analysis of shareholdings at 31 December 2021
Number of
accounts
% of total
accounts
% of total
shares
Number of
shares
Holding of shares
Up to 1,000
69,334 71.06
0.4423,444,870
1,001 to 5,000
21,872 22.41
0.88
47,264,1525,001 to 100,000
5,220 5.35 1.50
80,804,464
100,001 to 1,000,000
776
0.80 5.04 271,429,821
Over 1,000,000
368
0.38 92.14 4,964,071,752
97,570
100.00 100.00 5,387,015,059
Held by
Institutional and Corporate holders 2,723
2.79
61.96 3,337,598,976
Individuals and other corporate bodies
94,845 97.21
13.55
729,773,041Guaranty Nominees Limited
1
0.00
17. 9 0
964,437,092Held as Treasury shares by GlaxoSmithKline
1
0.00 6.59 355,205,950
J.P. Morgan Chase Bank, N.A. is the Depositary for the company’s American Depository Receipt (ADR) programme. The
company’s ADS are listed on the NYSE. Ordinary Shares representing the company’s ADR programme, which is managed by the
Depositary, are registered in the name of Guaranty Nominees Limited. At 27 February 2022, Guaranty Nominees Limited held
994,314,754 Ordinary Shares representing 19.56% of the issued share capital (excluding Treasury shares) at that date.
At 27 February 2022, the number of holders of Ordinary Shares in the US was 939 with holdings of 915,261 Ordinary Shares, and
the number of registered holders of ADS was 18,627 with holdings of 497,157,377 ADS. Certain of these Ordinary Shares and
ADS were held by brokers or other nominees. As a result, the number of holders of record or registered holders in the US is not
representative of the number of beneficial holders or of the residence of beneficial holders.
The company pays dividends quarterly and continues to return
cash to shareholders through its dividend policy. Dividends
remain an essential component of total shareholder return and
GSK recognises the importance of dividends to shareholders.
The company aims to distribute regular dividend payments that
will be determined primarily with reference to the free cash flow
generated by the business after funding the investment
necessary to support the Group’s future growth.
Dividends per share
The table below sets out the dividend per share and per ADS
for the last five years. The dividend per ADS is translated into
US dollars at applicable exchange rates.
Year pence US$
2021
80
–*2020
80
2.092019
80
1.982018
80
2.082017
80
2.16
*
The Q4 2021 ordinary dividend receivable by ADS holders will be calculated based on
the exchange rate on 7 April 2022. An annual fee of $0.03 per ADS (or $0.0075 per
ADS per quarter) will be charged by the Depository. The cumulative dividend receivable
by ADS holders for Q1, Q2 and Q3 2021 was $1.56.
On 23 June 2021, at the new GSK Investor Update, GSK
set out that from 2022 a progressive dividend policy will be
implemented for new GSK. The dividend policy, the total
expected cash distribution, and the respective dividend pay-out
ratios for new GSK and new Consumer Healthcare remain
unchanged. GSK expects to declare a 27p per share dividend
payable by the current group for the first half. This comprises
22 pence per share for new GSK and 5 pence per share
representing Consumer Healthcare during the first half whilst
part of the group. For the second half of 2022, new GSK
continues to expect to declare a 22p per share dividend. As
previously communicated, new GSK would expect to declare
a dividend of 45 pence per share for 2023.
Following separation, the dividend policy for the new Consumer
Healthcare company will be the responsibility of its Board of
Directors and is expected to be guided by a 30 to 50 per cent
pay-out ratio. On this basis, we now expect a second-half
dividend from the new Consumer Healthcare company
equivalent to a payout of around 3 pence per share, subject
to its Board’s decisions on the intra-year phasing of dividend
payments. This expected distribution per share for the second
half of the year has been adjusted from that highlighted at the
GSK Investor Update in June 2021 to reflect the total number
of shares (up to circa 9.25 billion shares) in the new Consumer
Healthcare company that are expected to be in issue upon
demerger. In June 2021 the planning assumption for the
Investor Update reflected only the GSK shares in issue at
that time (circa 5 billion shares).
Dividends
Shareholder information
continued
GSK Annual Report 2021
291
Strategic report Governance and remuneration Financial statements
Investor information
Event Date
Quarter 1 Results announcement 27 April 2022
Annual General Meeting 4 May 2022
Quarter 2 Results announcement 27 July 2022
Quarter 3 Results announcement 2 November 2022
Preliminary/Quarter 4 Results announcement 1 February 2023
Annual Report publication February/March 2023
Annual Report distribution March 2023
Information about the company, including the share and ADS
price, is available on our website at www.gsk.com. Information
made available on the website does not constitute part of this
Annual Report.
Results announcements
Results announcements are issued to the LSE and are available
on its news service. They are also sent to the US Securities and
Exchange Commission (SEC) and the NYSE, issued to the
media and made available on our website.
Financial reports
The company publishes an Annual Report which is made
available on our website from the date of publication.
Shareholders may elect to receive notification by email
of the publication of Annual Reports by registering on
www.shareview.co.uk, and may also elect to receive a
printed copy of the Annual Report by contacting our registrar,
Equiniti Limited.
Copies of previous Annual Reports are available on our website.
Printed copies can also be obtained from our registrar (see
page 294 for the contact details).
Our Annual General Meeting (AGM) will be held at 2.30pm
(UK time) on Wednesday, 4 May 2022 at the Sofitel London
Heathrow, Terminal 5, London Heathrow Airport, TW6 2GD
and will also be broadcast live for you to join electronically.
The AGM is the company’s principal forum for communication
with private shareholders. In addition to the formal AGM
business, there will be a presentation by the CEO on the
performance of the Group and its future development. There
will be an opportunity for questions to be asked of the Board.
Chairs of the Board’s Committees and the Workforce
Engagement Director will be available to take questions
relating to their roles.
Further details on how to access the AGM electronically or
attend in person, ask questions and vote, can be found in the
notice of Annual General Meeting 2022 (AGM Notice) which is
available on our website at www.gsk.com.
Investors holding shares through a nominee service should
arrange with that nominee service for them to be appointed as a
proxy in respect of their shareholding in order to attend and vote
at the meeting electronically.
ADS holders wishing to attend the meeting electronically should
refer to the AGM Notice for details on how to request a proxy
appointment from the Depositary, J.P. Morgan Chase Bank N.A.
This will enable them to attend, ask questions and vote, all
electronically, on the business to be transacted at the meeting.
ADS holders are reminded that if they do not instruct the
Depositary as to the way in which the shares represented
by their ADS should be voted by completing and returning
the voting card provided by the Depositary, their shares
will not be voted.
Documents on display
The Articles of Association of the company and Directors’
service contracts or, where applicable, letters of appointment
between Directors and the company or any of its subsidiaries
(and any side letters relating to severance terms and pension
arrangements) are available for inspection at the company’s
registered office and will be made available for inspection at
the AGM.
Annual General Meeting 2022
Financial calendar 2022
Shareholder information
continued
Dividends
continued
In aggregate, this would represent on the full year 2022 basis
the equivalent of a Group dividend of around 52p per share.
Dividends payable by Consumer Healthcare will only be
receivable by shareholders who remain invested in Consumer
Healthcare post-separation and at the appropriate record dates.
Details of the dividends declared, the amounts and the payment
dates are given in Note 16 to the financial statements,
‘Dividends’.
2022 Dividend calendar
Quarter
Ex-dividend date Record date Payment date
Q4 2021 24 February 2022 25 February 2022 7 April 2022
Q1 2022 19 May 2022 20 May 2022 7 July 2022
Q2 2022 18 August 2022 19 August 2022 6 October 2022
Q3 2022 17 November 2022 18 November 2022 12 January 2023
Q4 2022 23 February 2023 24 February 2023 13 April 2023
292
GSK Annual Report 2021
A summary of certain UK tax and US federal income tax
consequences for holders of shares and ADS who are citizens
of the UK or the US is set out below. It is not a complete
analysis of all the possible tax consequences of the purchase,
ownership or sale of these securities. It is intended only as a
general guide. Holders are advised to consult their advisers with
respect to the tax consequences of the purchase, ownership or
sale of their shares or ADS and the consequences under state
and local tax laws in the US and the implications of the current
UK/US tax conventions.
US holders of ADS generally will be treated as the owners of
the underlying shares for the purposes of the current UK/US
double taxation conventions relating to income and gains
(Income Tax Convention), estate and gift taxes (Estate and Gift
Tax Convention), and for the purposes of the Internal Revenue
Code of 1986, as amended.
UK shareholders
This summary only applies to a UK resident shareholder that
holds shares as capital assets.
Taxation of dividends
For the 2021/22 UK tax year, UK resident individuals are entitled
to a dividend tax allowance of up to £2,000, so that the first
£2,000 of dividends received in a tax year will be free of tax.
Dividends in excess of this allowance will be taxed at 7.5% for
basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1%
for additional rate taxpayers. Note that from April 2022 tax on
dividend income will increase by 1.25% to help support the
NHS and social care.
UK resident shareholders that are corporation taxpayers should
note that dividends payable on ordinary shares are generally
entitled to exemption from corporation tax.
Taxation of capital gains
UK resident shareholders may be liable for UK tax on gains on
the disposal of shares or ADS.
For disposals by individuals in the 2021/22 UK tax year, a
taxable capital gain accruing on a disposal of shares or ADS
will be taxed at 10% for basic rate taxpayers, or 20% if, after
all allowable deductions, the individual’s taxable income for
the year exceeds the basic rate income tax banding. Note this is
following the use of any exemptions available to the individual
taxpayer such as the annual exempt amount.
Corporation taxpayers may be entitled to an indexation
allowance which applies to reduce capital gains to the extent
that such gains arise due to inflation. Indexation allowance may
reduce a chargeable gain but will not create an allowable loss.
For assets acquired on or before 1 January 2018, legislation in
the Finance Act 2018 freezes the level of indexation allowance
that is given in calculating a company’s chargeable gains at the
value that would apply to the disposal of an asset in December
2017. For assets acquired from 1 January 2018 onwards,
legislation in the Finance Act 2018 removes any indexation
allowance on disposal.
Inheritance tax
Individual (UK-domiciled or otherwise) shareholders may be
liable to UK inheritance tax on the transfer of shares or ADS.
Tax may be charged on the amount by which the value of the
shareholder’s estate is reduced as a result of any transfer by
way of lifetime gift or other disposal at less than full market
value. In the case of a bequest on death, tax may be charged on
the value of the shares at the date of the shareholder’s death.
If such a gift or other disposal were subject to both UK
inheritance tax and US estate or gift tax, the Estate and Gift Tax
Convention would generally provide for tax paid in the US to be
credited against tax payable in the UK.
Stamp duty and stamp duty reserve tax
UK stamp duty and/or stamp duty reserve tax (SDRT) will,
subject to certain exemptions, be payable on the transfer of
shares at a rate of 0.5% (rounded up to the nearest £5 in
the case of stamp duty) of the consideration for the transfer.
Notwithstanding this, provided that an instrument is executed
in pursuance of the agreement that gave rise to the charge to
SDRT and that instrument is stamped within six years of the
agreement (including being stamped as exempt) any SDRT
charge should be cancelled and any SDRT which has already
been paid will be repaid.
US shareholders
This summary only applies to a shareholder (who is a citizen or
resident of the US or a domestic corporation or a person that
is otherwise subject to US federal income tax on a net income
basis in respect of the shares or ADS) that holds shares or ADS
as capital assets, is not resident in the UK for UK tax purposes
and does not hold shares for the purposes of a trade, profession
or vocation that is carried on in the UK through a branch or
agency.
The summary also does not address the tax treatment of
holders that are subject to special tax rules, such as banks,
tax-exempt entities, insurance companies, dealers in securities
or currencies, persons that hold shares or ADS as part of an
integrated investment (including a ‘straddle’) comprised of a
share or ADS and one or more other positions, and persons that
own (directly, indirectly or constructively) 10% or more of the
company’s stock (by vote or value), nor does it address tax
treatment that may be applicable as a result of international
income tax treaties.
Tax information for shareholders
Shareholder information
continued
GSK Annual Report 2021
293
Strategic report Governance and remuneration Financial statements
Investor information
Tax information for shareholders
continued
Taxation of dividends
The gross amount of dividends received is treated as foreign
source dividend income for US tax purposes. It is not eligible for
the dividend received deduction allowed to US corporations.
Dividends on ADS are payable in US dollars; dividends on
Ordinary Shares are payable in Sterling. Dividends paid in
Sterling will be included in income in the US dollar amount
calculated by reference to the exchange rate on the day the
dividends are received by the holder. Subject to certain
exceptions for short-term or hedged positions, an individual
eligible US holder will be subject to US taxation at a maximum
federal rate of 23.8% plus applicable state and local tax in
respect of qualified dividends. A qualified dividend as defined
by the US Internal Revenue Service (IRS) is a dividend that
meets the following criteria:
1. Must be issued by a US corporation, a corporation
incorporated in a US possession, or a corporation that is
eligible for the benefits of a comprehensive income tax treaty
deemed satisfactory, as published by the IRS.
2. The dividends are not of a type listed by the IRS as dividends
that do not qualify.
3. The required dividend holding period has been met. The
shares must have been owned by you for more than 60 days
of the ‘holding period’ – which is defined as the 121-day
period that begins 60 days before the ex-dividend date, or
the day in which the stock trades without the dividend priced
in. For example, if a stock’s ex-dividend date is 1 October,
the shares must be held for more than 60 days in the period
between 2 August and 30 November of that year in order to
count as a qualified dividend.
Dividends that are not qualified are subject to taxation at the
US federal graduated tax rates, at a maximum rate of 40.8%.
Some types of dividends are automatically excluded from being
qualified dividends, even if they meet the other requirements.
These include (but are not limited to):
1. Capital gains distributions
2. Dividends on bank deposits
3. Dividends held by a corporation in an Employee Stock
Ownership Plan (ESOP)
4. Dividends paid by tax-exempt corporations.
US state and local tax rates on qualified and non-qualified
dividends may vary and would be assessed in addition to the
federal tax rates communicated above
.
Taxation of capital gains
Generally, US holders will not be subject to UK capital gains
tax, but will be subject to US tax on capital gains realised on
the sale or other disposal of shares or ADS. Such gains will be
long-term capital gains (subject to reduced rates of taxation for
individual holders) if the shares or ADS were held for more than
one year, from the date the shares were vested/released.
Short-term capital gains can be subject to taxation of rates of
up to 40.8%, whereas long-term capital gains may be subject to
rates of up to 23.8%. State and local tax rates on capital gains
may also apply.
Information reporting and backup withholding
Dividends and payments of the proceeds on a sale of shares or
ADS, paid within the US or through certain US-related financial
intermediaries, are subject to information reporting and may
be subject to backup withholding unless the US holder is a
corporation or other exempt recipient or provides a taxpayer
identification number and certifies that no loss of exemption
has occurred. Non-US holders generally are not subject to
information reporting or backup withholding, but may be
required to provide a certification of their non-US status in
connection with payments received. Any amounts withheld will
be allowed as a refund or credit against a holder’s US federal
income tax liability provided the required information is furnished
to the IRS.
Estate and gift taxes
Under the Estate and Gift Tax Convention, a US shareholder
is not generally subject to UK inheritance tax. However, a US
holder may be subject to US federal estate and gift tax.
Stamp duty
UK stamp duty and/or SDRT will, subject to certain exemptions,
be payable on any transfer of shares to the ADS custodian or
depository at a rate of 1.5% of the amount of any consideration
provided (if transferred on sale), or their value (if transferred for
no consideration).
However, no stamp duty or SDRT should be payable on the
transfer of, or agreement to transfer, an ADS.
Shareholder information
continued
294
GSK Annual Report 2021
Other statutory disclosures
Shareholder services and contacts
Registrar
The company’s registrar is:
Equiniti Limited
Aspect House, Spencer Road, Lancing, BN99 6DA
www.shareview.co.uk
Tel: 0371 384 2991 (in the UK)*
Tel: +44 (0)121 415 7067 (outside the UK)
Equiniti provides a range of services for shareholders:
Service
What it offers How to participate
Dividend Reinvestment Plan
(DRIP)
As an alternative to receiving cash dividends you may choose
to reinvest your dividends to buy more GSK shares.
A DRIP election form can be downloaded
from www.shareview.co.uk or requested by
contacting Equiniti.
Dividend payment direct to your bank
account (Bank Mandate)
All dividends are paid directly into your bank or building society
account. To receive your cash dividends, you must provide
Equiniti with your bank or building society account details.
This is a quick and secure method of payment.
A dividend bank mandate form can be
downloaded from www.shareview.co.uk
or requested by contacting Equiniti.
Dividend payment direct to bank
account for overseas shareholders
Equiniti can convert your dividend into your local currency and
send it direct to your local bank account. This service is available
in over 100 countries worldwide.
For more details on this service and the costs
involved please contact Equiniti.
Electronic communications
Shareholders may elect to receive electronic notifications
of company communications including our Annual Report,
dividend payments, dividend confirmations and the availability of
online voting for all general meetings. Each time GSK publishes
shareholder documents you will receive an email containing a link
to the document or relevant website.
Please register at www.shareview.co.uk.
Shareview portfolio service
This enables you to create a free online portfolio to view your
share balance and movements, update your address and
dividend payment instructions and register your votes for
our general meetings.
Please register at www.shareview.co.uk.
Deduplication of publications or mailings
If you receive duplicate copies of mailings, you may have more
than one account. Please contact Equiniti and they will arrange
for your accounts to be merged into one for your convenience
and to avoid waste and unnecessary costs.
Please contact Equiniti.
Share dealing service
†
(please note that market trading hours
are from 8.00am to 4.30pm UK time,
Monday to Friday (excluding public
holidays in England and Wales))
Shareholders may trade shares, either held in certificated
form or in our Corporate Sponsored Nominee, online, by
telephone or via postal dealing service provided by Equiniti
Financial Services Limited.
For online transactions, please log on to:
www.shareview.co.uk/dealing.
For telephone transactions, please call:
0345 603 7037 (in the UK) or
+44 (0)121 415 7560 (outside the UK).
Lines are open from 8.00am to 4.30pm
UK time, Monday to Friday (excluding
UK public holidays).
For postal transactions, please call:
0371 384 2991* to request a
dealing form.
Corporate Sponsored Nominee Account
This is a convenient way to manage your shares without requiring
a share certificate. The service provides a facility for you to hold
your shares in a nominee account sponsored by the company.
You will continue to receive dividend payments and can attend
and vote at the company’s general meetings. Shareholders’
names do not appear on the publicly available share register
and the service is free to join.
An application form can be requested
from www.shareview.co.uk or by
contacting Equiniti.
Individual Savings Accounts (ISAs)
†
The company has arranged for Equiniti Financial Services
Limited to provide a GSK Corporate ISA to hold GSK shares.
Details are available from www.shareview.co.uk
or can be requested by telephoning Equiniti,
on 0345 0700 720. Lines are open 8.00am
to 4.30pm for dealing, and until 5.30pm for
enquiries Monday to Friday (excluding public
holidays in England and Wales).
* Lines are open from 8.30am to 5.30pm, Monday to Friday (excluding public holidays in England and Wales).
†
stockbroker or independent financial adviser.
GSK Annual Report 2021
295
Strategic report Governance and remuneration Financial statements
Investor information
ADS Depositary
The ADR programme is administered by J.P. Morgan
Chase Bank, N.A:
Regular Correspondence:
EQ Shareowner Services
P.O. Box 64504
St. Paul, MN 55164-0504
Delivery of Stock Certificates and Overnight Mail:
EQ Shareowner Services
110 Centre Point Curve, Suite 101
Mendota Heights, MN 55120-4100
www.shareowneronline.com
General: +1 800 990 1135
From outside the US: +1 651 453 2128
The Depository also provides Global Invest Direct, a direct
ADS purchase/sale and dividend reinvestment plan for ADS
holders. For details on how to enrol please visit www.adr.com
or call the above helpline number to obtain an enrolment pack.
Donating shares to Save the Children
In 2013, GSK embarked on an ambitious global partnership
with Save the Children to share our expertise and resources
with the aim of helping to save the lives of one million children.
Shareholders with a small number of shares, the value of which
makes it uneconomical to sell, may wish to consider donating
them to Save the Children. Donated shares will be aggregated
and sold by Save the Children who will use the funds raised to
help them reach the above goal.
†
To obtain a share donation form, please contact our registrar,
Equiniti, which is managing the donation and sale of UK shares
to Save the Children free of charge.
†
to engage in an investment activity. Advice on share dealing should be obtained from
a stockbroker or independent financial adviser.
Stock Exchange announcement notifications
We provide shareholders with a service to receive automatic
email notifications when we publish a stock exchange
announcement. To receive email notifications, please sign up
for announcements at www.gsk.com in the Investors section.
Contacts
Investor relations
Investor relations may be contacted as follows:
UK
980 Great West Road
Brentford, Middlesex, TW8 9GS
Tel: +44 (0)20 8047 5000
US
5 Crescent Drive
Philadelphia PA 19112
Tel: +1 888 825 5249 (US toll free)
Tel: +1 215 751 4611 (outside the US)
GSK Response Center
Tel:
+1
888 825 5249 (US toll free)
Share scam alert
If you receive an unsolicited telephone call offering to sell or buy
your shares, please take extra care. The caller may be part of a
highly organised financial scam.
If you are a UK shareholder, please contact the Financial
Conduct Authority at www.fca.org.uk/consumers or on its
consumer helpline:
Tel: 0800 111 6768 (in the UK)*
Tel:
+44 (0)
20 7066 1000 (outside the UK)
* Lines are open from 8.00am to 6.00pm, UK time, Monday to Friday, except UK public
holidays, and 9.00am to 1.00pm on Saturdays.
Shareholders services and contacts
continued
Other statutory disclosures
continued
296
GSK Annual Report 2021
A number of provisions of US law and regulation apply to the
company because our shares are quoted on the NYSE in the
form of ADS.
NYSE rules
In general, the NYSE rules permit the company to follow UK
corporate governance practices instead of those applied in
the US, provided that we explain any significant variations.
This explanation is contained in our Form 20-F, which can be
accessed from the SEC'S EDGAR database or via our website.
NYSE rules require us to file annual and interim written
affirmations concerning our Audit & Risk Committee (ARC)
and our statement on significant differences in corporate
governance.
Sarbanes-Oxley Act of 2002
Following a number of corporate and accounting scandals in
the US, Congress passed the Sarbanes-Oxley Act of 2002.
Sarbanes-Oxley is a wide-ranging piece of legislation
concerned largely with financial reporting and corporate
governance.
As recommended by the SEC, the company has established a
Disclosure Committee. The Committee reports to the CEO, the
CFO and to the ARC. It is chaired by the Company Secretary
and its members consist of senior managers from finance, legal,
corporate communications and investor relations.
External legal counsel, the external auditors and internal experts
are invited to attend the Disclosure Committee’s meetings
periodically. The Committee has responsibility for considering
the materiality of information and, on a timely basis, determining
the disclosure of that information. It has responsibility for the
timely filing of reports with the SEC and the formal review of
the Annual Report and Form 20-F. In 2021, the Committee met
18 times.
Sarbanes-Oxley requires that the annual report on Form 20-F
contains a statement as to whether a member of the ARC is
an audit committee financial expert, as defined in rules under
Sarbanes-Oxley. Such a statement for the relevant members
of the ARC (Charles Bancroft) is included in the Board
Committee information area of the Corporate Governance
report on page 93 and in his biography on page 84. Additional
disclosure requirements arise under section 302 and section
404 of Sarbanes-Oxley in respect of disclosure controls and
procedures and internal control over financial reporting.
Section 302: Corporate responsibility for
financial reports
Sarbanes-Oxley requires for the CEO and the CFO to complete
formal certifications, confirming that:
–
they have each reviewed the annual report on Form 20-F;
–
based on their knowledge, the annual report on Form 20-F
contains no material misstatements or omissions;
–
based on their knowledge, the financial statements and other
financial information fairly present, in all material respects, the
financial condition, results of operations and cash flows as of
the dates, and for the periods, presented in the annual report
on Form 20-F;
–
they are responsible for establishing and maintaining
disclosure controls and procedures that ensure that material
information is made known to them, and have evaluated the
effectiveness of these controls and procedures as at the year
end, the results of such evaluation being contained in the
annual report on Form 20-F;
–
they are responsible for establishing and maintaining internal
control over financial reporting that provides reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
and
–
they have disclosed in the annual report on Form 20-F any
changes in internal controls over financial reporting during the
period covered by the annual report on Form 20-F that have
materially affected, or are reasonably likely to affect materially,
the company’s internal control over financial reporting, and
they have disclosed, based on their most recent evaluation of
internal control over financial reporting, to the external auditor
and the ARC, all significant deficiencies and material
weaknesses in the design or operation of internal controls
over financial reporting which are reasonably likely to affect
adversely the company’s ability to record, process,
summarise and report financial information, and any fraud
(regardless of materiality) involving persons that have a
significant role in the company’s internal control over financial
reporting.
The Group has carried out an evaluation under the supervision
and with the participation of its management, including the CEO
and CFO, of the effectiveness of the design and operation of
the Group’s disclosure controls and procedures as at 31
December 2021.
There are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the
controls and procedures. Accordingly, even effective disclosure
controls and procedures can only provide reasonable
assurance of achieving their control objectives.
US law and regulation
Other statutory disclosures
continued
GSK Annual Report 2021
297
Strategic report Governance and remuneration Financial statements
Investor information
The CEO and CFO expect to complete these certifications
and report their conclusions on the effectiveness of disclosure
controls and procedures in March 2022, following which the
certifications will be filed with the SEC as part of our Group’s
Form 20-F.
Section 404: Management’s annual report on internal
control over financial reporting
In accordance with the requirements of section 404 of
Sarbanes-Oxley, the following report is provided by
management in respect of the company’s internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the US Securities Exchange Act of 1934, as amended
(the Exchange Act)):
–
management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
Group. Internal control over financial reporting is designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS;
–
management conducted an evaluation of the effectiveness
of internal control over financial reporting based on the
framework, Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organisations of
the Treadway Commission (COSO);
–
there have been no changes in the Group’s internal control
over financial reporting during 2021 that have materially
affected, or are reasonably likely to materially affect, the
Group’s internal control over financial reporting;
–
management has assessed the effectiveness of internal
control over financial reporting as at 31 December 2021
and its conclusion will be filed as part of the Group’s Form
20-F; and
–
Deloitte LLP, which has audited the consolidated financial
statements of the Group for the year ended 31 December
2021, has also assessed the effectiveness of the Group’s
internal control over financial reporting under Auditing
Standard 2201 of the Public Company Accounting Oversight
Board (United States). Their audit report will be filed with the
Group’s Form 20-F.
Section 13(r) of the Exchange Act
Section 13(r) of the Exchange Act requires issuers to make
specific disclosure in their annual reports of certain types of
dealings with Iran, or controlled transactions or dealings with
government-owned entities, as well as dealings with entities
sanctioned for activities related to terrorism or proliferation of
weapons of mass destruction, even when those activities are
not prohibited by US law and do not involve US persons.
The Group exports certain pharmaceutical, vaccine and
consumer products to Iran, via sales by non-US entities that
are not subsidiaries of a US entity, to two privately held Iranian
distributors.
The Group does not regularly receive information regarding
the identity of its distributors' downstream customers and
intermediaries in Iran, and it is possible that these parties
include entities, such as government-owned hospitals and
pharmacies, that are owned directly or indirectly by the Iranian
government or by persons or entities sanctioned in connection
with terrorism or proliferation activities.
Because the Group does not regularly receive information
regarding the identity of its distributors' downstream customers
it cannot establish the proportion of gross revenue or sales
potentially attributable to entities affiliated with the Iranian
government or parties sanctioned for disclosable activities.
As a result, the Group is reporting the entire gross revenues
(£11.5 million) and net profits (£5.6 million) from the Group's
sales to Iran in 2021.
The Group is also aware that some hospitals or other medical
facilities in Lebanon may be affiliated with or controlled by
Hezbollah or other groups that are designated by the United
States pursuant to Executive Order 13224. Again, the Group
does not deal directly with such hospitals or facilities and
instead sells through distributors. The Group is unable to
establish the proportion of gross revenue or sales potentially
attributable to reportable activities. As a result, the Group is
reporting the entire gross revenues (£30.7 million) and net
profits (£0.6 million) from the Group's sales to Lebanon in 2021.
Unless noted, the Group intends to continue the activities
described above.
In addition to Section 13(r) of the Exchange Act, US law
generally restricts dealings by US persons and dealings that
otherwise are subject to US jurisdiction with certain countries or
territories that are subject to comprehensive sanctions, currently
Crimea, Cuba, Donetsk People's Republic, Iran, Luhansk
People's Republic, North Korea and Syria, as well as with the
Government of Venezuela (though not with the country of
Venezuela as a whole). The Group does business, via non-US
entities (which are not owned or controlled by US entities), in
certain such jurisdictions. While we believe the Group complies
with all applicable US sanctions in all material respects, such
laws are complex and continue to evolve rapidly.
US law and regulation
continued
Other statutory disclosures
continued
298
GSK Annual Report 2021
To ensure a consistent approach to political contributions
across the Group, in 2009 a global policy was introduced
to voluntarily stop all corporate political contributions.
In the period from 1 January 2009 to 31 December 2021,
the Group did not make any political donations to EU or
non-EU organisations.
Notwithstanding the introduction of this policy, in accordance
with the Federal Election Campaign Act in the US, we continue
to support an employee-operated Political Action Committee
(PAC) that facilitates voluntary political donations by eligible
GSK employees.
The PAC is not controlled by GSK. Decisions on the amounts
and recipients of contributions are governed by the PAC Board
of Directors. Contributions to the PAC are made by participating
eligible employees exercising their legal right to pool their
resources and make political contributions, which are subject
to strict limitations under US law. In 2021, a total of
US$298,000 (2020 – US$366,750) was donated to
political organisations by the GSK employee PAC.
English law requires prior shareholder approval for political
contributions to EU political parties and independent election
candidates as well as for any EU political expenditure. The
definitions of political donations, political expenditure and
political organisations used in the legislation are, however,
quite broad. In particular, the definition of EU political
organisations may extend to bodies such as those concerned
with policy review, law reform, the representation of the
business community and special interest groups such as
those concerned with the environment, which the company
and its subsidiaries might wish to support.
As a result, the definitions may cover legitimate business
activities not in the ordinary sense considered to be political
donations or political expenditure, nor are they designed to
support any political party or independent election candidate.
Therefore, notwithstanding our policy, and while we do
not intend to make donations to any EU political parties or
organisations, nor to incur any EU political expenditure, we
annually seek shareholder authorisation for any inadvertent
expenditure.
The authority is a precautionary measure to ensure that the
company and its subsidiaries do not inadvertently breach the
legislation.
This authorisation process, for expenditure of up to £100,000
each year, dates back to the AGM held in May 2001, following
the introduction of the Political Parties, Elections and
Referendums Act 2000. The authority has since been
renewed annually.
Donations to political organisations and political expenditure
Other statutory disclosures
continued
GSK Annual Report 2021
299
Strategic report Governance and remuneration Financial statements
Investor information
Group companies
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, associates, joint ventures and joint
arrangements, the address of the registered office and effective percentage of equity owned, as at 31 December 2021 are
disclosed below. Unless otherwise stated the share capital disclosed comprises Ordinary shares which are indirectly held by
GlaxoSmithKline plc. The percentage held by class of share is stated where this is less than 100%. Unless otherwise stated,
all subsidiary companies have their registered office and are tax resident in their country of incorporation.
Name Security
Registered address
Wholly owned subsidiaries
1506369 Alberta ULC
Common
3500 855-2nd Street SW, Calgary AB T2P 4J8, CanadaAction Potential Venture Capital Limited 980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Ordinary
Adechsa GmbH (ii) c/o PRV Provides Treuhandgesellschaft AG, Dorfstrasse 38, 6341, Baar,
Ordinary
Switzerland
Allen & Hanburys Limited (ii)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandAllen & Hanburys Pharmaceutical Nigeria Limited
Ordinary
24 Abimbola Way, Ilasamaja, Isolo, Lagos, NigeriaAllen Farmaceutica, S.A.
Ordinary
Severo Ochoa, 2, Parque Tecnológico de Madrid, Tres Cantos, 28760, Madrid, Spain
Allen Pharmazeutika Gesellschaft m.b.H.
Ordinary
Wagenseilgasse 3, Euro Plaza, Gebäude 5i, 4.Stock, 1120, Vienna, Austria
Beecham Group p.l.c 5p Shares 'B';
20p Shares 'A'
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Beecham Pharmaceuticals (Pte) Limited
Ordinary
38 Quality Road, Jurong Industrial Estate, Jurong, 618809, SingaporeBeecham Portuguesa-Produtos Farmacêuticos e Químicos, Lda Ordinary Quota Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores,
1495-131, Alges, Portugal
Beecham S.A. (ii)
Ordinary
avenue Fleming 20, 1300 Wavre, BelgiumBiovesta Ilaçlari Ltd. Sti. (ii)
Nominative
Büyükdere Caddesi No. 173, 1.Levent Plaza B Blok, 1.Levent, Istanbul, 34394, Turkey
Cascan GmbH & Co. KG Partnership Capital Prinzregentenplatz 9, D-81675, Munich, Germany
Castleton Investment Ltd (In Liquidation)
Ordinary
C/O DTOS, 19 Cybercity, 10th Floor Standard Chartered Tower, Ebene, Mauritius
Cellzome GmbH
Ordinary
Meyerhofstrasse 1, 69117, Heidelberg, GermanyCellzome Limited (in liquidation since year end)
Ordinary
55 Baker Street, London, W1U 7EU, United KingdomCharles Midgley Limited (in liquidation since year end) 7% Cumulative Preference;
Ordinary
55 Baker Street, London, W1U 7EU, United Kingdom
Clarges Pharmaceuticals Limited (in liquidation since year end)
Ordinary;
Preference (99.97%)
55 Baker Street, London, W1U 7EU, United Kingdom
Clarges Pharmaceutical Trustees Limited (ii) (iv)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandColleen Corporation
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Corixa Corporation
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Dealcyber Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandDesarrollo Energía Solar Alternativa S.L.
Ordinary
Severo Ochoa, 2, Parque Tecnológico de Madrid, Tres Cantos, 28760, Madrid, Spain
Duncan Flockhart Australia Pty Limited (ii) (iv)
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaDuncan Pharmaceuticals Philippines Inc.
Common
23rd Floor, The Finance Centre, 26th Street Corner 9th Avenue, Bonifacio Global City, Taguig City, 1634, Philippines
Etex Farmaceutica Ltda Social Capital Avenue Andres Bello 2687, Piso 19, Las Condes, Santiago, C.P.
7550611, Chile
Genelabs Technologies, Inc.
Common
Corporation Service Company, 2710 Gateway Oaks Drive, Suite 150N, Sacramento CA 95833, United States
Glaxo Group Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxo Kabushiki Kaisha (ii)
Ordinary
1-8-1 Akasaka Minato-ku, Tokyo, JapanGlaxo Laboratories (Nigeria) Limited (ii)
Ordinary
82 Marine Road, Apapa, Lagos, NigeriaGlaxo Laboratories Limited (In Liquidation)
Ordinary
55 Baker Street, London, W1U 7EU, United KingdomGlaxo New Zealand Pension Plan Trustee Limited
Ordinary
Level 2 E.2, Generator at GridAKL, 12 Madden Street, Wynyard Quarter, Auckland, 1010, New Zealand
Glaxo Operations UK Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxo Properties BV
Ordinary
Van Asch van Wijckstraat 55h, 3811 LP, Amersfoort, NetherlandsGlaxo Trustees Limited (ii) (in liquidation)
Ordinary
55 Baker Street, London, W1U 7EU, United KingdomGlaxo Verwaltungs GmbH
Ordinary
Prinzregentenplatz 9, D-81675, Munich, GermanyGlaxo Wellcome Australia Pty Ltd (ii) (iv)
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaGlaxo Wellcome Farmacêutica, Limitada Ordinary Quota Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores,
1495-131, Alges, Portugal
Glaxo Wellcome International B.V. (ii) (iii)
Ordinary
Huis ter Heideweg 62, 3705 LZ, Zeist, NetherlandsGlaxo Wellcome Manufacturing Pte Ltd
Ordinary
1 Pioneer Sector 1, Jurong Industrial Estate, Jurong, 628413, SingaporeGlaxo Wellcome Production
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, FranceGlaxo Wellcome Vidhyasom Limited (ii)
Ordinary
12th Floor Wave Place, 55 Wireless Road, Lumpini, Pathumwan, Bangkok, 10330, Thailand
Other statutory disclosures
continued
300
GSK Annual Report 2021
Name Security
Registered address
Wholly owned subsidiaries
continued
Glaxo Wellcome, S.A.
Ordinary
Poligono Industrial Allendeduero, Avenida de Extremadura, 3, Aranda de Duero, 09400, Burgos, Spain
Glaxo, S.A.
Ordinary
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, 28760, Madrid, Spain
Glaxo-Allenburys (Nigeria) Limited (ii)
Ordinary
41 Creek Road, Apapa, Lagos, PMB 1401, NigeriaGlaxochem Pte Ltd (iii)
Ordinary
23 Rochester Park, 139234, SingaporeGlaxoSmithKline - Produtos Farmacêuticos, Limitada Ordinary Quota Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores,
1495-131, Alges, Portugal
GlaxoSmithKline (Cambodia) Co., Ltd. (In Liquidation)
Ordinary
5th Floor DKSH Building, No.797 Preah Monivong Boulevard (Co, Sangkat Phsar Deum Thakov, Khan Chamkarmon, Phnom Penh,
Cambodia
GlaxoSmithKline (China) Investment Co Ltd
Ordinary
Room 901, 902, 903, 905, 908, 909 and 910, Unit 901, Floor 9, No. 56 Mid 4th East Ring Road, Chaoyang District, Beijing, China
GlaxoSmithKline (China) R&D Company Limited
Equity
F1-3, No.18 Building, 999 Huanke Road, Pilot Free Trade Zone, Shanghai, 201210, China
GlaxoSmithKline (Cyprus) Limited
Ordinary
Arch. Makariou III, 2-4, Capital Center, 9th Floor, Nicosia, P.C. 1065, Cyprus
GlaxoSmithKline (GSK) S.R.L.
Ordinary
1-5 Costache Negri Street, Opera Center One, 5th and 6th floors, Zone 1, District 5, Bucharest, Romania
GlaxoSmithKline (Ireland) Limited
Ordinary
12 Riverwalk, Citywest Business Campus, Dublin 24, IrelandGlaxoSmithKline (Israel) Ltd
Ordinary
25 Basel Street, PO Box 10283, Petach-Tikva, 49002, IsraelGlaxoSmithKline (Malta) Limited
Ordinary
1, First Floor, De La Cruz Avenue, Qormi, QRM2458, MaltaGlaxoSmithKline (Private) Limited (ii)
Ordinary
Unit 3, 20 Anthony Road, Msasa, Harare, ZimbabweGlaxoSmithKline (Thailand) Limited
Ordinary
12th Floor Wave Place, 55 Wireless Road, Lumpini, Pathumwan, Bangkok, 10330, Thailand
GlaxoSmithKline AB
Ordinary
Hemvarnsg. 9, 171 54, Solna, SwedenGlaxoSmithKline AG
Ordinary
Talstrasse 3-5, 3053 Muenchenbuchsee, SwitzerlandGlaxoSmithKline Angola Unipessoal Limitada (iv)
Quota
Luanda, Bairro Petrangol, Estrada de Cacuaco n ° 288, AngolaGlaxoSmithKline Argentina S.A.
Ordinary
Tucumán 1, piso 4, Buenos Aires, C1049AAA, ArgentinaGlaxoSmithKline AS
Ordinary
Drammensveien 288, Oslo, NO-0283, NorwayGlaxoSmithKline Asia Private Limited
Equity
Patiala Road, Nabha 147201, Dist Patiala, Punjab, IndiaGlaxoSmithKline Australia Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaGlaxoSmithKline B.V.
Ordinary
Van Asch van, Wijckstraat 55h, 3811 LP Amersfoort, The Netherlands, Netherlands
GlaxoSmithKline Beteiligungs GmbH
Ordinary
Prinzregentenplatz 9, 81675, Munchen, GermanyGlaxoSmithKline Biologicals (Shanghai) Ltd.
Ordinary
277 Niudun Road, Pilot Free Trade Zone, Shanhai, ChinaGlaxoSmithKline Biologicals Kft.
Ordinary
2100 Gödöllõ, Homoki Nagy István utca 1, HungaryGlaxoSmithKline Biologicals S.A.S.
Ordinary
637 Rue des Aulnois, Saint-Amand Les Eaux, 59230, FranceGlaxoSmithKline Biologicals SA
Ordinary:
Preference
Rue de l'Institut 89 B-1330 Rixensart, Belgium
GlaxoSmithKline Brasil Limitada
Quotas
Estrada dos Banderiantes, 8464, Rio de Janeiro, 22783-110, BrazilGlaxoSmithKline Capital Inc.
Common
Wilmington Trust SP Services Inc., 1105 North Market Street, Suite 1300, Wilmington DE 19801, United States
GlaxoSmithKline Capital plc
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Caribbean Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Chile Farmaceutica Limitada Social Capital Avenue Andres Bello No. 2687, Piso 19, Las Condes, Santiago, C.P.
7550611, Chile
GlaxoSmithKline Colombia S.A.
Ordinary
Avenida El Dorado, #69B-45/Piso 9, Bogotá, ColombiaGlaxoSmithKline Consumer Healthcare Holdings Limited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Consumer Holding B.V. (ii)
Ordinary
Van Asch van Wijckstraat 55h, 3811 LP, Amersfoort, NetherlandsGlaxoSmithKline d.o.o.
Quotas
Zmja od Bosne broj 7-7a, Sarajevo, 71000, Bosnia and HerzegovinaGlaxoSmithKline d.o.o. Equity Capital Ulica Damira Tomljanovica Gavrana 15, Zagreb, Croatia
GlaxoSmithKline doo Beograd
Ordinary
Omladinskih brigada 88, New Belgrade, City of Belgrade, 11070, SerbiaGlaxoSmithKline Ecuador S.A.
Ordinary
Av 10 De Agosto N36-239, y Naciones Unidas, Edificio Electroectuatoriana, 2do piso, Quito, Ecuador
GlaxoSmithKline Eesti OU
Ordinary
Lõõtsa 8a, Tallinn, 11415, EstoniaGlaxoSmithKline El Salvador S.A. de C.V.
Ordinary
Municipio de San Salvador, Departamento de San Salvador, El SalvadorGlaxoSmithKline EOOD
Ordinary
115 G Tsarigradsko Shose Blvd., floor 9, Mladost Region, Sofia, 1784, Bulgaria
GlaxoSmithKline Export Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Export Panama S.A.
Ordinary
Panama City, Republic of Panama, PanamaGlaxoSmithKline Far East B.V.
Ordinary
Van Asch van Wijckstraat 55h, 3811 LP, Amersfoort, NetherlandsGlaxoSmithKline Finance plc
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline GmbH & Co. KG Partnership Capital Prinzregentenplatz 9, 81675, Munchen, Germany
GlaxoSmithKline Guatemala S.A.
Ordinary
3ra. Av. 13-78 Zona 10, Torre Citibank, Nivel 8, Guatemala City, Guatemala
Group companies
continued
Other statutory disclosures
continued
GSK Annual Report 2021
301
Strategic report Governance and remuneration Financial statements
Investor information
Name Security
Registered address
Wholly owned subsidiaries
continued
GlaxoSmithKline Holding AS
Ordinary
Drammensveien 288, Oslo, NO-0283, NorwayGlaxoSmithKline Holdings (Americas) Inc.
Common
Wilmington Trust SP Services Inc., 1105 North Market Street, Suite 1300, Wilmington DE 19801, United States
GlaxoSmithKline Holdings (One) Limited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Holdings Limited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Holdings Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaGlaxoSmithKline Honduras S.A.
Ordinary
Tegucigalpa, MDC, HondurasGlaxoSmithKline IHC Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Ilaclari Sanayi ve Ticaret A.S.
Nominative
Büyükdere Caddesi No. 173, 1.Levent Plaza B Blok, 1.Levent, Istanbul, 34394, Turkey
GlaxoSmithKline Inc. Class A Common;
Class C Preference
7333 Mississauga Road North, Mississauga Ontario L5N 6L4, Canada
GlaxoSmithKline Insurance Ltd
Ordinary
19 Par-La-Ville Road, Hamilton, HM11, BermudaGlaxoSmithKline Intellectual Property (No.2) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Intellectual Property Development Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Intellectual Property Holdings Limited A Ordinary;
B Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Intellectual Property Limited
Deferred;
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Intellectual Property Management Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Investigación y Desarrollo, S.L.
Ordinary
Severo Ochoa 2 Parque Tecnológico de Madrid, Tres Cantos, 28760, Madrid, Spain
GlaxoSmithKline Investment Holdings Limited (In Liquidation)
Ordinary
55 Baker Street, London, W1U 7EU, United KingdomGlaxoSmithKline Investment Services Limited (In Liquidation)
Ordinary
55 Baker Street, London, W1U 7EU, United KingdomGlaxoSmithKline Investments Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaGlaxoSmithKline K.K.
Ordinary
1-8-1 Akasaka Minato-ku, Tokyo, JapanGlaxoSmithKline Korea Limited
Ordinary
9F LS Yongsan Tower, 92 Hangang-daero, Yongsan-gu, Seoul, 04386, Korea, Republic of
GlaxoSmithKline Latin America, S.A.
Ordinary
Panama City, Republic of Panama, PanamaGlaxoSmithKline Latvia SIA
Ordinary
Duntes iela 3, Riga, LatviaGlaxoSmithKline Lietuva UAB
Ordinary
Ukmerges st. 120, Vilnius, LT-08105, LithuaniaGlaxoSmithKline Limited
Ordinary
23/F., Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, Kowloon, Hong Kong
GlaxoSmithKline LLC LLC Interests Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
GlaxoSmithKline Manufacturing SpA
Ordinary
Viale dell’Agricoltura 7, 37135, Verona, ItalyGlaxoSmithKline Maroc S.A.
Ordinary
42-44 Angle Bd, Rachidi et Abou Hamed El Glaza, Casablanca, MoroccoGlaxoSmithKline Medical and Healthcare Products Limited
Ordinary
H-1124, Csorsz utca 43, Budapest, HungaryGlaxoSmithKline Mercury Limited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Mexico S.A. de C.V. Ordinary A:
Ordinary B
Calzada, Mexico-Xochimilco 4900, Colonia San Lorenzo, Huipulco,
Delegacion Tlalpan, 14370, Mexico
GlaxoSmithKline NZ Limited
Ordinary
Level 2 E.2, Generator @GridAKL, 12 Madden Street, Wynyard Quarter, Auckland, 1010, New Zealand
GlaxoSmithKline Oy
Ordinary
Piispansilta 9A, P.O. Box 24, Espoo, FIN-02230, FinlandGlaxoSmithKline Peru S.A.
Ordinary
Av. Javier Prado Oeste, 995, San Isidro, LIMA 27, PeruGlaxoSmithKline Pharma A/S
Ordinary
Nykaer 68, DK-2605, Brondby, DenmarkGlaxoSmithKline Pharma GmbH
Ordinary
Wagenseilgasse 3, Euro Plaza, Gebäude 5i, 4.Stock, Wien, 1120GlaxoSmithKline Pharmaceutical Kenya Limited
Ordinary
Likoni Road, Nairobi, 78392 - 00507, KenyaGlaxoSmithKline Pharmaceutical Nigeria Limited
Ordinary
1 Industrial Avenue, Ilupeju, Ikeja, Lagos, PM B 21218, NigeriaGlaxoSmithKline Pharmaceutical Sdn Bhd
Ordinary
Level 6, Quill 9, 112 Jalan Prof. Khoo Kay Kim, Petaling Jaya, 46300 Selangor, Malaysia
GlaxoSmithKline Pharmaceuticals (Pvt) Ltd
Ordinary
121 Galle Road, Kaldemulla, Moratuwa, Sri LankaGlaxoSmithKline Pharmaceuticals Costa Rica S.A.
Ordinary
Autopista Florencia del Castillo, kilómetro siete, Oficentro TerraCampus, edificio uno, cuarto piso, San Diego, Cartago, 30302, Costa Rica
GlaxoSmithKline Pharmaceuticals S.A. Ordinary A;
Ordinary B;
Ordinary C;
Ordinary D
Ul. Grunwaldzka 189, 60-322, Poznan, Poland
GlaxoSmithKline Pharmaceuticals S.A.
Ordinary
Site Apollo, Avenue Pascal 2-4-6, Wavre, 1300, BelgiumGlaxoSmithKline Pharmaceuticals Ukraine LLC Chartered Capital Pavla Tychyny avenue, 1-V, Kiev, 02152, Ukraine
GlaxoSmithKline Philippines Inc
Ordinary
23rd Floor, The Finance Centre, 26th Street Corner 9th Avenue, Bonifacio
Global City, Taguig City, 1634, Philippines
GlaxoSmithKline Pte Ltd
Ordinary
23 Rochester Park, 139234, SingaporeGlaxoSmithKline Puerto Rico, Inc.
Common
The Prentice-Hall Corporation System, Puerto Rico, Inc, c/o Fast Solutions, LLC, 252 Ponce de Leon Avenue, Floor 20, San Juan, 00918,
Puerto Rico
Group companies
continued
Other statutory disclosures
continued
302
GSK Annual Report 2021
Name Security
Registered address
Wholly owned subsidiaries
continued
GlaxoSmithKline Republica Dominicana S.A.
Ordinary
Blue Mall Tower, Floor 23 Ave., Winston Churchill 95, Santo Domingo, Dominican Republic
GlaxoSmithKline Research & Development Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline S.A.
Ordinary
Severo Ochoa, 2, Parque Tecnológico de Madrid, Tres Cantos, 28760, Madrid, Spain
GlaxoSmithKline S.p.A.
Ordinary
Viale dell’Agricoltura 7, 37135, Verona, ItalyGlaxoSmithKline s.r.o.
Ordinary
Hvezdova 1734/2c, Prague, 4 140 00, Czech RepublicGlaxoSmithKline Services GmbH & Co. KG Partnership Capital Prinzregentenplatz 9, 81675, Munchen, Germany
GlaxoSmithKline Services Unlimited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Single Member A.E.B.E.
Ordinary
266 Kifissias Avenue, Halandri, Athens, 152 32, GreeceGlaxoSmithKline SL LLC LLC Interests Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
GlaxoSmithKline SL LP (ii) (viii)
Partnership
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Slovakia s.r.o.
Ordinary
Galvaniho 7/A, Bratislava, 821 04, SlovakiaGlaxoSmithKline South Africa (Pty) Limited
Ordinary
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston 2021, South Africa
GlaxoSmithKline Trading Services Limited (iii)
Ordinary
12 Riverwalk, Citywest Business Campus, Dublin 24, IrelandGlaxoSmithKline Tunisia S.A.R.L.
Ordinary
Immeuble REGUS, Lot B17, Centre Urbain Nord, Tunis, TunisiaGlaxoSmithKline UK Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Uruguay S.A. Registered Provisory Stock Salto 1105, CP 11.200 Montevideo, Uruguay
GlaxoSmithKline US Trading Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGlaxoSmithKline Venezuela C.A.
Ordinary
Urbanizacion La Trinidad, Calle luis De Camoems, Edif No 115-117 Apatado Posta, Caracas, 1010, Venezuela, Bolivarian Republic of
GlaxoSmithKline Vietnam Limited Liability Company (ii) (iv) Equity Capital The Metropolitan, 235 Dong Khoi Street, District 1, 7th Floor Unit 701, Ho
Chi Minh City, Vietnam
GlycoVaxyn AG (iv)
Common;
Preferred A;
Preferred B;
Preferred C
Grabenstrasse 3, 8952 Schlieren, Switzerland
Groupe GlaxoSmithKline
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, FranceGSK Australia NVD Pty Ltd (ii) (iv)
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaGSK Bangladesh Private Limited
Ordinary
Sweden Tower, 1, Harinnachala, Konabari, Gazipur, BangladeshGSK Biopharma Argentina S.A. Nominative Non Endorseable Ordinary Tucumán 1, piso 4, Buenos Aires, C1049AAA, Argentina
GSK Business Service Centre Sdn Bhd
Ordinary
Level 6, Quill 9, 112 Jalan Prof. Khoo Kay Kim, Petaling Jaya,, 46300 Selangor, Malaysia
GSK Capital B.V. (iii) (v)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGSK Capital K.K.
Ordinary
1-8-1 Akasaka Minato-ku, Tokyo, JapanGSK Commercial Sp. z o.o.
Ordinary
ul. Rzymowskiego 53, 02-697, Warsaw, PolandGSK d.o.o., Ljubljana
Ordinary
Ameriška ulica 8,, Ljubljana, 1000, SloveniaGSK Enterprise Management Co, Ltd
Ordinary
Floor 4, 18 Lane 999 Huanke Road, No. 1358 Zhongke Road, Shanghai, China
GSK Equity Investments, Limited
Units
Corporation Service Company, 2595 Interstate Drive, Suite 103, Harrisburg PA 17110, United States
GSK Finance (No 2) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGSK Finance (No.3) plc
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGSK India Global Services Private Limited
Equity
Level 1, 2 & 3 Luxor North Tower, Bagmane Capital Business Park Outer Ring Road, Bangalore, Karnataka, 560037, India
GSK International Holding and Finance BV
Ordinary
Van Asch van Wijckstraat 55h, 3811 LP, Amersfoort, NetherlandsGSK Kazakhstan LLP Participation Interest 273, Furmanov Street, Almaty, Medeu District, 050059, Kazakhstan
GSK Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandGSK Pharma Vietnam Company Limited Chartered Capital Unit 702/703 7th Floor, The Metropolitan Tower, 235 Dong Khoi Street,
Ben Nghe Ward, District 1, Ho Chi Minh, Vietnam
GSK Pharmaceutical Trading S.A. (ii) (iv)
Ordinary
Bucharest, 1-5 Costache Negri Street, Opera Center One, 5th floor, discussions room 01, District 5, Romania
GSK PSC Poland sp. z o.o. Equal and indivisible shares ul. Grunwaldzka 189, Poznań, 60-322, Pol
GSK Services Sp z o.o.
Ordinary
Ul. Grunwaldzka 189, 60-322, Poznan, PolandGSK Vaccines BV
Ordinary
Hullenbergweg 85, 1101 CL, Amsterdam, NetherlandsGSK Vaccines GmbH
Ordinary
Emil-von-Behring-Str.76, 35041 Marburg, GermanyGSK Vaccines Institute for Global Health S.r.l.
Quotas
Via Fiorentina 1, 53100, Siena, ItalyGSK Vaccines S.r.l.
Quotas
Via Fiorentina 1, 53100, Siena, ItalyGSK Vaccines Vertriebs GmbH (ii)
Ordinary
Rudolf-Diesel-Ring 27, 83607, Holzkirchen, GermanyHGS France S.a.r.l. (ii) (iv)
Ordinary
52-54, Rue de la Belle Feuille, Boulogne-Billancourt, 92100, FranceHuman Genome Sciences, Inc.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
ID Biomedical Corporation of Quebec
Common
2323, boul. Du Parc Technologique, Québec Québec G1P 4R8, CanadaGroup companies
continued
Other statutory disclosures
continued
GSK Annual Report 2021
303
Strategic report Governance and remuneration Financial statements
Investor information
Name Security
Registered address
Wholly
owned subsidiaries
continued
Instituto Luso Farmaco, Limitada (ii)
Quotas
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131, Algés, Portugal
InterPharma Dienstleistungen GmbH (ii)
Quotas
Wagenseilgasse 3, Euro Plaza, Gebäude I, 4. Stock, A-1120, Vienna, Austria
J&J Technologies, LC LLC Interests Corporation Service Company, 100 Shockoe Slip, 2nd Floor, Richmond
VA 23219,, United States
JSC GlaxoSmithKline Trading
Ordinary
Leningradskiy Prospect 37A, Building 4, Floor 3, Premises XV, Room 1, 125167, Moscow, Russian Federation
Laboratoire GlaxoSmithKline
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, FranceLaboratoire Pharmaceutique Algérien LPA Production SPA
Ordinary
Zone Industrielle Est, Boudouaou, Boumerdes, AlgeriaLaboratoire Pharmaceutique Algérien SPA
Ordinary
Zone Industrielle Est, Boudouaou, Boumerdes, AlgeriaLaboratoires Paucourt (ii)
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, FranceLaboratoires Saint-Germain (ii)
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, FranceLaboratorios Dermatologicos Darier, S.A de C.V. Ordinary A;
Ordinary B
Calzada Mexico Xochimilco, 4900 San Lorenzo Huipulco, District Federal
Mexico, 14370, Mexico
Laboratórios Farmaceuticos Stiefel (Portugal) LTDA (ii)
Ordinary
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131, Algés, Portugal
Laboratorios Stiefel de Venezuela SA
Ordinary
Calle Luis de Camoens, Edificio GlaxoSmithKline, No. 115-117, Urb. La Trinidad, Caracas, Venezuela, Bolivarian Republic of
Laboratorios Stiefel Ltda.
Ordinary
Rua Professor Joao Cavalheiro Salem, no.1077, Bairro de Bonsucesso, Municipality of Guarulhos, Sao Paulo, CEP 07243-580, Brazil
Laboratorios Wellcome De Portugal Limitada (ii)
Quota
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131, Alges, Portugal
Mixis Genetics Limited (In Liquidation)
Ordinary
BDO LLP, 5 Temple Square Temple Street, Liverpool, L2 5RHMontrose Pharma Company Limited (ii) (iv) Ordinary Quota H-1124, Csorsz utca 43, Budapest, Hungary
Penn Labs Inc. (ii)
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Setfirst Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandSitari Pharma, Inc. Common Stock Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Smith Kline & French Portuguesa-Produtos Farmaceuticos,
LDA (ii)
Ordinary
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores,
1495-131, Alges, Portugal
SmithKline Beecham (Bangladesh) Private Limited (ii)
Ordinary
House-2/A, Road-138,Gulshan-1, Dhaka, 1212, BangladeshSmithKline Beecham (Cork) Limited
Ordinary
12 Riverwalk, Citywest Business Campus, Dublin 24, IrelandSmithKline Beecham (Manufacturing) Limited (In Liquidation)
Ordinary
BDO, Beax Lane House, Mercer Street, Lower, D02 DH60, Dublin, D02 DH60, Ireland
SmithKline Beecham (SWG) Limited (In Liquidation)
Ordinary
BDO LLP, 5 Temple Square Temple Street, Liverpool, L2 5RHSmithKline Beecham Egypt L.L.C.
Quotas
Amoun Street, El Salam City, Cairo, EgyptSmithKline Beecham Farma, S.A.
Ordinary
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, 28760, Madrid, Spain
SmithKline Beecham Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandSmithKline Beecham Pension Plan Trustee Limited (ii)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandSmithKline Beecham Pension Trustees Limited (In Liquidation)
Ordinary
55 Baker Street, London, W1U 7EU, United KingdomSmithKline Beecham Pharma GmbH & Co KG Partnership Capital Prinzregentenplatz 9, 81675, Munchen, Germany
SmithKline Beecham Pharma Verwaltungs GmbH
Ordinary
Prinzregentenplatz 9, 81675, Munchen, GermanySmithKline Beecham Pharmaceuticals (Pty) Limited (ii) (iv)
Ordinary
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston 2021, South Africa
SmithKline Beecham Pharmaceuticals Co.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
SmithKline Beecham Port Louis Limited (In Liquidation)
Ordinary
C/o CIM Corporate Services Ltd, Les Cascades Building, Edith Cavell Street, Port Louis, Mauritius
SmithKline Beecham Senior Executive Pension Plan Trustee
Limited (ii)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Stiefel Dominicana, S.R.L. (ii) (iv)
Ordinary
Ave. Lope de Vega #29, Torre NovoCentro, Local 406, Santo Domingo, Dominican Republic
Stiefel Farma, S.A.
Ordinary
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, 28760, Madrid, Spain
Stiefel GmbH & Co. KG Partnership Capital Prinzregentenplatz 9, 81675, Munchen, Germany
Stiefel India Private Limited
Equity
1, Battery House, Bhulabhai Desai Raod, Mumbai, Maharashtra, 400026, India
Stiefel Laboratories (Maidenhead) Ltd (In Liquidation)
Ordinary
BDO LLP, 5 Temple Square Temple Street, Liverpool, L2 5RHStiefel Laboratories Legacy (Ireland) Limited
Ordinary
Unit 2 Building 2500, Avenue 2000 Cork Airport Business Park, Cork, Ireland
Stiefel Laboratories Limited (in liquidation since year end)
Ordinary
55 Baker Street, London, W1U 7EU, United KingdomStiefel Laboratories Pte Limited
Ordinary
1 Pioneer Sector, 628413, SingaporeGroup companies
continued
Other statutory disclosures
continued
304
GSK Annual Report 2021
Name Security
Registered address
Wholly
owned subsidiaries
continued
Stiefel Laboratories, Inc.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Stiefel Maroc SARL (ii) (iv)
Ordinary
275 Boulevard Zerktouni, Casablanca, MoroccoStiefel Research (Australia) Holdings Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaStiefel Research Australia Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaStiefel West Coast LLC LLC Interests Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Strebor Inc.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Tesaro Bio GmbH (In Liquidation)
Ordinary
Poststrasse 6, 6300 Zug, SwitzerlandTesaro Bio Netherlands B.V
Ordinary
Joop Geesinkweg 901, 1114 AB, Amsterdam-Duivendrecht, NetherlandsTesaro Bio Sweden AB
Common
c/o BDO Malardalen AB, Skatt Box 24193, 104 51, Stockholm, SwedenTesaro Development, Ltd.
Ordinary
Clarendon House, 2 Church Street, Hamilton HM11, BermudaTesaro, Inc.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
The Sydney Ross Co. (ii)
Ordinary
Corporation Service Company, Princeton South Corporate Center, Suite 160, 100 Charles Ewing Blvd, Ewing NJ 08628, United States
UCB Pharma Asia Pacific Sdn Bhd (ii)
Ordinary
12th Floor, Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim,, Seksyen 13, 46200 Petaling Jaya, Malaysia
Wellcome Consumer Healthcare Limited (ii)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandWellcome Consumer Products Limited (in liquidation
since year end)
Ordinary
BDO LLP, 5 Temple Square Temple Street, Liverpool, L2 5RH
Wellcome Developments Pty Ltd (ii) (iv)
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaWellcome Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandWellcome Operations Pty Ltd (ii) (iv)
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, AustraliaGroup companies
continued
Other statutory disclosures
continued
Name Security
Effective %
Ownership
Registered address
Subsidiaries where the effective interest is less than 100%
Alacer Corp.
Common
Corporate Service Company d/b/a CSC - Lawyers Incorporating , 68
Service, 2710 Gateway Oaks Drive, Suite 150N , Sacramento, California
95833-3505, United States
Amoun Pharmaceutical Industries Co. S.A.E. New Monetary Shares
(99.5%)
90.7
El Salam City 11491, PO Box 3001, Cairo, Egypt
Beecham Enterprises Inc. (ii)
Common 59.8
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Biddle Sawyer Limited
Equity
252 Dr Annie Besant Road, Mumbai, 400030, India68
Block Drug Company, Inc.
Common
68
Corporation Service Company, Princeton South Corporate Center, Suite
160, 100 Charles Ewing Blvd, Ewing NJ 08628, United States
Block Drug Corporation (ii)
Common
Corporation Service Company, Princeton South Corporate Center, Suite 68
160, 100 Charles Ewing Blvd, Ewing NJ 08628, United States
British Pharma Group Limited (i) Capital (50%)
50
980 Great West Road, Brentford, Middlesex, TW8 9GS, EnglandConsumer Healthcare Holdings Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
Consumer Healthcare Intermediate Holdings Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
Duncan Consumer Healthcare Philippines Inc
Common
23rd Floor, The Finance Centre, 26th Street Corner 9th Avenue, Bonifacio 68
Global City, Taguig City, 1634, Philippines
Ex-Lax, Inc.
Common
The Prentice Hall Corporation System, Puerto Rico, Inc., c/o, Citi Tower, 68
252 Ponce de Leon Avenue, Floor 20, San Juan, 00918, Puerto Rico
Ferrosan ApS A Shares;
B Shares
68
Delta Park 37, 2665, Vallensbæk Strand, Denmark
Ferrosan International ApS
Ordinary
Delta Park 37, 2665, Vallensbæk Strand, Denmark68
Ferrosan S.R.L. Registered Capital
68
178/C Calea Turzii, Cluj-Napoca, Cluj County, RomaniaGalvani Bioelectronics Inc.
Common 55
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Galvani Bioelectronics Limited A Ordinary;
B Ordinary (0%)
55
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Glaxo Saudi Arabia Limited
Ordinary 75
PO Box 22617, Area No 56 to 73, Warehouse City, First Stage Al Khomrah, Jeddah 21416, Saudi Arabia
Glaxo Wellcome Ceylon Limited
Ordinary;
Ordinary B
67. 8
121 Galle Road, Kaldemulla, Moratuwa, Sri Lanka
GlaxoSmithKline (Suzhou) Trading Co., Ltd Registered Capital
68
No.699 Gangpu Road, Wusongjiang Science and Technology Industrial Park, Wuzhong Economic & Technical Development Zone, Suzhou, China
GlaxoSmithKline (Tianjin) Co. Ltd
Ordinary
No. 65, the Fifth Avenue, Tai Feng Industrial Park, Tianjin Economic and 90
Technolog, Tianjin, 300457, China
GlaxoSmithKline Algérie S.P.A.
Ordinary 99.99
Zone Industrielle Est, Boudouaou, Wilaya de Boumerdes, AlgeriaGlaxoSmithKline Brasil Produtos para Consumo
e Saude Ltda
Quotas
68
Av das Americas, 3500, 4th floor, rooms 407-420, , Rio de Janeiro, RJ,
22621-000, Brazil
GSK Annual Report 2021
305
Strategic report Governance and remuneration Financial statements
Investor information
Name Security
Effective %
Ownership
Registered address
Subsidiaries where the effective interest is less than 100%
continued
GlaxoSmithKline Consumer Healthcare (China) Co. Ltd
Ordinary
Room 506, No. 1 Shen’gang Boulevard, Lin-gang Special Area of China 68
Pilot Free Trade Z, Shanghai, Shanghai, 200000, China
GlaxoSmithKline Consumer Healthcare (Hong Kong) Limited
Ordinary
23/F., Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, Kowloon, 68
Hong Kong
GlaxoSmithKline Consumer Healthcare (Ireland) Limited
Ordinary
12 Riverwalk, Citywest Business Campus, Dublin 24, Ireland68
GlaxoSmithKline Consumer Healthcare (Overseas) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GlaxoSmithKline Consumer Healthcare (Thailand) Limited
Ordinary
68
13th Floor, Unit 13.05 and 13.06 Wave Place, 55 Wireless Road,
Lumpini, Pathumwan, Bangkok, 10330, Thailand
GlaxoSmithKline Consumer Healthcare (UK) IP Limited (iv)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GlaxoSmithKline Consumer Healthcare (UK) Trading Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GlaxoSmithKline Consumer Healthcare (US) IP LLC LLC Interests
68
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
GlaxoSmithKline Consumer Healthcare AB
Ordinary
Hemvärnsgatan 9, P.O. Box 516, 169 29, Solna, Sweden68
GlaxoSmithKline Consumer Healthcare Aps
Ordinary
Delta Park 37, 2665, Vallensbæk Strand, Denmark68
GlaxoSmithKline Consumer Healthcare Australia Pty Ltd
Ordinary
68
82 Hughes Avenue, Ermington New South Wales NSW 2115, Australia
GlaxoSmithKline Consumer Healthcare B.V.
Ordinary
Van Asch van Wijckstraat 55G, 3811 LP, Amersfoort, Netherlands68
GlaxoSmithKline Consumer Healthcare Colombia SAS
Ordinary
Carrera 7 No. 113 - 43 Piso 4, Colombia68
GlaxoSmithKline Consumer Healthcare Czech Republic s.r.o.
Ordinary
Hvezdova 1734/2c, Prague, 4 140 00, Czech Republic68
GlaxoSmithKline Consumer Healthcare Finance Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GlaxoSmithKline Consumer Healthcare Finance No.2 Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GlaxoSmithKline Consumer Healthcare Finland Oy
Ordinary
Piispansilta 9A, Fin-02230, Espoo, Finland68
GlaxoSmithKline Consumer Healthcare GmbH
Ordinary
Wagenseilgasse 3, Euro Plaza, Gebäude I, 4. Stock, A-1120, Vienna, 68
Austria
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG Partnership Capital
68
Barthstr. 4, 80339, München, GermanyGlaxoSmithKline Consumer Healthcare Hellas Single
Member Societe Anonyme
Ordinary
68
274 Kifissias Avenue Halandri, Athens, 152 32, Greece
GlaxoSmithKline Consumer Healthcare Holdings (No.2)
Limited
A;
B (0%);
Preference
68
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Consumer Healthcare Holdings (US) LLC LLC Interests
68
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
GlaxoSmithKline Consumer Healthcare Investments
(Ireland) (No 3) Limited (iii) (In Liquidation)
Ordinary
68
Knockbrack, Dungarvan, Co Waterford, X35 RY76, Ireland
GlaxoSmithKline Consumer Healthcare Investments
(Ireland) (No.2) Unlimited Company (iii) (In Liquidation)
Ordinary
68
Knockbrack, Dungarvan, Co Waterford, X35 RY76, Ireland
GlaxoSmithKline Consumer Healthcare Japan K.K.
Ordinary
1-8-1 Akasaka Minato-ku, Tokyo, Japan68
GlaxoSmithKline Consumer Healthcare Korea Co., Ltd.
Ordinary
9F LS Yongsan Tower, 92 Hangang-daero, Yongsan-gu, Seoul, 04386, 68
Korea, Republic of
GlaxoSmithKline Consumer Healthcare L.L.C. LLC Interests
68
Corporation Service Company, 2595 Interstate Drive Suite 103, Harrisburg PA 17110, United States
GlaxoSmithKline Consumer Healthcare Mexico, S. De R.L.
de C.V.
Ordinary
68
Boulevard Adolfo Ruiz Cortines No. 3720, Torre 3 Piso 11, Colonia
Jardines del Pedregal, Alcaldía Alvaro Obregón, Ciudad de México , C.P.
01900, Mexico
GlaxoSmithKline Consumer Healthcare New Zealand ULC
Ordinary
Level 2 E.2 12 Madden Street, Auckland Central, Auckland, 1010, 68
New Zealand
GlaxoSmithKline Consumer Healthcare Norway AS
Ordinary
Drammensveien 288, Lysaker, 1326, Norway68
GlaxoSmithKline Consumer Healthcare Pakistan Limited Ordinary (85.8%)
58.3
The Sykes Building, 35 Dockyard Road, West Wharf, Karachi, 74000, Pakistan
GlaxoSmithKline Consumer Healthcare Philippines Inc
Common
23rd Floor, The Finance Centre, 26th Street Corner 9th Avenue, Bonifacio 68
Global City, Taguig City, 1634, Philippines
GlaxoSmithKline Consumer Healthcare Pte. Ltd.
Ordinary
23 Rochester Park, 139234, Singapore68
GlaxoSmithKline Consumer Healthcare S.A.
Ordinary
Site Apollo, Avenue Pascal 2-4-6, Wavre, 1300, Belgium68
GlaxoSmithKline Consumer Healthcare S.A.
Ordinary
Severo Ochoa, 2, Parque Tecnológico de Madrid, Tres Cantos, 28760, 68
Madrid, Spain
GlaxoSmithKline Consumer Healthcare S.r.l
Ordinary
68
Via Zambeletti snc, Baranzate, 20021, Milan, Italy
GlaxoSmithKline Consumer Healthcare Saudi Limited
Ordinary
603 Salamah Tower, 6th Floor, Madinah Road, Al-Salamah District, 68
Jeddah 21425, Saudi Arabia
GlaxoSmithKline Consumer Healthcare Sdn. Bhd.
Ordinary
Lot 89, Jalan Enggang,, Ampang / Hulu Kelang Industrial Estate, Selangor 68
Darul Ehsan, 68000 Ampang, Malaysia
GlaxoSmithKline Consumer Healthcare Slovakia s. r. o. Ownership Interest
68
Galvaniho 7/A, Bratislava, 821 04, SlovakiaGlaxoSmithKline Consumer Healthcare South Africa (Pty)
Ltd
Ordinary
68
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston
2021, South Africa
GlaxoSmithKline Consumer Healthcare Sp.z.o.o.
Ordinary
Ul. Grunwaldzka 189, 60-322, Poznan, Poland68
GlaxoSmithKline Consumer Healthcare SRL
Ordinary
68
1-5 Costache Negri Street, Opera Center One, 6th floor (Zone 2), District
5, Bucharest, Romania
Group companies
continued
Other statutory disclosures
continued
306
GSK Annual Report 2021
Group companies
continued
Name Security
Effective %
Ownership
Registered address
Subsidiaries where the effective interest is less than 100%
continued
GlaxoSmithKline Consumer Healthcare ULC /
GlaxoSmithKline Soins De Sante Aux Consommateurs SRI
A Class Preference;
Common
68
595 Burrard Street, Suite 2600 Three Bentall Centre, P.O. Box 49314
Vancouver BC V7X 1L3, Canada
GlaxoSmithKline Consumer Healthcare Vietnam Company
Limited (ii)
Charter Capital
68
Floor 16, Metropolitan, 235 Dong Khoi, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam
GlaxoSmithKline Consumer Healthcare, L.P. Partnership Capital
59.8
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
GlaxoSmithKline Consumer Healthcare, Produtos para a
Saude e Higiene, Lda
Ordinary Quota
68
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131, Algés, Portugal
GlaxoSmithKline Consumer Nigeria plc (vi)
Ordinary 46.4
1 Industrial Avenue, Ilupeju, Ikeja, Lagos, PM B 21218, NigeriaGlaxoSmithKline Consumer Private Limited
Equity
Patiala Road, Nabha 147201, Dist Patiala, Punjab, India68
GlaxoSmithKline Consumer Trading Services Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GlaxoSmithKline Costa Rica S.A.
Ordinary
San José 300 Este de la Rotonda Betania, Carretera a Sabanilla, 68
Costa Rica
GlaxoSmithKline Dungarvan Limited
Ordinary
Knockbrack, Dungarvan, Co Waterford, X35 RY76, Ireland68
GlaxoSmithKline Healthcare AO
Ordinary
premises III, Room 9, floor 6, Presnenskaya nab. 10, 123112, Moscow, 68
Russian Federation
GlaxoSmithKline Healthcare GmbH
Ordinary
Barthstr. 4, 80339, München, Germany68
GlaxoSmithKline Healthcare Ukraine O.O.O. Ownership Interest
68
Pavla Tychyny avenue, 1-V, Kiev, 02152, UkraineGlaxoSmithKline Limited Cumulative Redeemable
Preference;
Ordinary
68
Likoni Road, PO Box 78392, Nairobi, Kenya
GlaxoSmithKline Pakistan Limited
Ordinary 82.6
The Sykes Building, 35 Dockyard Road, West Wharf, Karachi, 74000, Pakistan
GlaxoSmithKline Panama S.A. Non-qualified preference
shares;
Ordinary
68
Urbanizacion Industrial Juan D, Calles A Y B, Republic of Panama,
Panama
GlaxoSmithKline Paraguay S.A.
Ordinary
Oficial Gilberto Aranda 333, Planta Alta casi Salvador del Mundo, 68
Asunción, Paraguay
GlaxoSmithKline Pharmaceuticals Limited
Equity 75
252 Dr Annie Besant Road, Mumbai, 400030, IndiaGlaxoSmithKline S.A.E.
Ordinary 91.2
Boomerang Office Building - Land No. 46, Zone (J) - 1st District, Town Center - 5th Tagammoe, New Cairo City, Egypt
GlaxoSmithKline Santé Grand Public
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, France68
GlaxoSmithKline Technology (Taizhou) Co., Ltd
Ordinary
Room 708 in Building D, Phase II of New Drug Innovation Base, Taizhou, 68
Jiangsu Province, 225300, China
GlaxoSmithKline Tuketici Sagligi Anonim Sirketi
Nominative
Büyükdere Caddesi No. 173, 1.Levent Plaza B Blok, 1.Levent, Istanbul, 68
34394, Turkey
GlaxoSmithKline-Consumer Kft.
Membership
H-1124, Csorsz utca 43, Budapest, Hungary68
GSK Canada Holding Company Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GSK CH Caricam Sociedad De Responsabilidad
Limitada (ii)
Participation
68
Urbanizacion Industrial Juan D, Calles A Y B, Republic of Panama,
Panama
GSK CH Kazakhstan LLP Charter Capital
68
32 A Manasa Str., Bostandyk District, Almaty, 050008, KazakhstanGSK Consumer Health, Inc.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 68
19808, United States
GSK Consumer Healthcare Capital NL B.V. (iii) (v)
Shares
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GSK Consumer Healthcare Capital US LLC LLC Interests
68
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
GSK Consumer Healthcare Chile SpA CLP Interests
68
Av. Andrés Bello N°2687, 25th floor, Las Condes, ChileGSK Consumer Healthcare Egypt Limited
Ordinary
North 90th street, Boomerang Building, 5th District, Cairo, Egypt68
GSK Consumer Healthcare Egypt LLC
Quotas
North 90th street, Boomerang Building, 5th District, Cairo, Egypt68
GSK Consumer Healthcare Export Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GSK Consumer Healthcare Holdings (No.1) Limited Non-voting preference
shares;
Ordinary
68
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GSK Consumer Healthcare Holdings (No.3) Limited Non-voting preference
shares;
Ordinary
68
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GSK Consumer Healthcare Holdings (No.5) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GSK Consumer Healthcare Holdings (No.6) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GSK Consumer Healthcare Holdings (No.7) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
GSK Consumer Healthcare Holdings (US) Inc.
Common;
Preference Stock
68
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Other statutory disclosures
continued
GSK Annual Report 2021
307
Strategic report Governance and remuneration Financial statements
Investor information
Group companies
continued
Name Security
Effective %
Ownership
Registered address
Subsidiaries where the effective interest is less than 100%
continued
GSK Consumer Healthcare Holdings No. 2 LLC (iii)
Unit
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 68
19808, United States
GSK Consumer Healthcare Insurance Limited
Ordinary
Dorey Court, Admiral Park, St Peter Port, GY1 4AT, Guernsey68
GSK Consumer Healthcare Israel Ltd (iv)
Ordinary
25 Basel Street, Petech Tikva 49510, Israel68
GSK Consumer Healthcare Levice s.r.o.
Ordinary
Priemyselny Park Gena, Ul. E. Sachsa 4-6, 934 01, Levice, Slovakia68
GSK Consumer Healthcare Peru S.R.L
Ordinary
Av Jorge Basadre 349, piso 5, San Isidro, Lima, 05W-109, Peru68
GSK Consumer Healthcare SARL
Ordinary
Route de I'Etraz, 1197 Prangins, Switzerland68
GSK Consumer Healthcare Schweiz AG
Ordinary
Suurstoffi 14, 6343, Rotkreuz, Switzerland68
GSK Consumer Healthcare Services, Inc.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 68
19808, United States
GSK Consumer Healthcare Singapore Pte. Ltd.
Ordinary
23 Rochester Park, 139234, Singapore68
GSK Consumer Healthcare Trinidad and Tobago Limited
Ordinary:
Preference
68
5th Floor Algico Plaza, 91-93 St. Vincent Street, Port of Spain, Trinidad
and Tobago
GSK-Gebro Consumer Healthcare GmbH Ordinary (60%)
40.8
Bahnhofbichl 13, 6391 Fieberbrunn, Kitzbühel, AustriaIodosan S.p.A.
Ordinary
Via Zambeletti snc,, Baranzate,, 20021, Milan, Italy68
Kuhs GmbH
Ordinary
Barthstr. 4, 80339, München, Germany68
Laboratorios ViiV Healthcare, S.L.
Ordinary 78.3
Severo Ochoa, 2, Parque Tecnológico de Madrid, Tres Cantos, 28760, Madrid, Spain
Modern Pharma Trading Company L.L.C.
Quotas 98.2
Amoun Street, PO Box 3001, El Salam City, Cairo, 11491, EgyptN.C.H. – Nutrition Consumer Health Ltd (ii)
Ordinary
14 Hamephalsim St, Petach Tikva, Israel68
P.T. SmithKline Beecham Pharmaceuticals Ordinary A;
Ordinary B (0%)
99
Jl. Pulobuaran Raya, Kav. III DD/2,3,4, Kawasan Industri Pulogadung,
Jakarta, 13930, Indonesia
P.T. Sterling Products Indonesia A Shares;
B Shares
68
Graha Paramita Building, 5th F, Jalan Denpasar Raya Blok D-2, Jakarta,
12940, Indonesia
Panadol GmbH
Ordinary
Barthstr. 4, 80339, München, Germany68
PF Consumer Healthcare 1 LLC Membership Interest
68
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
PF Consumer Healthcare B.V. Class A;
Class B
68
Van Asch van Wijckstraat 55G, 3811 LP Amersfoort, Netherlands
PF Consumer Healthcare Brazil Importadora e Distribuidora
de Medicamentos Ltda
Quota
68
Barueri, at Avenida Ceci, No.1900, Block III, Part 67, Tambore District,
São Paulo, 06460, Brazil
PF Consumer Healthcare Canada ULC/PF Soins De Sante
SRI
Common;
Preferred
68
595 Burrard Street, Suite 2600 Three Bentall Centre, P.O. Box 49314
Vancouver BC V7X 1L3, Canada
PF Consumer Healthcare Holding B.V.
Ordinary
Van Asch van Wijckstraat 55G, 3811 LP Amersfoort, Netherlands68
PF Consumer Healthcare UK Limited (In Liquidation)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
PF Consumer Ireland Company Limited (In Liquidation)
Ordinary
BDO, Beax Lane House, Mercer Street, Lower, D02 DH60, Dublin, D02 68
DH60, Ireland
PF Consumer Taiwan LLC
Interests
The Corporation Trust Company, Corporation Trust Center, 1209 Orange 68
Street, Wilmington DE 19801, United States
Pfizer Biotech Corporation Ordinary (55%)
37. 4
24F, No. 66, Sec 1, Zhong Xiao W. Rd, Taipei 100, TaiwanPfizer Consumer Healthcare AB
Ordinary
Vetenskapsvagen 10, SE-191 90, Sollentuna, Sweden68
Pfizer Consumer Healthcare GmbH
Ordinary
Linkstrasse 10, 10785, Berlin, Germany68
Pfizer Consumer Manufacturing Italy S.r.l. Quota (no stock)
68
90, Via Nettunese, 04011, Aprilia (Prov. di Latin), ItalyPfizer Laboratories PFE (Pty) Ltd.
Common
Flushing Meadows Building, The Campus, 57 Sloane Street, 68
Bryanston 2021, South Africa
Pfizer PFE Colombia S.A.S
Common
Carrera 7 No. 113 - 43 Piso 4, Colombia68
PHIVCO-1 LLC LLC Interests
78.3
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
PHIVCO-2 LLC LLC Interests
78.3
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
PRISM PCH Limited Non-Voting Shares;
Voting Shares;
68
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
PT Glaxo Wellcome Indonesia Class A;
Class B (0%)
95
JL. Pulobuaran Raya Kav.III/DD 2,3,4 KWS. Industri, Pulogadung,
Jatinegara, Cakung, Jakarta Timur, Indonesia
PT GSK Consumer Healthcare Indonesia
Ordinary
Graha Paramita Building, 5th F, Jalan Denpasar Raya Blok D-2,, Kuningan, 68
JAKARTA SELATAN, 12940, Indonesia
PT. Bina Dentalindo (In Liquidation)
Ordinary
Gedung Graha Ganesha Lantai 3, Jl Raya Bekasi Km 17, No5, Jakarta 68
Timur 13930, Indonesia
Shionogi-ViiV Healthcare LLC (ii) Common Interests
78.3
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Sino-American Tianjin Smith Kline & French Laboratories
Ltd
Ordinary (55%)
37. 4
Cheng Lin Zhuang Industrial Zone, Dong Li District, Tianjin, 300163, China
SmithKline Beecham (Private) Limited Ordinary (99.6%)
67. 8
World Trade Center, Level 34, West Tower, Echelon Square, Colombo 1, Sri Lanka
Other statutory disclosures
continued
308
GSK Annual Report 2021
Name Security
Effective %
Ownership
Registered address
Subsidiaries where the effective interest is less than 100%
continued
SmithKline Beecham Research Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
SmithKline Beecham S.A.
Ordinary
Ctra de Ajalvir Km 2.500, Alcala de Henares, 28806, Madrid, Spain68
SmithKline Beecham-Biomed O.O.O. Participation Interest
97
Leningradskiy Prospect 37A, Building 4, Floor 2, Premises XIV, Room 42, 125167, Moscow, Russian Federation
Stafford-Miller (Ireland) Limited
Ordinary
Clocherane, Youghal Road, Dungarvan, Co. Waterford, Ireland68
Stafford-Miller Limited (In Liquidation)
Ordinary;
Non-Cumulative Non
Redeemable Preference
68
Clocherane, Youghal Road, Dungarvan, Co. Waterford, Dungarvan,
Waterford, Ireland
Sterling Drug (Malaya) Sdn Berhad
Ordinary
Lot 89, Jalan Enggang, Ampang/Hulu Kelang Industrial Estate, Selangor 68
Darul Ehsan, 68000 Ampang, Malaysia
Sterling Products International, Incorporated (ii)
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 68
19808, United States
Stiefel Consumer Healthcare (UK) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
Stiefel Egypt LLC (ii)
Quotas
Amoun Street, PO Box 3001, El Salam City, Cairo, 11491, Egypt99
Stiefel Laboratories (Ireland) Limited (In Liquidation)
Ordinary
BDO, Beax Lane House, Mercer Street, Lower, D02 DH60, Dublin, D02 68
DH60, Ireland
Treerly Health Co., Ltd Capital Contribution
68
Unit 01A, Room 3901, No 16. East Zhujiang Road, Tianhe District, Guangzhou City, the PRC, China
ViiV Healthcare (South Africa) (Proprietary) Limited (ii); (iv)
Ordinary 78.3
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston 2021, South Africa
ViiV HealthCare BV
Ordinary 78.3
Van Asch van, Wijckstraat 55h, 3811 LP Amersfoort, The Netherlands,
Netherlands
ViiV Healthcare Company
Common 78.3
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
ViiV Healthcare Finance 1 Limited (In Liquidation)
Ordinary 78.3
55 Baker Street, London, W1U 7EU, United KingdomViiV Healthcare Finance 2 Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare Finance Limited
Ordinary;
Redeemable Preference
78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare GmbH
Ordinary 78.3
Prinzregentenplatz 9, 81675, Munchen, Germany
ViiV Healthcare GmbH
Ordinary 78.3
Talstrasse 3-5, 3053 Muenchenbuchsee, Switzerland
ViiV Healthcare Hong Kong Limited (ii)
Ordinary 78.3
23/F Tower 6, The Gateway, 9 Canton Road, Harbour City, Tsimshatsui,
Kowloon, Hong Kong
ViiV Healthcare K.K.
Ordinary 78.3
1-8-1 Akasaka Minato-ku, Tokyo, JapanViiV Healthcare Limited Class A;
Class B (0%);
Class C (0%);
Class D1 (0%);
Class D2 (0%);
Deferred;
Class E 5% Cumulative
Preference (0%)
78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare Pty Ltd
Ordinary 78.3
1061 Mountain Highway, Boronia Victoria VIC 3155, Australia
ViiV Healthcare Puerto Rico, LLC LLC Interests
78.3
Centro International de Mercadeo, 90 carr. 165 Torre 2, Suite 800, Guaynabo, 00968, Puerto Rico
ViiV Healthcare S.r.l.
Quota 78.3
Viale dell’Agricoltura 7, 37135, Verona, Italy
ViiV Healthcare SAS
Ordinary 78.3
23 rue François Jacob, 92500, Rueil-Malmaison, France
ViiV Healthcare sprl
Ordinary 78.3
Site Apollo, Avenue Pascal 2-4-6, Wavre, 1300, Belgium
ViiV Healthcare Trading LLC (ii) Participation Interest
78.3
Leningradskiy Prospect 37A, Building 4, Floor 2, Premises XIV, Room 28, 125167, Moscow, Russian Federation
ViiV Healthcare Trading Services UK Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.3) Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.4) Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.5) Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.6) Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.7) Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare ULC
Common 78.3
3500 855-2nd Street SW, Calgary AB T2P 4J8, Canada
ViiV Healthcare Venture LLC LLC Interests
78.3
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
ViiVHIV Healthcare Unipessoal Lda
Quota 78.3
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores,
1495-131, Algés, Portugal
Vog AU PTY LTD (ii)
Ordinary;
Redeemable Preference
68
82 Hughes Avenue, Ermington New South Wales NSW 2115, Australia
Winster Pharmaceuticals Limited (ii)
Ordinary 46.4
2A Association Avenue, Ilupeju Industrial Estate, Lagos, PO Box 3199,
Nigeria
Wyeth Pharmaceutical Co. Ltd Registered Capital
68
4 Baodai West Road, Suzhou, Jiangsu Province, 215128, China
Wyeth Pharmaceuticals Company (vii)
Partnership
68
No registered address required, Puerto Rico general partnership, Contact
entity contact for any questions, Puerto Rico
Group companies
continued
Other statutory disclosures
continued
GSK Annual Report 2021
309
Strategic report Governance and remuneration Financial statements
Investor information
Group companies
continued
Name Security
Effective %
Ownership
Registered address
Associates
GlaxoSmithKline Landholding Company, Inc Common (40%)
39.9
23rd Floor, The Finance Centre, 26th Street Corner 9th Avenue, Bonifacio Global City, Taguig City, 1634, Philippines
Index Ventures Life VI (Jersey) LP Partnership Interest (25%)
25
44 Esplanade, St Helier, Jersey, JE4 9WG, Channel IslandsKurma Biofund II FCPR Partnership Interest (32.1%)
32.1
24 rue Royale, 75008, Paris, FranceLongwood Fund I, LP Partnership Interest (35%)
35
The Prudential Tower, Suite 1555, 800 Boylston Street, Boston, MA 02199
Medicxi Ventures I LP Partnership Interest (26.2%)
26.2
44 Esplanade, St Helier, Jersey, JE4 9WG, Channel IslandsJoint Ventures
Chiron Panacea Vaccines Private Limited Equity Shares (50%)
50
708/718, 7th Floor, A Wing, Sagar Tech Plaza, Saki Naka, Andheri East, Mumbai, Maharashtra, 400072, India
Qualivax Pte. Limited Ordinary (50%)
50
80 Robinson Road, #02-00, 068898, SingaporeQura Therapeutics, LLC Units (39.2%)
39.2
Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States
Other significant holdings
Axon Therapies, Inc Common (5%); Series A
Preference (15%)
20
315 west 36th street, New York 10018, Delaware, USA
Global Farm S.A. A Shares (0%)
B Shares (0%)
C Shares (100%)
D Shares (0%)
E Shares (0%)
F Shares (0%)
16.7
Cazadores de Coquimbo 2841 piso 3, Munro, Argentina
Longwood Fund II, LP Partnership Interest (20%)
20
The Prudential Tower, Suite 1555, 800 Boylston Street, Boston, MA 02199
Sanderling Ventures VII, L.P. A63 Partnership Interest (25.3%)
25.3
400 S. El Camino Real, Suite 1200, San Mateo, CA 94402SR One Capital Fund I-B, LP Partnership Interest (44%)
44
Corporation service company, 251 Little Falls Drive, City of Wilmington, County of New Castle, Delaware 19808
Other statutory disclosures
continued
The following UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act 2006
for the period ended 31 December 2021. Unless otherwise stated, the undertakings listed below are owned, either directly or
indirectly, by GlaxoSmithKline plc.
Name Security
Effective %
Ownership
Registered address
Company
Number
UK registered subsidiaries exempted from audit
Burroughs Wellcome International Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
00543757
Domantis Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
03907643
Edinburgh Pharmaceutical Industries Limited (ii)
Ordinary;
Preference
100
Shewalton Road, Irvine, Ayrshire, KA11 5AP, United Kingdom
SC005534
Eskaylab Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
00099025
Glaxo Wellcome UK Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
00480080
Glaxochem (UK) Unlimited
Ordinary;
Ordinary B;
Ordinary C
100
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
04299472
GlaxoSmithKline Consumer Healthcare (UK) (No.1)
Limited
Ordinary
68
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
00753340GlaxoSmithKline Consumer Healthcare Sri Lanka
Holdings Limited
Ordinary
68
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
9400298GlaxoSmithKline Intellectual Property (No.3) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
11480952
GlaxoSmithKline Intellectual Property (No.4) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
11721880
GlaxoSmithKline Intellectual Property (No.5) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
11959399
GlaxoSmithKline International Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
02298366
GSK Consumer Healthcare Capital UK PLC
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
13481162
GSK Consumer Healthcare Holdings (No.4) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
13401336
GSK Consumer Healthcare Holdings (No.8) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
13434151
GSK New Zealand Holding Company Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England68
12342879
Montrose Fine Chemical Company Ltd
Ordinary
Shewalton Road, Irvine, Ayrshire, KA11 5AP, United Kingdom100
SC190635
PHIVCO UK II Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
06944229
PHIVCO UK Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England06944223
Smith Kline & French Laboratories Limited (iv)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England10 0
00052207
SmithKline Beecham (Export) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
02860752
SmithKline Beecham (H) Limited
Non-cumulative
Non-redeemable;
Ordinary
100
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
03296131
310
GSK Annual Report 2021
Key
(i) Directly owned by GlaxoSmithKline plc.
(ii) Dormant entity.
(iii) Tax resident in the UK.
(iv) Entity expected to be disposed of or removed.
(v) Incorporated in the Netherlands
(vi) Consolidated as a subsidiary in accordance with section 1162 (4)(a) of the Companies Act 2006 on the grounds of dominant influence.
(vii) Principal business address in Puerto Rico.
(viii) Exempt from the provisions of Regulations 4-6 of the Partnership (Accounts) Regulation 2008, in accordance with the exemptions noted in Regulation 7 of that Regulation.
Group companies
continued
Name Security
Effective %
Ownership
Registered address
Company
Number
UK registered subsidiaries exempted from audit
continued
SmithKline Beecham (Investments) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
00302065
SmithKline Beecham Legacy H Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
00210281
SmithKline Beecham Marketing and Technical
Services Limited
Ordinary
100
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
00494385
SmithKline Beecham Nominees Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England10 0
00503868
SmithKline Beecham Overseas Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
02552828
Stiefel Laboratories (U.K.) Ltd
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England10 0
00831160
Tesaro UK Limited
Ordinary
10 0
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
07890847
The Wellcome Foundation Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England100
00194814
ViiV Healthcare Overseas Limited
Ordinary 78.3
980 Great West Road, Brentford, Middlesex, TW8 9GS, England07027385
In accordance with section 479C of the Companies Act 2006, the Company will guarantee debts and liabilities of the above UK subsidiary undertakings. As at 31 December 2021 the
total sum of these debts and liabilities is £876 million (2020 – £168 million)
Other statutory disclosures
continued
GSK Annual Report 2021
311
Strategic report Governance and remuneration Financial statements
Investor information
Terms used in the Annual Report US equivalent or brief description
Accelerated capital allowances Tax allowance in excess of depreciation arising from the purchase of fixed assets that delay
the charging and payment of tax. The equivalent of tax depreciation.
American Depositary Receipt (ADR) Receipt evidencing title to an ADS. Each GSK ADR represents two Ordinary Shares.
American Depositary Shares (ADS) Listed on the New York Stock Exchange; represents two Ordinary Shares.
Basic earnings per share Basic income per share.
Called up share capital Ordinary Shares, issued and fully paid.
CER growth Growth at constant exchange rates.
The company GlaxoSmithKline plc.
Currency swap An exchange of two currencies, coupled with a subsequent re-exchange of those currencies,
at agreed exchange rates and dates.
Defined benefit plan Pension plan with specific employee benefits, often called ‘final salary scheme’.
Defined contribution plan Pension plan with specific contributions and a level of pension dependent upon the growth
of the pension fund.
Derivative financial instrument A financial instrument that derives its value from the price or rate of some underlying item.
Diluted earnings per share Diluted income per share.
Employee Share Ownership Plan Trusts Trusts established by the Group to satisfy share-based employee incentive plans.
Equity Shareholders’ funds Shareholders’ equity.
Finance lease Capital lease.
Freehold Ownership with absolute rights in perpetuity.
The Group GlaxoSmithKline plc and its subsidiary undertakings.
GSK GlaxoSmithKline plc and its subsidiary undertakings.
Hedging The reduction of risk, normally in relation to foreign currency or interest rate movements,
by making off-setting commitments.
Intangible fixed assets Assets without physical substance, such as computer software, brands, licences, patents,
know-how and marketing rights purchased from outside parties.
Ordinary Share A fully paid up ordinary share in the capital of the company.
Profit Income.
Profit attributable to shareholders Net income.
Share capital Ordinary Shares, capital stock or common stock issued and fully paid.
Share option Stock option.
Share premium account Additional paid-up capital or paid-in surplus (not distributable).
Shares in issue The number of shares outstanding.
Subsidiary An entity in which GSK exercises control.
Treasury share Treasury stock.
Turnover Revenue.
UK Corporate Governance Code As required by the UK Listing Authority, the company has disclosed in the Annual Report how
it has applied the best practice corporate governance provisions of the Financial Reporting
Council’s UK Corporate Governance Code.
Glossary of terms
312
GSK Annual Report 2021
2021 Remuneration policy summary 143
Accounting principles and policies 172
Acquisitions and disposals 221
Adjustments reconciling profit after tax to operating
cash flows 225
Affordability and availability 36
Annual General Meeting 2022 291
Approach to tax 60
Assets held for sale 201
Associates and joint ventures 188
Audit & Risk Committee Report 111
Being a responsible business 38
Business model 01
Cash and cash equivalents 201
Cash generation and conversion 73
CEO’s statement 05
Chairman’s statement 03
Chairman’s Governance statement 89
Chairman’s Remuneration annual statement 120
Climate-related financial disclosure 49
Commitments 216
Consolidated balance sheet 169
Consolidated cash flow statement 171
Consolidated income statement 168
Consolidated statement of changes in equity 170
Consolidated statement of comprehensive income 168
Consumer Healthcare 41
Consumer Healthcare products and competition 274
Contingent consideration liabilities 215
Contingent liabilities 216
Corporate governance 82
Corporate Responsibility Committee Report 104
Critical accounting judgements and key sources
of estimation uncertainty 177
Critical accounting policies 80
Data and engagement 39
Directors and senior management 141
Directors’ interests in shares 140
Directors’ report 117
Directors’ statement of responsibilities 154
Dividends 192,290
Donations to political organisations and
political expenditure 298
Earnings per share 192
Employee costs 185
Employee share schemes 245
Environment 39
Ethics and values 38
Exchange rates 180
Finance expense 187
Finance income 187
Financial calendar 2022 291
Financial instruments and related disclosures 228
Financial performance 7,61
Financial position and resources 74
Financial statements of GlaxoSmithKline plc, prepared
under UK GAAP 252
Five year record 263
Glossary of terms 311
Goodwill 195
Group companies 299
Group financial review 55
GSK Leadership Team 87
Independent Auditor’s report 156
Innovation 17
Inventories 200
Investments in associates and joint ventures 198
Investor relations 295
Key performance indicators 12
Legal proceedings 248
Major restructuring costs 186
Modern employer 37
Movements in equity 217
Net debt 203
New accounting requirements 179
Nominations Committee Report 107
Non-controlling interests 219
Non-controlling interests in ViiV Healthcare 57
Non-Executive Directors’ fees 139
Non-financial information statement 54
Notes to the financial statements 172
Operating profit 184
Other intangible assets 196
Other investments 199
Other non-current assets 200
Other non-current liabilities 216
Other operating income/(expense) 183
Other provisions 214
Our culture 11
Our external environment 13
Our long-term priorities 10
Pensions and other post-employment benefits 205
Performance 29
Pharmaceuticals 17,29
Pharmaceutical products, competition and
intellectual property 272
Pipeline 269
Post balance sheet events 251
Presentation of the financial statements 171
Principal Group companies 247
Principal risks and uncertainties 275
Property, plant and equipment 193
Quarterly trend 258
Reconciliation of net cash flow to movement in net debt 226
Registrar 294
Related party transactions 221
Reliable supply 38
Remuneration governance 138
Remuneration report 125
Reporting framework 56
Right of use assets 194
Risk management 46
Science and technology 35
Science Committee report 105
Section 172 statement 116
Share capital and control 288
Share capital and share premium account 217
Shareholder information 288
Shareholder services and contacts 294
Stakeholder engagement 44
Task Force on Climate-related Financial Disclosures 49
Taxation 189
Tax information for shareholders 291
The Board 83
Trade and other payables 201
Trade and other receivables 200
Transformation & Separation Committee report 110
Treasury policies 79
Trust 34
Turnover and segment information 180
US law and regulation 295
Vaccines 17,31
Vaccine products, competition and intellectual property 273
Viability statement 53
Page Page
Index
Strategic report Governance and remuneration Financial statements
Investor information
Cautionary statement regarding
forward-looking statements
The Group’s reports filed with or furnished to the US
Securities and Exchange Commission (SEC), including
this document, and any other written information
released, or oral statements made, to the public in the
future by or on behalf of the Group, may contain
forward-looking statements. Forward-looking statements
give the Group’s current expectations or forecasts of
future events. An investor can identify these statements
by the fact that they do not relate strictly to historical or
current facts. They use words such as ‘anticipate’,
‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’, ‘plan’,
‘believe’, ‘target’ and other words and terms of similar
meaning in connection with any discussion of future
operating or financial performance. In particular, these
include statements relating to future actions, prospective
products or product approvals, future performance or
results of current and anticipated products, sales efforts,
expenses, the outcome of contingencies such as legal
proceedings, dividend payments and financial results.
Other than in accordance with its legal or regulatory
obligations (including under the Market Abuse
Regulations, the UK Listing Rules and the Disclosure
and Transparency Rules of the Financial Conduct
Authority), the Group undertakes no obligation to update
any forward-looking statements, whether as a result of
new information, future events or otherwise. The reader
should, however, consult any additional disclosures that
the Group may make in any documents which it
publishes and/or files with the SEC. All readers,
wherever located, should take note of these disclosures.
Accordingly, no assurance can be given that any
particular expectation will be met and investors are
cautioned not to place undue reliance on the
forward-looking statements.
Forward-looking statements are subject to assumptions,
inherent risks and uncertainties, many of which relate to
factors that are beyond the Group’s control or precise
estimate. The Group cautions investors that a number
of important factors, including those in this document,
could cause actual results to differ materially from those
expressed or implied in any forward-looking statement.
Such factors include, but are not limited to, those
discussed under ‘Principal risks and uncertainties’ on
pages 275 to 287 of this Annual Report and any impacts
of the
COVID
-19 pandemic. Any forward-looking
statements made by or on behalf of the Group speak only
as of the date they are made and are based upon the
knowledge and information available to the Directors on
the date of this Annual Report.
A number of non-IFRS measures are used to report the
performance of our business. These measures are defined
on pages 56 and 59 and a reconciliation of Adjusted
results to Total results is set out on page 70.
The information in this document does not constitute an
offer to sell or an invitation to buy shares in
GlaxoSmithKline plc or an invitation or inducement to
engage in any other investment activities. Past
performance cannot be relied upon as a guide to future
performance. Nothing in this Annual Report should be
construed as a profit forecast.
Assumptions related to 2022 guidance
In outlining the guidance for 2022, the Group has made
certain assumptions about the healthcare sector, the
different markets in which the Group operates and the
delivery of revenues and financial benefits from its current
portfolio, pipeline and restructuring programmes. The
Group also assumes that the demerger of our Consumer
Healthcare business will be delivered in mid-2022 and this
guidance relates only to new GSK.
The Group has made planning assumptions for 2022 that
healthcare systems will approach normality as the year
progresses, and we expect sales of Specialty Medicines
to grow approximately 10% at CER and sales of General
Medicines to show a slight decrease, primarily reflecting
increased genericisation of established Respiratory
products. Vaccines sales are expected to grow at a low
teens percentage at CER for the year as a whole. However,
governments’ prioritisation of COVID-19 vaccination
programmes and ongoing measures to contain the
pandemic are expected to result in some continued
disruption to adult immunisations, with the impact
weighted to the first half. For
Shi ngrix
, despite the potential
for short-term pandemic disruption, we continue to expect
strong double-digit growth and record annual sales based
on strong demand in existing markets and geographical
expansion. Guidance also includes the future benefit in
royalty income from the settlement and license agreement
with Gilead announced on 1 February 2022.
These planning assumptions as well as operating profit
guidance and dividend expectations assume no material
interruptions to supply of the Group’s products, no material
mergers, acquisitions or disposals, no material litigation or
investigation costs for the company (save for those that are
already recognised or for which provisions have been
made) and no change in the Group’s shareholdings in ViiV
Healthcare. The assumptions also assume no material
changes in the healthcare environment or unexpected
significant changes in pricing as a result of government or
competitor action. The 2022 guidance factors in all
divestments and product exits announced to date.
The Group’s guidance assumes successful delivery of
the Group’s integration and restructuring plans. It also
assumes that the separation programme to deliver the
demerger of the Consumer Healthcare business is
delivered successfully. Material costs for investment in
new product launches and R&D have been factored into
the expectations given. Given the potential development
options in the Group’s pipeline, the outlook may be
affected by additional data-driven R&D investment
decisions. The guidance is given on a constant currency
basis.
2021-2026 outlooks, 2031 sales ambition and
2021-2023 dividend expectations should be read together
with the section “Basis of preparation, assumptions and
cautionary statements” on pages 5-7 of our stock-
exchange announcement relating to an update to investors
dated 23 June 2021. All outlook and ambition statements
are given on a constant currency basis and use 2021
actual exchange rates as a base.
Notice regarding limitations on
Director Liability under English Law
Under the UK Companies Act 2006, a safe harbour limits
the liability of Directors in respect of statements in and
omissions from the Directors’ Report (for which see page
117), the Strategic report and the Remuneration report.
Under English law the Directors would be liable to the
company, but not to any third party, if one or more of these
reports contained errors as a result of recklessness or
knowing misstatement or dishonest concealment of a
material fact, but would otherwise not be liable. Pages 82
to 118, 154 to 155, and 275 to 310 inclusive comprise the
Directors’ Report, pages 1 to 81 inclusive comprise the
Strategic report and pages 119 to 152 inclusive comprise
the Remuneration report, each of which have been drawn
up and presented in accordance with and in reliance upon
English company law and the liabilities of the Directors in
connection with these reports shall be subject to the
limitations and restrictions provided by such law.
Website
GSK’s website www.gsk.com gives additional information
on the Group. Notwithstanding the references we make
in this Annual Report to GSK’s website, none of the
information made available on the website constitutes
part of this Annual Report or shall be deemed to be
incorporated by reference herein.
GlaxoSmithKline plc was incorporated as an English
formed by a merger between Glaxo Wellcome plc and
SmithKline Beecham plc. GSK acquired these two
English companies on 27 December 2000 as part
of the merger arrangements.
Our shares are listed on the London Stock Exchange
and the New York Stock Exchange.
Read more at
www.gsk.com
Download PDFs:
Annual Report 2021
Form 20-F
Brand names
Brand names appearing in italics throughout this report
are trade marks either owned by and/or licensed to GSK
or associated companies. All other trade marks are the
property of their respective owners.
Acknowledgements
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