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GSK PLC
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Annual Report 2022
Proof 6 (e) 08.03.2023 at 1 pm
Strategic report
Ahead Together
01
2022 performance and key
performance indicators
02
Chair’s statement
04
CEO’s statement
06
Business model
08
Our culture and people
10
Our external environment
12
Research and development
15
Commercial operations:
Performance: Vaccines
29
Performance: Specialty Medicines
33
Performance: General Medicines
38
Responsible business
41
Risk management
51
2022 principal risks summary
53
Climate-related financial disclosures 55
Nature-related financial disclosure
62
Employees by gender
63
Viability statement
64
Group financial review
65
We are a global biopharma company with a purpose
to unite science, technology and talent to get ahead
of disease together.
We aim to positively impact the health of 2.5 billion
people by the end of 2030. Our bold ambitions for
patients are reflected in commitments to growth and
a step-change in performance.
We are a company where outstanding people can thrive.
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 69 and 70 and reconciliations to the nearest IFRS measures are on pages 81 to 85.
Corporate governance
The Board and GSK Leadership Team
97
Chair’s governance statement
103
Corporate governance architecture
107
Ahead Together – Board oversight
110
Key decisions and engagements
112
Board committee reports
117
Directors’ report
130
Remuneration report
Chair’s annual statement
133
Annual report on remuneration
136
2022 remuneration policy summary
158
Financial statements
Directors’ statement of
responsibilities
166
Independent auditor’s report
168
Financial statements
182
Notes to the financial statements
186
Financial statements of GSK plc
prepared under UK GAAP
268
Investor information
Financial record
274
Product development pipeline
278
Products, competition and
intellectual property
282
Principal risks and uncertainties
285
Share capital and control
296
Dividends
298
Financial calendar 2023
299
Annual General Meeting 2023
299
Tax information for shareholders
299
Shareholder services and contacts
302
US law and regulation
304
Group companies
307
Glossary of terms
315
Contents
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01
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Ahead Together
2022 was a landmark year for GSK. Following the demerger of our consumer
healthcare business to form Haleon in July, we are now a fully focused
biopharma company.
We prioritise innovation in vaccines
and specialty medicines, maximising
the increasing opportunities to prevent
and treat disease
At the heart of this is our R&D focus on the science
of the immune system, human genetics and advanced
technologies, and our world-leading capabilities in
vaccines and medicines development. We focus on
four therapeutic areas: infectious diseases, HIV,
immunology/respiratory and oncology.
We’re confident in our future
Our bold ambitions for patients are reflected in our
commitments to a step-change in growth and performance
over the period to 2026. This means more GSK vaccines
and medicines, including innovative new products, will
reach more people than ever before.
Being a responsible business means getting
ahead of disease together in the right way
That’s why environmental, social and governance (ESG)
impacts are embedded in our strategy and support our
sustainable performance and long-term growth. They help
us build trust with our stakeholders, reduce risk to our
operations and deliver positive social impact.
Culture at GSK is something we all own
It powers our purpose, drives delivery of our strategy
and helps make GSK a place where people can thrive.
Our culture of being ambitious for patients, accountable
for impact and doing the right thing is the foundation
for how, together, we’ll deliver for our patients, shareholders
and GSK people.
Proof 6 (e) 08.03.2023 at 1 pm
02
GSK Annual Report 2022
2022 performance and key performance indicators
£29.3bn
Group turnover (£bn)
R
Total continuing operating profit (£bn)
KPI
AER
19%*
CER 13%*
Financial
Adjusted operating profit (£bn)
R
2021
24.4
24.7
29.3
2020
2022
We delivered a step-change in commercial execution with growth across the portfolio. Prioritised
investment and cost discipline supported strong growth in operating profit and earnings per share (EPS).
Turnover by product area
KPI
Free cash flow (£bn)
KPI
R
Total continuing earnings per share (p)
Adjusted earnings per share (p)
Cash generated from operations attributable to continuing
operations (£bn)
KPI
£6.4bn
AER
48%
CER 31%
2021
6.0
4.4
6.4
2020
2022
£8.2bn
AER
26%*
CER 14%*
2021
6.7
6.5
8.2
2020
2022
110.8p
AER
34%
CER 18%
2021
122.4p
82.9p
110.8p
2020
2022
139.7p
AER
27%*
CER 15%*
2021
114.4p
110.3p
139.7p
2020
2022
£7.9bn
2021
7.7
7.2
7.9
2020
2022
£3.3bn
2021
3.7
3.3
3.3
2020
2022
We use 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 69 and 70. AER – actual exchange rate; CER – constant exchange rate.
2020 and 2021 comparative results presented in the tables above have been restated on a consistent basis from those previously published to reflect the
demerger of the Consumer Healthcare business. The presentation of continuing and discontinued operations under IFRS 5 are set out on page 192.
KPI
Key performance indicator attributable to continuing operations
R
Linked to executive remuneration. See pages 136 to 139 for more details
Vaccines
£7.9bn
AER
17% CER 11%
Specialty Medicines
£11.3bn
AER
37% CER 29%
General Medicines
£10.1bn
AER
5% CER 1%
* 2022 growth excluding COVID-19 solutions AER 16% CER 10%
* 2022 growth excluding COVID-19 solutions AER 29% CER 17%
* 2022 growth excluding COVID-19 solutions AER 31% CER 18%
Proof 6 (e) 08.03.2023 at 1 pm
03
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Performance summary and key performance indicators continued
We continue to be recognised for our environmental and sustainability leadership. Our ESG Performance
Rating
KPI
is on track based on 83% of all performance metrics being met or exceeded. The metrics
cover our six new focus areas: access to healthcare, global health and health security, environment
R
,
diversity, equity and inclusion
R
, ethical standards, and product governance (see pages 41 to 50).
Responsible business
Culture
Culture progress
KPI
– ambitious for patients, accountable for impact and do the right thing –
is measured through our employee surveys. Our employee engagement score was 81% in 2022
compared to 78% in 2021.
Read more on page 10
Research and development
We continued to strengthen the late-stage pipeline with regulatory approvals, positive data read-outs
and strategic business development.
69
vaccines and specialty medicines
based on the science of the
immune system
5
including for depemokimab in
eosinophilic disease, and cobolimab
for second-line non-small cell lung
cancers
7
new collaborations and acquisitions
including with Affinivax, Sierra
Oncology and Spero Therapeutics
£12.7bn
sales of products launched in the
last five years including lifecycle
innovation
18
in phase III/registration
1st
in the Access to Medicine Index
for 8th consecutive time
13%
reduction in indirect scope 3
1
carbon emissions
2nd
in the pharmaceuticals industry for the
S&P Global Corporate Sustainability
Assessment, with a score of 86 (as
at 17 February 2023)
Innovation sales (£bn)
KPI
R
Innovative pipeline
Phase III starts
R
Pipeline value and progress
KPI
R
are not reported externally because of their commercial sensitivity.
>20
new approvals since 2017
1
based on latest available data for scope 3 emissions between 2020-2021
Proof 6 (e) 08.03.2023 at 1 pm
04
GSK Annual Report 2022
Chair’s statement
As I said last year, the programme
of change Emma and her team
are delivering is designed to
fundamentally reconstruct and
strengthen GSK’s operational
capability. Clear, ambitious priorities
have been set to sharpen commercial
execution and cost discipline; improve
the pipeline and R&D productivity;
tackle the Group’s structure and
capital allocation capacity; and shift
GSK’s culture to be more competitive
and performance focused.
We are seeing clear evidence of
success of this strategic
transformation. But, as always,
there is more to do.
We delivered the demerger and
separation of GSK’s Consumer
Healthcare business to form Haleon,
a separate company listed in London,
in July. This was the largest demerger
in Europe for 20 years and the
culmination of a huge amount of
work over several years.
We have created two attractive
and competitive businesses with
compelling investment propositions:
a world-leading consumer healthcare
business, and a newly focused GSK
with a strengthened balance sheet to
enable increased investment in R&D
and future growth.
We are already seeing evidence of
the benefits of a simpler, more
focused, business model.
Operational performance for GSK
in 2022 was excellent, with strong
growth in sales of vaccines and
specialty medicines and double-digit
growth in operating profit and EPS.
This is the start of a new, sustained
period of growth for the Group, with
sales and operating profit forecast to
grow by more than 5% and 10%
CAGR
1
, respectively over the period to
2026. The Board is very confident in
delivery of these targets, underpinned
by the improvement we are seeing in
the Group’s commercial execution and
competitiveness.
Increasing R&D productivity and
building a culture of performance,
which take longer to embed, are
critical levers of longer-term value
creation for GSK.
Progress in R&D
We are making good progress in
R&D. In the past five years, over 20
new medicines and vaccines have
been approved and more than 18 new
medicines are currently in late-stage
clinical trial development.
It was good to see clear progress in
our pipeline reflected in important
milestones during 2022. Our
respiratory syncytial virus (RSV)
vaccine candidate for older adults
achieved exceptional phase III results,
and the US Food and Drug
Administration (FDA) approval of
our long-acting HIV medicine
administered every two months
reaffirms GSK’s leadership in next-
generation HIV treatment and
prevention.
We also remain ambitious to support
the pipeline and future growth
through business development, with
acquisitions of Sierra Oncology and
Affinivax completed during the year.
I was delighted by the seamless
transition of Tony Wood into the
Chief Scientific Officer role in August,
replacing Hal Barron. Tony is an
outstanding and highly respected
scientist and has been a key architect
in rebuilding our pipeline.
2022 was one of the most important years in GSK’s history with
strong operational and financial performance and the successful
demerger of Consumer Healthcare.
1
Compound annual growth rate
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05
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Engaging with shareholders
The Board and management
continue to maintain very significant
engagement with shareholders.
It is clear from these conversations
that the vast majority of shareholders
support the strategy the company is
implementing. Nevertheless – and
despite the progress that is being
made – the Board recognises that
there is more to do to increase investor
confidence in the ability of the Group
to sustain growth over the next
decade.
This is important as GSK has under-
performed in terms of TSR and share
price performance for many years and
the Board understands the need to
deliver on this.
In the short term, this means
consistent, year-on-year delivery of
the targets for sales and operating
profit, including successful launch of
the company’s key new product
opportunities such as the RSV
vaccine in 2023.
Looking beyond 2026, successful
delivery and strengthening of the
late-stage pipeline is critical across
vaccines and specialty medicines,
including for our long-acting HIV
portfolio, supported by targeted
business development.
Longer term, the Board is confident
that the progress the company is
making to develop industry-leading
AI and machine learning capabilities,
and application of deep
understanding of genetics, can
provide us with an edge to be able to
identify, develop and launch products
that make a difference for patients
and deliver value for our shareholders.
Zantac
litigation
The Group’s share price performance
in the second half of the year was
impacted by the uncertainties
associated with the
Zantac
product
liability litigation in the US.
While this is disappointing, the
company remains clear on its position
on these matters, namely that the
scientific consensus is that there is no
consistent or reliable evidence that
Zantac
(ranitidine) increases the risk of
any cancer. The decision in December
by the US Federal Court in Southern
Florida to dismiss all claims and
cases relating to ranitidine was very
welcome and GSK will continue to
defend itself vigorously against claims
brought at the State level.
Targets and governance
The Board did not adopt the targets
for sales and operating profit growth
lightly. These commitments were a
very important demonstration of our
confidence in the business and our
determination to be held accountable
for delivery.
In line with this, we introduced a new
remuneration policy in 2022 linking
executive remuneration to reward for
outperformance.
We engaged extensively with
shareholders to develop these
proposals, recognising the new reward
system is a fundamental part of the
architecture of GSK post-separation
to ensure we build a performance
culture and generate sustained
delivery of shareholder value. While
we were pleased the policy achieved
a positive shareholder vote, we
recognise a sizeable minority of
shareholders voted against. We will
continue to engage with shareholders
to demonstrate why we believe
incentivising outperformance against
the targets will ultimately be rewarded
through shareholder value creation.
Operating responsibly
Operating responsibly is a foundation
stone on which GSK has been built.
We are committed to ensuring
ESG considerations are properly
embedded into our strategy.
This supports long-term growth,
reduces risk and helps us build trust
with stakeholders. The Board was
pleased to see continued progress in
many ESG areas during 2022, including
GSK again topping the independent
Access to Medicines Index.
Board evolution
Delivery of the demerger obviously
resulted in changes to the Board,
including departures of Vindi Banga
and Vivienne Cox to Haleon and the
retirement of Laurie Glimcher. I would
like to thank them all for their
significant contributions to GSK over
recent years.
We committed to using the
opportunity of the demerger to
deepen the GSK Board’s biopharma
experience and credentials. I was
delighted to welcome Dr Vishal Sikka
and Elizabeth McKee Anderson to the
Board during the year. Vishal is a
world-leading technologist and
Elizabeth has deep commercial
expertise, across both large and
specialty biopharma.
Together with the continued
involvement of Hal Dietz and Hal
Barron, I believe the scientific
credentials of GSK’s Board are
among the strongest in the industry.
We also look forward to the future
appointment of the highly
experienced Julie Brown as our new
CFO, starting 1 May 2023. I would like
to thank outgoing CFO Iain Mackay
for his outstanding work and support
over the last four years.
I would also like to note the
appointments of Anne Beal, who joined
the Board in May 2021 as Chair of the
Corporate Responsibility Committee,
and Charles Bancroft, currently Audit
& Risk Committee Chair, as our new
Senior Independent Director.
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 2023 for GSK.
Sir Jonathan Symonds
Chair
Chair’s statement continued
Proof 6 (e) 08.03.2023 at 1 pm
06
GSK Annual Report 2022
CEO’s statement
2022 was a landmark year for GSK. We enter 2023 with strong
momentum and as a focused global biopharma company.
Creating a focused global
biopharma company
2022 was a landmark year for GSK.
We successfully delivered the
demerger of Haleon which is the most
significant corporate change for the
company in 20 years, and began a
new chapter of competitive and
profitable growth. We enter 2023 with
strong momentum and as a focused
global biopharma company with
the ambition and purpose to unite
science, technology and talent, to
get ahead of disease together.
Strong 2022 performance increases
confidence in delivering growth
through 2026 and beyond
Group sales were £29.3 billion in
2022, up 13% CER, driven by strong
growth in both Vaccines and Specialty
Medicines. Adjusted operating profit
grew 14% and adjusted EPS by 15%
(both CER).
Strong operational performance has
enabled us to increase annual
investment in R&D to over £5 billion
and, through the demerger, we have
also significantly strengthened GSK’s
balance sheet, creating additional
flexibility to invest in growth and
innovation. In 2022, we acquired the
Boston-based vaccine company,
Affinivax, which gave us access to
the disruptive MAPS technology – for
higher valency and broader coverage
in a single vaccine – and a phase II
next-generation 24-valent vaccine
for pneumococcal disease. We also
acquired Sierra Oncology, including
the myelofibrosis treatment,
momelotinib, which we hope to see
approved in 2023, and signed an
exclusive licence agreement with
Spero Therapeutics for tebipenem,
a novel oral antibiotic in late-stage
development for complicated urinary
tract infections (cUTIs). We expect
to do more targeted business
development in 2023.
In addition, we generated over
£3.3 billion of free cash flow in 2022,
supporting investments and a
dividend of 61.25 pence per share
for the year.
Our strong momentum underpins our
confidence in delivering the ambitious
sales and profit outlooks we have
set for 2026. At the same time, we
continue to build a stronger portfolio
and pipeline based on science of the
immune system, to absorb the loss
of revenues from future patent
expirations, and to put us in a strong
position to deliver growth through the
decade and beyond.
Reflecting the huge progress we have
made to improve the competitiveness
of our commercial execution, we now
have 10 products exceeding £1 billion
in annual sales, including
Shingrix
,
Trelegy
,
Nucala
,
Benlysta
and
Dovato
.
Shingrix
alone delivered a record year
with £3 billion of sales. HIV sales,
including
Dovato
, were £5.7 billion,
up 12% CER.
Vaccines and Specialty Medicines
now represent nearly two-thirds of
our sales, compared to 46% in 2017,
and we are well on track to achieve
our target of 75% of revenues from
Vaccines and Specialty Medicines by
2026. This evolving portfolio, together
with prioritised investment in
innovation and good cost discipline,
is reflected in the further expansion
of our operating margin.
Proof 6 (e) 08.03.2023 at 1 pm
07
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
CEO’s statement continued
Innovation supports future growth
We now have a pipeline of 69
vaccines and specialty medicines,
many with the potential to be first-
or best-in-class.
In August, Tony Wood took up his new
role as GSK’s Chief Scientific Officer,
succeeding Hal Barron. With his
proven expertise in science, data and
new technologies, Tony is well placed
to capture the value and opportunities
we see with our R&D approach.
We are focused across four core
therapeutic areas: infectious diseases;
HIV; immunology/respiratory and
oncology. Overall, infectious diseases
and HIV represent around two-thirds
of our pipeline and our primary focus
for R&D.
In infectious diseases, we have
developed a potential best-in-class
vaccine for RSV in older adults.
We were excited to present the
phase III results in late 2022, which
demonstrated 94%
1
efficacy against
severe disease – an exceptional result.
The world has been waiting more than
50 years for an RSV vaccine, so this is
a significant scientific achievement.
We have submitted this data to
regulators and hope to see approval
during 2023. Alongside our existing
in-house capabilities, such as
adjuvants, MAPS through our Affinivax
acquisition and our collaboration with
CureVac in mRNA, we now have the
broadest suite of vaccine platform
technologies of any company in
the sector.
We also made important advances
in the clinical development of two
late-stage assets: gepotidacin, a new
novel antibiotic for uncomplicated
urinary tract infections (uUTIs), and
bepirovirsen, which has the potential
to provide a first-in-class functional
cure for chronic hepatitis B, where
there remains a significant unmet
medical need. One in three people
around the globe have been infected
with the virus and more than 300
million are living with chronic hepatitis
B infection today. Current standard of
care for chronic hepatitis B achieves
functional cure for very few patients,
fewer than 5%.
With bepirovirsen, which is now
undergoing final stage trials, and
other assets in our pipeline, we aim to
be at the forefront of a new wave of
treatments for this ancient disease.
In HIV, we launched
Apretude
, the
first and only long-acting injectable
for HIV prevention which, alongside
Cabenuva
, the first and only complete
long-acting HIV treatment regimen,
means we are changing the
landscape for HIV patients. We also
made further progress during the year
in the development of next-generation
pipeline options, including presenting
promising early-stage data for N6LS,
our new broadly neutralising antibody,
and we look forward to providing
further visibility on these pipeline
options during 2023.
In immunology/respiratory, we
increased R&D investment to
support the phase III programme for
depemokimab, a promising potential
new long-acting medicine to treat
severe asthma – an area in which
GSK has long-standing expertise and
proven commercial capability. In
oncology, we reported very positive
data for
Jemperli
as a potential
treatment for patients with primary
advanced or recurrent endometrial
cancer. Following discussions with the
FDA, we took the decision to withdraw
Blenrep
from the US market in
November, based on the previously
announced outcome of the
DREAMM-3 trial.
Building trust, reducing risk and
delivering positive social impact
We are committed to running a
responsible business, which builds
trust and reduces risk to deliver
sustainable health impact at scale,
shareholder returns and to support
our people to thrive.
As we set out later in this report,
we are making good progress in
strengthening our culture, which is key
to how we deliver our ambition and
purpose. We are committed to making
GSK a place where talented people
can thrive, with a culture where we are
all ambitious for patients, accountable
for impact, and do the right thing.
In June 2022, we introduced our new
Code, which sets out our culture, as
well as commitments GSK and our
people make, so we can deliver our
ambition and purpose in the right way.
Our ESG focus is on: access to
healthcare, global health and health
security, environment, diversity, equity
and inclusion, ethical standards, and
product governance. In 2022, we
made excellent progress, maintaining
our number one position in the
Access to Medicines Index for the 8th
consecutive time and ranking 2nd in
the S&P Corporate Sustainability
Assessment for the pharmaceutical
industry.
As I talked about last year, investors
and other stakeholders are
demanding transparent reporting of
performance on ESG matters. We are
introducing a new ESG Performance
Rating, to track delivery. I am pleased
to report that our performance in
2022 is ‘on track’ with details set out
on page 42.
As Jon has made clear on the
Zantac
product liability litigation in the US,
the scientific consensus is that there is
no consistent or reliable evidence that
Zantac
(ranitidine) increases the risk of
any cancer. We will continue to defend
ourselves vigorously in the State cases.
From my perspective, it is important
that as we do that, the company does
not get distracted from our main
priority – continuing to deliver on our
strategy for patients, shareholders
and our people.
Looking ahead with confidence
As we enter 2023, I believe GSK has
compelling prospects. As ever, its our
people who fuel this confidence and
I want to thank them for all they have
achieved during 2022 and the strong
momentum they are delivering. I am
very optimistic for the future and
excited by what we can achieve
together.
Emma Walmsley
Chief Executive Officer
1
Vaccine efficacy (VE) 94% (1 of 12,466 versus 17 of 12,494)
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GSK Annual Report 2022
Business model
Our ambition is to positively impact the health of 2.5 billion people
by the end of 2030. We aim to do this by developing transformational
vaccines and medicines and making them available at responsible prices
that are accessible for patients and sustainable for our business.
Central to our success are our people: experts in science,
technology, manufacturing, regulation, intellectual property
and commercialisation...
...who are identifying, researching, developing and
testing ground-breaking discoveries, and manufacturing
and commercialising...
Vaccines
We deliver one and a half million
doses of our vaccines every day; and
around 40% of the world’s children
receive a GSK vaccine each year.
General Medicines
Our portfolio of more than 150
products encompasses all of GSK’s
primary care medicines, supplied
in 112 countries worldwide.
4
global R&D centres
37
manufacturing sites
24,000
suppliers working directly
with GSK
>80
countries worldwide
£5.5bn
R&D investment in 2022
up by 9% at AER, 4% at CER
Specialty Medicines
Our portfolio of specialty medicines
prevent and treat diseases, from HIV
and respiratory diseases, to immuno-
inflammation diseases like lupus, to
cancer. Many are first or best-in-class.
69,400
GSK people
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Business model continued
...products that improve the health of millions of people
around the world in our core therapeutic areas...
...steered by our long-term priorities...
...and creating value for:
Innovation
We develop new medicines and
vaccines where they are needed,
with better, faster and smarter R&D.
We’re combining the power of
genetic and genomic insights
into the causes of disease, with
the speed and scale of artificial
intelligence and machine learning.
Infectious diseases
We are a world leader in
infectious diseases like
shingles and meningitis,
which, including HIV,
account for two-thirds of
the vaccines and medicines
in our pipeline.
Patients
2.3bn
packs of medicines and
doses of vaccines delivered
HIV
Our goal is to minimise
the impact of HIV on
people’s lives through
treatment, prevention
and ultimately cure.
Oncology
Our emerging portfolio
in oncology will potentially
bring new cancer
therapies to the patients
who need them most.
Performance
We've made commitments to growth
and a significant step-change
in delivery.
We are confident in our ability to
sustain growth through the decade
and beyond.
Immunology/respiratory
We’re unlocking the science
of the immune system to
understand how it reacts
to diseases like lupus,
eosinophilic asthma and
other inflammatory diseases.
Trust
We deliver our strategy responsibly:
always considering the ESG impacts
of everything we do from lab to
patient, helping to build trust with
our stakeholders, reduce risk to our
operations and deliver positive
social impact.
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. Information on the issues, factors and
stakeholders that the Board considers relevant to complying with Section 172 (a) to (f) of the Companies Act 2006 can
be found on page 112.
Shareholders
61.25p
per share dividend
Society
£1.3bn
corporate income tax paid; in
addition we pay duties, levies,
transactional and employment taxes
Our business model is supported by our ESG strategy,
described on page 42
Our strategy is supported by a robust framework for
monitoring and managing risk, described on pages 51 and 52
Our people
All our people are supported to grow, be well and do work that really matters.
Reinvestment
The returns we make enable us to reinvest in discovering and developing new vaccines and medicines
so we can continue getting ahead of disease.
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GSK Annual Report 2022
Our culture
We are committed to making GSK a place where people
can thrive, with a culture where we are all ambitious for
patients, accountable for impact, and do the right thing.
This means we support our people to do things better and
faster, focusing on what matters most. It means setting
clear objectives and accountability for results and giving
everyone the support and space they need to succeed. It
means doing everything responsibly with care and integrity,
because people and patients around the world count on us.
During 2022, we have dedicated significant leadership
energy in bringing to life our Ahead Together purpose,
strategy and culture across GSK. We have also placed real
emphasis on individual ownership of the culture and the
small changes we each need to make it a reality. This
change has been supported by team conversation guides
and simple tools used globally to support better and faster
decision making, greater clarity of accountabilities and
more ambitious, focused objectives.
In June, we introduced The Code. This sets out our culture
as well as the commitments GSK and our people make so
we can deliver on our ambition in the right way. GSK people
sign up to The Code annually and personally commit ‘I’m in’.
See The Code on gsk.com
1
Making GSK a place where people thrive
Core to our Ahead Together ambition is to make GSK a
place where people thrive. Although how people thrive is
very individual, we also believe there are common themes
that matter for all. Firstly, a belief in our purpose and a
desire to live our culture and contribute to delivering our
ambition. Secondly, feeling included and able to be yourself
with opportunities to keep growing, with the support,
feedback and space needed to succeed. And finally, feeling
good, with positive mental, physical, financial and social
wellbeing. This all requires GSK to be a place where people
feel welcome and valued, with an environment (including
our policies, workplaces and ways of working) which
wholeheartedly enables and supports each person to
deliver at their best.
Supporting our people managers
Our people managers play a crucial role in helping their
teams to thrive and bring culture to life. We expect people
managers to Motivate, Focus, Care for and Develop their
teams. Over the last two years we have delivered First Line
Leader training, anchored in these four areas, to over 80%
of this population. In addition, in 2022, we launched a new
senior leader programme, Leading Leaders, to further build
on our leadership development at more senior levels of the
organisation.
In preparation for 2023, we brought all people managers
together in a virtual event to bring to life our biggest
priorities and support managers in setting focused,
ambitious objectives with their teams, aligned to our
Innovation, Performance, Trust and Culture priorities.
Focusing on diversity, equity and inclusion
We are continuing our focus on building a more diverse
organisation and an equitable and inclusive culture so
that everyone feels welcome, valued and included. We
are delivering our leadership representation aspirations,
have implemented annual diversity, equity and inclusion
(DEI) training for all, and invested in development tools to
build more inclusive leaders. We support an award-winning
leadership development programme, Accelerating
Difference, to support women and ethnically diverse
leaders. We have also continued to evolve our people
policies, processes and practices to support recruitment,
retention and development of a more diverse workforce.
More details on our aspirational targets for DEI for our
people, business and suppliers, can be found in the
Responsible Business section on page 47.
Driving Performance with Choice
Performance with Choice – our approach to hybrid working
for those in office-based roles (about a quarter of our
people) continues to allow us to find the right balance of
on-site and remote working. This framework, balanced in
driving collective and individual performance, as well as
supporting individual flexibility, is supporting personal
wellbeing, driving performance and making us attractive
as an employer.
This year we have been clear in our expectations so that we
spend enough time together in person to help us continue
to build our sense of community, connectedness, enable
development and better achieve our Ahead Together
ambition.
GSK’s purpose – to unite science, technology and talent to
get Ahead of disease Together – puts our people at the heart
of our success.
Our culture and people
1
https://www.gsk.com/en-gb/company/governance/compliance/#the-code
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GSK Annual Report 2022
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Financial statements
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Strategic report
Our culture and people continued
Developing outstanding people
We are committed to developing outstanding people and
giving people opportunities to grow. All GSK people
are expected to have an agreed development plan,
regardless of grade or role, that is underpinned by a robust
conversation to understand the space and support needed
for them to succeed. We continue to invest in development
initiatives and training that can be accessed by all through
our Keep Growing Campus – a central platform for our
training and knowledge sharing.
In 2022, we have also redesigned our talent framework –
focusing our reviews for our people against performance,
living our culture and future potential. This gives us a
simpler assessment process, in line with our culture, to
support placing our best people in our most critical roles,
with strong and diverse succession plans. This allows us to
spend more time on development and action planning and
less on process.
Health and wellbeing improvements
We have announced improvements to our health and
wellbeing benefits, to better support people through
different life stages and to make sure our offerings are
fair and inclusive. These include a new global minimum
standard of 18 weeks’ parental leave for primary and
secondary carers for all forms of family, a new global
minimum standard for care of a family member for end
of life or serious health emergencies, insured benefits
to include same sex partners wherever possible, a new
financial wellbeing service and mental health training –
available to everyone.
In November, we gave a one-time discretionary payment
to our people who were feeling the greatest impact of
rising cost-of-living challenges. This payment was given
to almost half of our global workforce in 47 of our 83
countries, using consistent criteria to determine eligible
countries.
Understanding how our people experience GSK
We regularly measure how our people experience GSK,
including progress in our culture focus areas and as a place
to work. This includes an annual survey for all employees
featuring questions on engagement, confidence, inclusivity,
our culture focus areas and trust priorities. We also run
a series of pulse surveys each year, with a statistically
significant population, to get timely insights on our culture
progress as well as hot topics of the moment. Over the
last year, our progress is demonstrated by increased
engagement at 81% in 2022, up from 78% in 2021,
confidence in delivery of our ambitions, and positive
trends in Ambitions for Patients, Accountability for Impact,
Doing the Right Thing, and measures of inclusion.
To measure the effectiveness of our global manager
population, their teams provide feedback via an annual
One80 survey. Managers receive anonymised aggregate
feedback on their effectiveness in motivating their team,
focusing people on what matters most, leading with care,
inclusive leadership and supporting performance and
development. In 2022, 77% of our managers were rated
as highly effective by their reports.
Recognising and rewarding our people
Sharing our success and recognising and rewarding our
people, not just on the progress we have made but how
we have made it, continues to be an important part of
our culture. In addition to our bonus scheme that rewards
performance across the company, each year we award
10% of our population with extra ‘Ahead Together’ awards
for those delivering exceptional performance in line with
our culture. And 5% of people are identified as Missed
Performance for those that do not deliver on their
objectives or live the culture. This year, in addition
to our annual bonus and long-term incentive structure,
we also gave a special thank you to all our people
(excluding the GSK Leadership Team (GLT)), allowing us
to recognise in real time what we achieved together in
preparation for separation and the unprecedented
transformation of GSK: everyone received a one-off week’s
salary in March, separate to our 2021 bonus pay-out.
We remain energised to continually live and evolve our
culture in line with the internal and external environment.
It is part of everyone's objectives, starting at the top, with
all leadership team members having ambitious goals to
embed and grow culture, and shows up in how we act
every day.
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GSK Annual Report 2022
Geopolitical tensions prompt countries to shift their priorities and focus
Scientific and technological advances
offer significant promise for patients.
But geopolitical tensions are putting
pressure on the systems needed to
deliver this innovation. Rising
nationalism and friction between
countries, due to the conflict in
Ukraine and tensions between the
US and China, bring potential risk
and disruption. In the face of these
tensions, governments are taking more
interventionist actions to protect their
domestic economic competitiveness,
strengthen national security, create
domestic jobs and improve public
health.
There were notable examples of
solidarity during the year. Constructive
World Trade Organization discussions
about reducing tariffs demonstrated
that governments recognise the
importance of minimising trade
friction. But domestic interests remain
the priority with governments
encouraging companies to localise
and shorten value chains
3
, prioritising
strategic resilience over efficiency.
Policies to restrict trade and secure
access to essential items including
medical goods have persisted. For
example, in 2022, governments
introduced over 150 harmful policy
interventions affecting trade in
pharmaceutical goods.
4
In an environment defined by tensions,
trade disruption and economic
uncertainty, health and life sciences
continue to be viewed as sectors of
strategic importance for governments
across advanced markets, including
the US, Europe and the UK. In March
2022, the US enacted a new federal
agency – Advanced Research
Projects Agency for Health – to
improve the government’s ability to
speed biomedical and health research.
Life sciences was earmarked as a key
strength in the UK government’s new
Growth Plan.
5
Given their potential to
bolster economic productivity and
protect lives, healthcare and life
sciences are likely to be subject to
more muscular industrial policy
interventions such as additional
support for R&D, as well as state
scrutiny over supply chain resilience.
Rapid advances in science and
technology are changing life sciences
R&D. This is particularly evident in the
expansion of artificial intelligence and
machine learning (AI/ML), which has
the potential to transform outcomes for
patients by making R&D more precise
and productive. Research has
identified nearly 270 companies
working in the AI-driven drug discovery
industry.
1
We're investing in building our
own AI/ML capabilities and forging
partnerships to further strengthen our
position. Other biopharma companies
are also collaborating with AI
organisations, with 46 partnerships
struck in 2022, compared to 28 in 2016.
2
The pivotal role of innovation in
managing the COVID-19 pandemic
underscored the potential of new
technologies and approaches to
improve patient outcomes. Growth
areas include next-generation
vaccines, where there has been a
substantial increase in assets in
development, driven by the
advancement of mRNA and DNA
vaccine technology.
Greater use of new technologies
and digital tools, as well as growth
of decentralised trials, is accelerating
a drive towards modernisation of
clinical trial and regulatory processes.
Governments and regulators are
continuing to build on lessons learned
from COVID-19 and expand
international collaboration on complex
trials and further develop policies and
infrastructure for responsible access to
public datasets. As AI/ML advances,
different regulatory approaches on the
use of AI in medicines are emerging.
Collaboration is also needed to create
common models and standards for AI
regulation that support innovation
and benefit patients.
Read about our focus on data and
platform technologies on pages 18 and 19
Here, we set out five major themes that have influenced our environment –
and how we work with governments, regulators and industry partners to keep
providing medicines and vaccines to patients worldwide.
Our external environment
Life sciences continue to be shaped by new technology
1
AI in biopharma research: A time to focus and scale | McKinsey 10 October 2022
2
Deep Pharma Intelligence, Artificial Intelligence for Drug Discovery Landscape Overview Q3 2022
3
KPMG Singapore, six key trends impacting global supply chains in 2022
4
Global Trade Alert
5
HM Treasury, The Growth Plan 2022, September 2022
270
companies working in the
AI-driven drug discovery industry
>150
In 2022, governments
introduced over 150 harmful
policy interventions affecting
trade in pharmaceutical goods
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Governance and remuneration
Financial statements
Investor information
Strategic report
Our external environment continued
Lockdowns at the height of the
pandemic weighed on economies
worldwide and the outlook continued
to weaken in 2022. Global growth
was forecast to slow to 3.2% in 2022
6
amid surging inflation, heightened
geopolitical uncertainty and
tightening financial conditions. Energy
prices soared across Europe due to
increased demand and restricted
supply, contributing to rising inflation.
This has had immediate and
challenging consequences for
individuals and businesses.
With energy prices climbing,
governments have staged significant
and costly interventions to protect
households, seek alternative energy
sources, and invest in renewable
energy infrastructure. Government
interventions on this scale risk growing
fiscal deficits and put pressure on
other areas of public spending,
including healthcare. During the
pandemic, healthcare spending
increased as governments rolled out
vaccination programmes. But
spending is estimated to have fallen in
real terms during 2022 as it failed to
keep pace with inflation.
7
Medicines
spending is expected to return to
pre-pandemic growth rates by 2024,
albeit with pricing and value under
increasing scrutiny over the next few
years due to economic pressures and
geopolitical disruption.
8
As governments meet economic
headwinds, cost containment
measures are on the rise, with
healthcare budgets facing significant
pressures in the UK, EU and other
advanced markets. In August 2022,
the US President signed into law the
Inflation Reduction Act. This includes
provisions to drive down US national
debt through higher taxes, lowering
energy costs, and lowering drug
prices. Parts of the Act that focus
on patients are welcome as they
bring benefits to people who would
otherwise face challenges accessing
important vaccines. But there are
concerns over negotiation provisions,
allowing the federal health secretary
to negotiate prices of certain
expensive drugs each year for
Medicare. This could potentially
limit investment in innovation.
As well as cost containment, we
are also seeing more examples of
innovative contracting to support
prudent stewardship of healthcare
spending. Companies and payers
are continuing to explore innovative
pricing models, which facilitate
patient access and support payer
confidence in the value of a medicine
or vaccine at the time of launch.
Read more about pricing and access
on page 43
Green transition disrupted but long-term momentum remains
Economic slowdown as energy crisis and inflation bite
The energy crisis has not only
weakened economies, but also
disrupted the green transition. Amid
concerns over reliability, supply and
affordability, policymakers face
conflicting priorities. While energy
transition is necessary to mitigate
climate change, immediate energy
needs are driving renewed investment
in traditional fossil fuel energy sources.
European countries announced plans
to revert to higher coal usage to
produce electricity, while the US has
taken steps such as reopening oil and
gas leasing on public lands.
Investor sentiment, particularly in
the US, has seen similar shifts as the
ESG agenda becomes increasingly
polarised and politicised. During the
year, Florida and Texas implemented
measures banning their pension funds
from investing through any asset
managers that have policies on
excluding fossil fuels or taking ESG
factors into account.
Against this fractured backdrop,
corporate net zero efforts remain
in the spotlight with stakeholder
expectations on credibility and
transparency on net zero continuing
to rise. But voluntary commitments
and coalitions are being tested with,
for example, the UN-backed Race to
Zero dropping its explicit bar on
support for new coal projects.
Despite the disruption seen during
2022, getting ahead of climate
change remains a long-term
investor and societal expectation,
and a government priority. This was
reinforced by the $369 billion clean
energy investment in the US Inflation
Reduction Act. Any setback to the
energy transition is likely to be time-
limited, so companies must continue
to demonstrate leadership on the
issue and remain committed to cutting
their climate impact.
Read more about climate and nature
on pages 45 and 46
6
IMF, World Economic Outlook, October 2022
7
Economist Intelligence Unit, Healthcare outlook 2023 (eiu.com)
8
IQVIA, Global Use of Medicines 2023
3.2%
Global growth was forecast
to slow to 3.2% in 2022
$369bn
allocated to climate and clean
energy programmes in the US
Inflation Reduction Act
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GSK Annual Report 2022
Our external environment continued
COVID-19 demonstrated the value
of the life sciences sector and the
potential for delivering innovative
interventions at speed. But the
pandemic also raised questions about
the pace at which medicines and
vaccines could be rolled out, shining
a light on inequalities in access and
healthcare outcomes both within and
between countries. Around 26% of
people in low-income countries are
partially or fully vaccinated against
COVID-19, compared with 80% in
high-income countries.
9
Scrutiny of the COVID-19 vaccine
rollout has reignited the debate
around the intersection between
intellectual property (IP) rights and
access to medicines and vaccines.
This was evidenced by the TRIPS
waiver, agreed in June 2022, which
temporarily removes developing
country obligations on patent
protections for COVID-19 vaccines.
Such a step doesn't address
inequitable access and instead
undermines industry’s ability to
partner, invest at risk, and respond
quickly to future pandemics.
Industry has sought to encourage a
more holistic approach to realising
equitable and timely access during
future pandemics. This recognises the
multiple factors that enable access,
such as sustainable funding and
free trade. The international
pharmaceutical industry, along with
biotechs and vaccine manufacturers
based in developing countries, united
behind a vision for access in future
pandemics, known as the Berlin
Declaration. This outlined industry’s
willingness to reserve an allocation of
real-time production for distribution
to priority populations during future
pandemics. The success of such an
approach will rely on having a strong
innovation ecosystem; removal of
regulatory and trade barriers to
export; procurement mechanisms
for low- and middle-income countries;
and robust health systems.
More resilient health systems are
needed not only to counter the
increasing threat of infectious disease
emergencies, but also to manage the
growing burden of non-communicable
diseases. Delays to cancer diagnosis
and treatment during the pandemic
could have an adverse effect on
survival for years to come. As health
systems continue to manage the
long-term repercussions of the
pandemic, there is an opportunity to
move towards new models of care
that enable earlier action to prevent,
diagnose and treat disease. Investing
in prevention to get ahead of disease
has a clear return. It improves health
outcomes, is cost-effective, and
contributes to healthier lives, societies
and economies.
See pages 43 to 45 for more on pricing
and access, and global health and
health security
Our position
Access in focus as COVID-19 shines light on health inequity
In a challenging economic and
political landscape, it's more
important than ever that we invest in
a pipeline of vaccines and specialty
medicines that will meet changing
and unmet healthcare needs. At the
same time, we have to work with
governments, regulators and industry
partners to make sure these medicines
and vaccines can reach patients,
bringing value to both the people
who need them and payers.
Scientific innovation and improving
health remain a critical pathway to
sustainable economic growth. We
therefore continue to work with our
peers and governments to make
sure that the policy and regulatory
environment stimulates and sustains
innovation. This includes, for example,
advocating for appropriate IP
protections; a balanced regulatory
framework that supports the discovery
and delivery of vaccines and
medicines developed through
emerging technologies; and
reinforcing the importance of global,
diversified supply chains.
As the pricing environment becomes
tougher, we are well placed to offer
a differentiated, high-value pipeline
across prevention and treatment of
disease. This is built on using new
technology and techniques to make
our R&D faster and smarter. Demand
for data and real-world evidence to
support continued reimbursement of
new products is likely to increase. We
continue to work with payers to design
innovative solutions that manage their
risk and uncertainty, while also
recognising the full health, social
and economic value of innovative
medicines and vaccines. We also
continue to collaborate with global
health partners to increase our reach
to patients in lower income countries.
To support delivery of innovative
medicines and vaccines, we continue
to advocate for investment in resilient
healthcare systems around the world.
More robust infrastructure is needed
to support, for example, routine
life-course immunisation. Getting
ahead of future pandemics, and
managing them more effectively when
they do happen, starts with investing
in health systems and improving
public health now.
9
Financial Times, COVID-19 vaccine tracker: the global race to vaccinate, as at 23 December 2022
26%
of people in low-income
countries are partially or fully
vaccinated against COVID-19
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GSK Annual Report 2022
Research and
development
Science and technology have never before opened up so many possibilities
for new vaccines and medicines for patients. In 2022, we’ve continued to
harness the science of the immune system alongside genetics, genomics
and advanced technology to continue to strengthen our pipeline.
Strategic report
Governance and remuneration
Financial statements
Investor information
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Strategic report
15
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GSK Annual Report 2022
Our R&D approach
R&D is central to our purpose to get ahead of disease
together. By combining the science of the immune system,
genetics, genomics, advanced technologies and outstanding
talent, we discover and develop vaccines and medicines to
make a transformational impact on people’s lives.
In 2022, R&D expenditure was £5,488 million, up 9% at
AER, 4% at CER, from 2021 and we have strengthened
our pipeline and platform capabilities through strategic
business development. This means we have 22 vaccines
and 47 medicines in development (see page 28). Many have
the potential to be first-in-class.
Our late-stage R&D aligns to four therapeutic areas:
– infectious diseases, see page 20
– HIV, see page 23
– immunology/respiratory, see page 24
– oncology, see page 25
Our research team takes an approach that follows the
science to identify opportunities with the greatest
probability of success to lead to differentiated vaccines and
medicines, including opportunities outside these four areas.
Our scientists prioritise genetically identified targets that are
at least twice as likely to succeed in the clinic. They also
prioritise infectious disease targets and immune-modulators
that have greater lifecycle opportunities.
Prioritising execution and technology
Our priorities are:
– flawless execution of our late-stage pipeline and
acceleration of our organically derived pipeline
– doubling down on technology to deliver further innovation
faster
– finding new ways to help patients through lifecycle
innovation
– targeted business development to push towards new
discoveries
Research and development
2/3rds
of our pipeline comes from
infectious diseases and HIV
>20
new approvals
since 2017
69
vaccines and medicines
in the pipeline
Highlights
– Potential best-in-class RSV older adults
candidate vaccine filed in US, EU, Japan
–
Shingrix
interim 10-year data presented at
ID Week 2022
–Continued progress in development of long-
acting HIV treatments; positive phase II data
on N6LS broadly-neutralising antibody
presented at HIV Glasgow
–Pivotal phase III trials for gepotidacin
antibiotic for uUTIs stopped early for efficacy
–Positive phase IIb data for bepirovirsen,
our investigational treatment for chronic
hepatitis B, and started phase III study in
early 2023
– Expansion of depemokimab phase III
programme with trials for long-acting IL-5
inhibitor in three additional eosinophil-driven
diseases
–Business development including: acquisition
of Affinivax giving access to disruptive MAPS
technology and phase II next-generation
vaccine for pneumococcal disease;
acquisition of Sierra Oncology adding
momelotinib for myelofibrosis patients with
anaemia (regulatory submission EU, US); and
exclusive licence with Spero Therapeutics
giving access to tebipenem HBr, a late-stage
antibiotic for cUTIs
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Financial statements
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Strategic report
Flawless execution and acceleration of
our pipeline
Our pipeline, across all phases, has 69 potential vaccines
and medicines, more than 70% of them modulating the
immune system and more than 70% with human genetic
validation. In 2022, we started 16 phase I programmes,
moved nine candidates into phase II and started five phase
III programmes.
We also achieved industry-leading milestones, including the
approval and launch of the first long-acting HIV medicines
and the FDA priority review of the exceptional RSV older
adult vaccine candidate with a potential best-in-class
profile. We also presented new data at IDWeek 2022
showing that
Shingrix
can provide at least 10 years of
protection against shingles in the over 50s, and completed
our acquisition of Affininax.
We have made significant progress in improving key
measures of productivity. We reduced overall cycle times by
20% from the start of new drug discovery projects through to
the end of phase I (for 2019-2021 compared to 2016-2018),
and we now have a phase I portfolio that includes many
potential first-in-class medicines.
Doubling down on technology to deliver further
innovation faster
We believe the combination of science and technology
holds the key to fundamentally transforming medical
discovery, improving success rates and shaping how we
treat and prevent even the most challenging diseases. This
is why technology plays a growing role in progressing our
R&D towards vaccines and medicines not previously
thought possible. It covers:
– data technology, which helps us to understand the
patient and human biology, choose targets and design
clinical trials. We have access to large, rich datasets
thanks to our data-focused collaborations, including our
recent collaboration with Tempus (see page 19) as well as
established partnerships, for example with 23andMe, the
UK Biobank, and the Laboratory of Genomic Research
with the University of California (see page 18)
– platform technology, for the efficient design and
development of new vaccines and medicines. We have
access to a broad set of platform technologies, including
an unrivalled suite within vaccines like mRNA, MAPS
and adjuvant science, and a growing investment in
oligonucleotides (see page 19)
Finding new ways to help patients through
lifecycle innovation
We look to innovate throughout the lifecycle of our vaccines
and medicines by exploring new ways for them to treat
patients. Examples include:
– approval in the US for
Boostrix
, for immunisation during
pregnancy to prevent whooping cough in newborn babies
– FDA approval for a new, more convenient presentation
of our
Rotarix
vaccine to prevent gastroenteritis caused
by rotavirus
– approval for
Priorix
, our vaccine against measles, mumps
and rubella, in the US for children over 12 months
– approval of a two-dose regimen for
Cervarix
, our human
papillomavirus vaccine for girls aged 9 to 14, in China
– approval in China for
Benlysta
to treat adults with active
lupus nephritis (LN) and FDA approval for
Benlysta
for
paediatric patients with active LN
– continue to develop a new monoclonal antibody,
depemokimab, under development for its high affinity
and long-acting suppression of IL-5 function
Pushing towards new discoveries through
strategic business development
We work with commercial organisations and academic
institutions to find new research and discovery
opportunities, access new technology platforms or to
progress the development of our pipeline. We remain agile
and ambitious, looking for opportunities that address high
unmet medical needs and complement our R&D strategy.
We look to grow our pipeline through acquisitions. In 2022,
these included Affinivax adding a novel class of next-
generation pneumococcal vaccine candidates and
innovative MAPS technology (see page 20), and Sierra
Oncology adding momelotinib for the treatment of
mylefibrosis (see page 25).
We also announced five new collaborations, giving
us access to exciting new vaccines, medicines and
technologies, and deepening our understanding of how
to prevent and treat disease. We partnered with precision
medicine company Tempus, with oncology being a first
area of focus. We added to our pipeline through new
partnerships with Mersana Therapeutics for an option
to co-develop and commercialise their XMT-2056
immunosynthen antibody-drug conjugate in oncology, with
WuXi to progress bi-specific T-cell engaging antibodies for
oncology and with Zheming to progress a phase I TLR8
agonist for hepatitis B virus (HBV). We announced a new
partnership with Wave Life Sciences to drive discovery and
development of oligonucleotide therapeutics, including a
programme for alpha-1-antitrypsin deficiency with a novel
RNA-editing mechanism of action, and we also announced
an exclusive licence agreement with Spero Therapeutics for
tebipenem HBr, a late-stage antibiotic that may treat cUTIs.
Research and development continued
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GSK Annual Report 2022
Genetics, genomics and advanced technologies
To get ahead of disease, we use innovative tools to
maximise our chances of success and accelerate the
pace of discovery. Genomics and the predictive power
of AI/ML are changing how we find the right medicines for
the right patients.
Advanced technologies and real-world data are bringing
patients into the discovery and development process
earlier. This, in turn, improves how researchers can integrate
data into decision making. For diseases like cancer or
neurological conditions, we're investigating how tools like
genetic validation, wearables, genomics and AI/ML can
provide important insights that make us better at choosing
drug targets and the specific groups of patients in which to
study them.
Data produced using these tools helps us:
– select novel targets that are genetically validated and so
more likely to become approved medicines and vaccines
– design clinical trials to include the patients most likely to
benefit from our potential medicines and vaccines
– recruit these patients faster, and accelerate the pace of
our clinical trials
Improving drug discovery with the power of
genomics and partnerships
Today, more than 70% of the projects in our pipeline are
supported by human genetic evidence, informed by the
large genetic datasets from our ongoing collaborations
with the UK Biobank, 23andMe and FinnGen. In 2022, we
were a founding member in the creation of Our Future
Health, an ambitious UK effort aiming to recruit up to five
million people to capture a wide range of medical and
genetic information. We're also working with Genes &
Health and Discover Me South Africa to further expand
this work and ensure a diverse and robust genetic
representation of diseases.
In our collaboration with the consumer genetics and
research company 23andMe we have approximately 50
active joint drug discovery programmes for genetically
validated targets. In 2022, we extended our collaboration
for a fifth year to identify and validate additional new drug
targets until July 2023. This year we also took on sole
development responsibility for phase I of the collaboration
programme consisting of an investigational antibody
targeting CD96 as a novel immuno-oncology agent.
This is an investigational antibody that is currently being
evaluated for cancer alongside other GSK medicines.
Several collaborations in functional genomics are providing
further insight to improve our target selection. We work with
a range of institutions innovating in this fast-moving field,
from CRISPR pioneers to start-ups. In the US, this includes
dedicated genomics research centres, such as the Altius
Institute in Seattle and the Broad Institute affiliated with
MIT and Harvard University in Boston. We continue to
partner with Adrestia, a British biotech, and with Open
Targets, a UK consortium where we're a founding member.
These advances complement the progress we're making at
the genomics lab we founded in 2019 with CRISPR pioneers
at the University of California in San Francisco. The
Laboratory for Genomic Research is now advancing a
portfolio of 16 active technology and biology projects.
By automating and advancing CRISPR, our scientists work
side by side with academic researchers to uncover new
knowledge about disease mechanisms for immunology,
oncology and neurology. Scientists are creating new
technologies that stem from CRISPR, and they are
identifying additional applications of these technologies
to find better starting points for new medicines.
CRISPR and other tools contribute to the data we have
to understand the underlying causes of disease. Other
information sources range from tissue and blood samples
to human behaviour from wearable technology. Our
proprietary AI/ML capabilities help our researchers
interpret this volume of data and also make connections
and predictions that help identify which targets are most
likely to succeed. As assets move through our pipeline, both
AI/ML and functional genomics continue to play a role,
including in optimising clinical trial design, for example as
happening now with bepivorisen.
Building in-house AI/ML teams and expanding
our collaborations
AI/ML enables us to generate deeper insights from our own
research data and our collaborations. Our work in applied
AI/ML primarily focuses on two areas in R&D: at the early
discovery stage to find genetically validated targets, and
at the clinical stage to match patients with the right
medicines.
We’ve built one of the largest in-house functions dedicated
to AI/ML, and we work with partners to lead the way in
these fields. Our AI/ML team includes more than 160
experts based at key GSK R&D sites, including London, San
Francisco, Tel Aviv, Philadelphia and Boston. Combining our
team with the resources and expertise of our partners helps
us collect more data, find patterns in genetic data faster
than we could before and, ultimately, helps us increase
our success rates in making life-changing medicines. We
continue to expand our partnerships with world leader
data aggregation companies such as Tempus to further
complement our internally generated data.
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Strategic report
Our models are becoming more and more advanced with
every iteration. We've created a new imaging tool using
AI/ML that we are using to inform target selection and
potential business development opportunities in a
challenging and complex disease area, non-alcoholic
steatohepatitis (NASH).
Also, through a partnership with King’s College London,
we're using tumour models alongside digital pathology and
AI to develop personalised immuno-oncology treatments
for several solid cancers, including lung, gastrointestinal
and women’s cancers.
The Oxford-GSK Institute of Molecular and Computational
Medicine (IMCM), which we established in partnership with
Oxford University in December 2021, combines human
genetics with functional genomics and ML to focus on
neurological diseases like ALS, Alzheimer’s and Parkinson’s.
Our collaborations in data technology complement our
existing capabilities and resources and include ongoing
work with Cerebras, the pioneer in high performance AI
computer systems, and NVIDIA, a global leader in AI hard
and software. In 2022, we started two other data
collaborations:
– PathAI, a global leader in AI-powered pathology, aimed
at accelerating R&D in oncology and NASH. We’ll
combine our predictive and data-driven approach to
drug discovery and trials with PathAI’s models to build
algorithms that uncover new insights. We'll integrate
these into trials to help us predict which patients will be
impacted most
– Tempus, which enables access to their library of de-
identified patient data. Tempus’ dataset draws from its
work with over 40% of oncologists in the US at academic
medical centres and community hospitals. We will work
with Tempus to improve clinical trial design, speed up
enrolment and identify drug targets, with an initial focus
on oncology
Platform technology across vaccines
and medicines
Our work to use technology to drive drug discovery also
includes expanding our platform capabilities. These
technologies allow us to broaden the range of options for
future medicines and vaccines, going beyond existing
modalities like small molecules, antibodies and adjuvants
to help immune responses to vaccines, but importantly also
ensure we remain highly competitive by being faster and
more confident in identifying new medicines from our
genetically validated targets.
We develop these technologies ourselves and through
external collaborations. Key areas for new medicine and
vaccine technologies that we're actively investing in include:
– MAPS (multiple antigen presenting system), a novel and
highly efficient vaccine technology platform that
potentially enables broader coverage, generating higher
antibody responses. MAPS has mainly been directed at
preventing pneumococcal disease and has also shown
promise in addressing other infectious disease pathogens,
including those that cause hospital-acquired infections
– mRNA, which was validated by the launch of the
COVID-19 vaccines in 2020 and could potentially be
applied across a number of diseases. We're progressing
the development of the mRNA technology in-house, in
parallel with our CureVac collaboration. We're currently
evaluating a second generation mRNA backbone, which
we developed with CureVac, in a phase I trial featuring
modified mRNA vaccine candidates targeting COVID-19
and flu. Based on the promising preliminary analysis of
these studies, evaluating safety, reactogenicity and
immunogenicity, we are preparing to move these
candidates into late-stage clinical testing
– RNAi and oligonucleotides including: ARO-HSD, a phase
II programme for NASH, in-licensed from Arrowhead in
2021, consisting of an RNA interference (RNAi) molecule
against a genetically validated target; and bepirovirsen,
an anti-sense oligonucleotide designed to recognise
HBV DNA, in phase III, which we in-licensed from Ionis
in 2019. We also announced a collaboration with
Wave Life Sciences, which allows us to advance up
to eight preclinical programmes using Wave's PRISM
oligonucelotide platform and includes the in-licensing
of a novel RNA-editing oligonucleotide to treat liver and
lung disease caused by alpha-1-antitrypsin deficiency
– monoclonal antibodies (mAbs) such as
Xevudy
for
COVID-19, co-developed with Vir Biotechnology,
as well as other research programmes
– new ways to understand the biology and pharmacology
of genetically validated targets and how best to
intervene in their disease processes. Our Chemical
Biology group has developed several such methods,
including chemogenomic libraries, encoded libraries,
and reactive fragments, in part in collaboration with
the Francis Crick Institute. These novel technologies help
find critical starting points for drug discovery projects
– natural products derived from the biosphere, such as
the collaboration we started with LifeMine Therapeutics
in 2022, which gives us access to its platform for
proprietary evolutionary-derived genomic drug discovery
– bi-specific antibodies for multiple auto-immune
diseases that are advancing through preclinical phases
– digitisation to optimise each phase of vaccine
development and production. Working with
Siemens and Atos, two of the world’s leading digital
transformation and technology companies, we've
developed a ‘digital twin’, a complete and real-time
simulation of the vaccine manufacturing process.
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Infectious diseases
Two-thirds of the vaccines and medicines in our pipeline
address the global public health burden of infectious
diseases, such as those caused by HIV, RSV, meningococci,
hepatitis B, rotavirus and antibiotic resistant bacteria.
These diseases cause significant morbidity and mortality
and put strain on global healthcare systems.
In 2022, we generated pivotal data for our RSV candidate
vaccine for older adults and positive interim analysis readout
for gepotidacin, our antibiotic to treat uUTIs and gonorrhoea.
Both have the potential to be first and best-in-class.
We also sought opportunities to boost our pipeline
through business development. In 2022, we completed
our acquisition of the clinical-stage biopharmaceutical
company Affinivax. It has pioneered a novel class of
next-generation pneumococcal vaccine candidates.
These include a 24-valent vaccine candidate for adults,
which has completed phase II, and a paediatric version
currently in phase II. A 30-plus valent pneumococcal
vaccine programme is in pre-clinical development. These
vaccines incorporate the MAPS technology (see page 19).
Our new partnership with Spero Therapeutics, Inc. gave
us an exclusive licence agreement for tebipenem HBr, a
late-stage antibiotic being developed by Spero. This is the
first oral carbapenem antibiotic, and it has the potential to
treat cUTIs. With a clear FDA regulatory path to potential
approval, tebipenem HBr will address an unmet medical
need for a novel oral antibiotic as an alternative to
intravenous hospital therapy for drug-resistant cUTIs.
RSV
RSV is a major cause of acute respiratory illness in older
adults and is currently one of the major infectious diseases
without a vaccine. RSV can worsen underlying conditions
and cause pneumonia. It leads to approximately 420,000
hospitalisations and over 29,000 deaths a year in adults in
industrialised countries. Around 94% of people hospitalised
with RSV have underlying comorbidities.
In 2022, we became the first company to announce positive
phase III efficacy data for a RSV older adult vaccine
candidate. Interim results from our ARESVI-006 phase III
pivotal trial showed vaccine efficacy of over 94%
1
observed
against RSV lower respiratory tract disease (RSV-LRTD) in
adults with at least one comorbidity of interest and in those
with severe disease. Overall vaccine efficacy against
RSV-LRTD was 82.6%
1
, meeting the trial's primary endpoint.
Consistent high vaccine efficacy was observed across a
range of pre-specified secondary endpoints, including
against severe disease, in adults aged 70-79 and across
RSV A and B strains.
The vaccine was generally well tolerated, with a favourable
safety profile. These data were presented as part of the
Infectious Disease Society of America’s IDWeek 2022
annual meeting in Washington, DC, in October. We also
shared positive data on the co-administration of our RSV
older adult vaccine candidate with a flu vaccine, a key
finding for practical immunisation.
Based on these data, the vaccine candidate was granted
Priority Review by the FDA. It was also accepted for
accelerated assessment by the European Medicines
Agency (EMA) and for review by the Japanese Ministry of
Health, Labour and Welfare (MHLW).
We’re committed to finding solutions for people at high risk
of the serious consequences of RSV infection. In 2022, we
started a clinical trial exploring the effect of the RSV older
adult vaccine candidate in people aged 50-59, including
those at increased risk of RSV-LRTD, compared to people 60
and over. We also began two further flu co-administration
trials. The ARESVI-006 trial will also continue to evaluate an
annual revaccination schedule and longer-term protection
over multiple seasons.
Shingles
Approximately one in three adults develop shingles, a
painful and potentially serious illness.
Shingrix
is the first
approved shingles vaccine to combine a non-live antigen
with one of our adjuvants. It may help overcome the natural
age-related decline in immunity that contributes to the
challenge of protecting people aged 50 and over from this
disease.
Shingrix
is now available in 26 countries, and we’ve
continued to broaden access to it in 2022. In Japan, where
Shingrix
is already approved for people over 50, we’ve also
submitted an application to extend the indications to
include over 18-year-olds at risk, such as those with immune
suppression and immune deficiency. The US Cancer
Network has recommended
Shingrix
for cancer survivors
over 19, and the vaccine has a preferential recommendation
from the Brazilian Immunization Society.
We presented new data at IDWeek 2022 showing that
Shingrix
can provide at least 10 years of protection against
shingles in the over 50s. In the primary endpoint analysis,
the interim data showed overall efficacy of more than 80%
2
in the follow-up period of approximately six to ten years
after initial vaccination. No new safety concerns were
identified during the follow-up period. These data
significantly add to the real-world evidence demonstrating
the long-term benefit of
Shingrix
.
Research and development continued
1
VE 94.1% (1 of 12,466 versus 17 of 12,494); 94.6% (1 of 4,937 versus 18
of 4,861); VE 82.6% (7 of 12,466 versus 40 of 12,494)
2
VE 81.6% (52 cases in 32673.8 f/u years versus 283 cases* in 32673.8 f/u
years); *cases for the placebo group are estimated from the ZOE-50/70
placebo groups to assess vaccine efficacy during ZOE-LTFU study;
f/u: follow up; (95% confidence interval [CI]: 75.2–86.6)
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Meningitis
Around 1.2 million people develop invasive meningococcal
disease (IMD) each year. It can be fatal, and 10–20% of
survivors will have long-term disabilities such as brain
damage, deafness, nervous system problems or loss of
limbs. Bacterial meningitis is also of particular concern. One
in 10 people who are diagnosed with bacterial meningitis
end up dying, and 1 in 5 are left with severe complications.
Bexsero
, our meningitis B vaccine, and
Menveo
, our
meningitis ACWY vaccine, are registered in more than 60
countries, and together protect against most forms of IMD.
Since launch, more than 150 million doses of these vaccines
have been distributed. In 2022, we received FDA approval
in the US and ANVISA approval in Brazil for a fully liquid,
ready-to-use single vial presentation of
Menveo
. This gives
healthcare providers a more convenient option by removing
the need to reconstitute the vaccine.
Our investigational first generation MenABCWY candidate
pentavalent (5-in-1) vaccine combines the technologies
used in our
Bexsero
and
Menveo
vaccines. The goal of
introducing a 5-in-1 meningitis vaccine is to protect people
against the five serotypes that cause most disease with just
one vaccine, not two. A 5-in-1 meningitis vaccine has the
potential to help improve vaccination rates by providing a
more convenient way to prevent IMD.
MenABCWY is currently in phase III development, in a trial
spanning five countries with 3,650 participants aged 10-25.
We expect results in early 2023. New multivalent vaccines
like this have the potential to support the global strategy to
defeat meningitis by 2030, set out in the World Health
Organization’s Global Road Map.
A second-generation 5-in-1 meningitis vaccine is currently
in phase II and is aimed at improving protection against B
strains and allowing for broader age indications globally.
COVID-19
By the end of 2022, more than 650 million cases of
COVID-19 had been reported around the world, and there
had been over 6.5 million deaths. The disease continues to
challenge healthcare systems. We and our innovation
partners have been part of the response, developing
treatments and vaccines.
Treating COVID-19 with
Xevudy
Xevudy
(sotrovimab) is our SARS-CoV-2 monoclonal
antibody treatment, developed with Vir Biotechnology.
It works by preventing the virus from entering and infecting
healthy cells in the body. It has been an important part
of early treatment to prevent high-risk patients from
developing severe disease. With Vir, we developed
sotrovimab from discovery to approval in less than 1.5 years.
We have delivered over two million doses of
Xevudy
to over
30 countries including government purchases to meet
current and future need.
Providing solutions with new COVID-19 vaccines
Our pandemic adjuvant technology is part of several
protein-based COVID-19 vaccines we’ve developed, such
as with Sanofi and SK bioscience, which are now licensed
in some markets. These vaccines are important new options
to help protect against COVID-19.
Chronic hepatitis B
Chronic hepatitis B (CHB) is a major global health issue
with approximately 300 million people infected and
approximately 900,000 people dying annually due to
liver complications, including cirrhosis and liver cancer.
The mainstay of therapy includes nucleoside/nucleotide
analogues (NA) which are often taken for life because
they suppress but rarely clear the virus.
Bepirovirsen is the only drug in development as a
monotherapy for CHB that works to reduce virus replication,
suppress surface antigen and stimulate the immune system.
In November 2022, phase II full-study data published in
The New England Journal of Medicine demonstrated that
treatment with bepirovirsen resulted in sustained clearance
of hepatitis B surface antigen (HBsAg) and HBV DNA
in a sub-group of patients followed for six months after
discontinuation of their bepirovirsen. Levels of HBsAg
and HBV DNA together are key efficacy measures. When
HBsAg and HBV DNA remain undetectable for more than
six months without medications, patients are considered
to have a functional cure, an outcome associated
with significant decreased risk developing cirrhosis,
hepatocellular carcinoma and death. Currently, standard
of care treatment with NA rarely achieves functional
cure, which is why new therapies are needed for patients
diagnosed with chronic HBV. Our phase III study which
started in early 2023 will build our understanding of how
bepirovirsen works. Our aim for bepirovirsen is for it to
become a potential monotherapy or the backbone of future
therapy for hepatitis B patients. We are exploring potential
sequential treatment trials and expect to share data later
in 2023.
Other infectious diseases
Diptheria, tetanus and pertussis
Since 2010, there have been up to 48,000 cases of pertussis
(whooping cough) in the US each year, with infants more
likely to experience complications from the disease.
Boostrix
, our tetanus, diphtheria and pertussis vaccine
(Tdap), received approval from the FDA in October 2022 for
immunisation during the third trimester of pregnancy for
the prevention of whooping cough in newborn infants.
This makes it the first vaccine in the US approved
specifically for use during pregnancy. The vaccine is
approved in 80 countries, including in the EU, Canada,
Australia and New Zealand.
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Rotavirus
In November 2022, the FDA approved the new fully
liquid presentation of our
Rotarix
vaccine to prevent
gastroenteritis caused by rotavirus. This new presentation
makes it more convenient for healthcare providers to
prepare
Rotarix
by removing the need to reconstitute the
dose at the point of use. We expect it to be commercially
available in early 2023.
Varicella
In February 2022, we started a phase II study in the US
with children aged 12-15 months to compare the safety
and immunogenicity of our varicella (chickenpox) new
strain candidate vaccine with the vaccine currently
available. The aim is to develop a vaccine that fits the
Advisory Committee for Immunization Practices' (ACIP)
recommended US immunisation schedule and offers
healthcare professionals and parents an alternative to the
current vaccine. This varicella new strain vaccine could also
be used as a component of the measles-mumps-rubella-
varicella vaccine in the US.
Herpes simplex virus
We have started a phase I study to investigate the potential
of GSK 3943104A, an immunotherapeutic against herpes
simplex virus (HSV). The aim is to offer a better solution for
people with the virus than current standard of care. The
study is gathering safety and immunogenicity data on GSK
3943104A in healthy people. Phase II development will
focus on safety and immunogenicity, as well as proof-of-
concept efficacy.
Human papillomavirus
Human papillomavirus (HPV) is a common sexually
transmitted infection – around 14 million people a year
become infected in the US alone. It often has no symptoms
but can cause genital warts or cancer. We’ve begun a
phase I/II study of our next-generation adjuvanted
vaccine, developed in collaboration with Innovax, to
protect against nine types of HPV. The study is evaluating
the reactogenicity, safety and immunogenicity of an
adjuvanted vaccine candidate for girls and women aged
16-26. The aim is to identify the most effective vaccine
formulation to take into phase III trials.
We also received approval in China for
Cervarix
, our human
papillomavirus vaccine for girls aged nine to 14, in a
two-dose regimen.
Pneumococcal disease
Pneumococcal disease is the term for any illness caused
by the bacterium Streptococcus pneumoniae, a leading
cause of acute bacterial disease worldwide. Our acquisition
of Affinivax adds a novel class of next-generation
pneumococcal vaccine candidates that incorporate MAPS
technology (see pages 19 and 20).
Antibiotics and antimicrobial resistance
According to the World Health Organization (WHO),
antimicrobial resistance (AMR) is one of the top 10 global
health threats. By undermining the effectiveness of
antibiotics, it contributes to around 1.2 million worldwide
deaths a year.
We're using our expertise in developing prevention and
treatment options to focus on pathogens that have the
highest probability of developing AMR, as identified by the
Centers for Disease Control (CDC) and the WHO.
Progressing towards a new treatment for urinary tract
infections and gonorrhoea
We are developing gepotidacin, a novel mechanism
topoisomerase inhibitor, for uncomplicated UTIs and
gonorrhoea, in partnership with the Biomedical Advanced
Research and Development Authority (BARDA) in the US. In
early November, we received positive results from EAGLE-2
and EAGLE-3 phase III trials evaluating gepotidacin, in
female adults and adolescents with uUTIs. Following a
recommendation by the Independent Data Monitoring
Committee (IDMC) we stopped the trials early for efficacy
and plan to submit a New Drug Application to the FDA in
2023. We are also studying gepotidacin as a potential
treatment for urogenital gonorrhoea (GC) in the EAGLE-3
phase III trial, with potential to read out in the second half
of 2023.
In November 2022, we started a phase I/II study to
evaluate the safety and efficacy of a new vaccine
candidate for gonorrhoea prevention. This vaccine
candidate, based on our proprietary GMMA (generalised
modules for membrane antigens), aims at protecting
adolescents and adults against gonorrhoea infections.
In 2022, we also started a phase Ib study of our first-in-
class FimH antagonist, a novel molecule that blocks
binding of E. coli bacteria to the bladder epithelium, as a
treatment for recurrent urinary tract infection.
Investigating our salmonella vaccine
In July 2022, we started a phase I study with the University
of Oxford to investigate our candidate vaccine for invasive
non-typhoidal salmonellosis (iNTS). The vaccine uses our
generalised modules for membrane antigens (GMMA)
technology. To explore its potential, we’re partnering with
Vacc-iNTS, a consortium of 12 partners from eight countries,
including some where iNTS is endemic.
Research and development continued
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Strategic report
HIV
In recent years, we’ve made breakthroughs in treating and
preventing HIV to transform patients’ lives. We’re now
building on these achievements with new products,
including long-acting injectables which, for many, means
significantly reducing therapy to just a few times a year.
HIV is one of the world’s biggest health threats, with 1.5
million new cases in 2021, including approximately 38,000
in the US. Around 38 million people were living with HIV
worldwide in 2021, over half of them in sub-Saharan Africa.
In HIV, our work 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 treat, prevent and eventually cure HIV.
Transforming the experience of patients
living with HIV
With our portfolio of 17 antiretroviral medicines, we’re
transforming the experience of people living with HIV.
Instead of taking medicine orally every day, our
Cabenuva
(cabotegravir, rilpivirine) long-acting injectable regimen
allows some patients to only have treatment six times a
year. The treatment has established ViiV Healthcare as the
industry leader in long-acting HIV medicines.
Cabenuva
is approved for dosing every two months in
the US, and in Europe as the combination of
Vocabria
(cabotegravir) and
Rekambys
(rilpivirine). This combination
received marketing approval in Japan in 2022, again for
dosage every two months. The FDA has also approved a
label update for
Cabenuva
that means patients no longer
have to take cabotegravir and rilpivirine tablets for a month
before starting
Cabenuva
injections.
ViiV’s dolutegravir is the world’s most widely prescribed
integrase inhibitor for HIV, taken by around 21 million
people, or three out of four of those currently on HIV
medications. It’s the foundation for
Dovato
and
Juluca
,
our two-drug regimen oral therapies, which are as effective
as three-drug regimens and allow people to take fewer
drugs while still maintaining viral suppression.
Working to prevent HIV
Preventing HIV is a central part of ViiV Healthcare’s work.
In late 2021, we received FDA approval for
Apretude
(cabotegravir), the first and only long-acting injectable
pre-exposure prophylaxis (PrEP) option to reduce the risk of
sexually acquired HIV-1. This approval was based on results
from two pivotal phase III studies, HIV Prevention Trials
Network (HPTN) 083 and 084, demonstrating superiority
over the established standard of care.
In August 2022, we announced more data showing the
continued superior efficacy of cabotegravir long-acting for
PrEP over daily tablets. The unblinded portion of the HPTN
084 trial with women in sub-Saharan Africa showed a
substantially lower rate of HIV acquisition.
Offering a range of options for people living
with HIV
We offer different medicines to meet the varying needs of
people living with HIV.
Our portfolio of antiretrovirals also includes
Tivicay
and
Triumeq
, which contain dolutegravir.
Triumeq
now has US
approval in a dispersible once-daily tablet formulation for
children weighing 10kg and above and the Committee for
Medicinal Products for Human Use (CHMP) of the EMA
issued a positive opinion recommending marketing
authorisation for
Triumeq PD
for children 14kg and above at
the end of 2022. With 1.7 million children living with the virus,
it’s important that this medicine, the first fixed-dose tablet
regimen for children, is now available in a form that’s easier
for them to take. The FDA has also lowered the minimum
weight at which a child can be prescribed the
Triumeq
tablet from 40kg to 25kg.
Our commitment is to leave no person with HIV behind. That
includes working to develop medicines for heavily treatment-
experienced adults who have very few treatment options
because of safety concerns, intolerance, or resistance. In
2022, we announced five-year data for
Rukobia
(fostemsavir), a first-in-class attachment inhibitor. In the
ongoing BRIGHTE study, week 240 data shows that these
patients can take fostemsavir as part of their antiretroviral
regimen and keep their virus suppressed over the long term.
Exploring more ways to improve the lives of
people living with HIV
We’re exploring new types of long-acting therapy, based on
cabotegravir, that could give people living with HIV the
option to take medicine at home. These involve combining
cabotegravir with other assets in our early-stage pipeline to
create medicines that patients can administer themselves.
We're also investigating ultra-long-acting medicines with
dosing every three months or longer. Based on studies in
2022 and 2023, we will choose partners for cabotegravir
and begin phase IIb and phase III studies of these
combinations in 2024.
In October 2022, we announced positive phase IIa data
for N6LS, a novel broadly neutralising antibody (bNAb). A
study showed strong antiviral efficacy at two dosing levels.
bNAbs can recognise different strains of HIV and stop them
entering healthy cells, and so block the virus from
replicating. They offer a potentially new approach to
treatment and may help us combat treatment resistance
in our efforts to end the HIV epidemic.
A European study of
Vocabria
(cabotegravir injection) and
Rekambys
(rilpivirine long-acting injectable suspension)
showed the treatment was well received by people living
with HIV and by clinic staff. In the CARISEL study, 81% of
participants said the injectable treatment was less
stigmatising than daily tablets, and the combination showed
a high clinical effectiveness and a low rate of viral failure.
Research and development continued
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24
GSK Annual Report 2022
Immunology/respiratory
For 50 years, we have been leaders in medicines that
advance the management of asthma and chronic
obstructive pulmonary disease (COPD), and we've sold
products for respiratory problems since the 1880s. Now we
draw on our expertise in the science of the immune system
to develop medicines for immune-mediated conditions
including lupus, eosinophilic-driven diseases such as
severe eosinophilic asthma and other inflammatory
diseases. Our innovative medicines help millions of
people with immune and respiratory conditions.
Widening access to
Benlysta
beyond systemic
lupus erythematosus (SLE) to include lupus
nephritis (LN)
SLE is a chronic autoimmune disease where the immune
system mistakenly attacks healthy tissue in many parts of
the body. It causes symptoms like swollen joints, fever, hair
loss and facial rash, along with potential long-term
complications including irreversible damage to vital organs
like the heart and kidneys. SLE affects around five million
people worldwide. LN, the kidney inflammation caused by
lupus, can progress to kidney failure if left untreated.
Approximately 40% of patients with SLE develop LN.
Our innovative research into the role of B cells in
autoimmune conditions led to the development of
Benlysta
(belimumab), the only biologic approved for both SLE and
LN.
Benlysta
is a monoclonal antibody that targets
B-lymphocyte stimulator (BLyS), an underlying cause of SLE
and LN, reducing autoantibody levels to help treat the
short-term symptoms of inflammation and prevent
irreversible damage to vital organs. In 2022, we received
approval in China for
Benlysta
to treat adults with active
LN. We also received FDA approval for
Benlysta
for
paediatric patients with active LN. These followed earlier
approvals for adult treatment in markets including EU
member states, Japan and Brazil.
Our ambition is to improve outcomes for lupus patients with
a ‘treat to target’ approach that aims for remission or
reduced disease activity.
Innovating to treat eosinophil-driven diseases
Eosinophil-driven diseases are associated with heightened
levels of eosinophils, a type of white blood cell. Increased
levels of eosinophils in the blood or tissue can cause a
range of symptoms across a variety of conditions. When
eosinophils infiltrate certain tissues, they can cause
inflammation and organ damage which, over time, can
affect patients’ day-to-day life.
Eosinophil-driven diseases are associated with poor
symptom control such as worsening asthma, and can cause
breathing difficulties and interfere with taste, smell and
sleep.
Our first-in-class monoclonal antibody
Nucala
(mepolizumab), targets interleukin-5 (IL-5) to reduce the
number of eosinophils. It’s the only treatment in the US and
Europe with indications across four eosinophilic diseases,
including severe eosinophilic asthma (SEA), chronic
rhinosinusitis with nasal polyps (CRSwNP), eosinophilic
granulomatosis with polyangiitis (EGPA) and
hypereosinophilic syndrome (HES).
In 2022
Nucala
was approved in the US, Japan and Europe
as a 40mg pre-filled syringe for 6-11-year-olds with SEA.
The pre-filled syringe allows healthcare professionals or
caregivers to administer
Nucala
at home. Previously,
children could only receive the medicine in hospitals or
physicians’ offices, as pre-filled syringes were only available
in adult strength.
We also continue to develop a new monoclonal antibody,
depemokimab, under development for its high affinity and
long-acting suppression of IL-5 function. Current IL-5
inhibitors are dosed every four weeks or every eight weeks.
Depemokimab is designed to be administered every six
months, which means it has the potential to be the first
biologic to deliver ultra-long-acting treatment for patients
with SEA. In 2022, we began phase III trials of
depemokimab for CRSwNP, EGPA and HES, following
initiation of trials in SEA in 2021.
Otilimab
Data from the ContRAst programme examining otilimab as
a potential treatment for rheumatoid arthritis showed
limited efficacy and did not support a suitable benefit/risk
profile. As a result, we decided not to progress with
regulatory submissions.
Other clinical advances
We moved two antibodies from phase I to phase II: anti-
CCL17 – a novel anti-cytokine antibody for pain in both
osteoarthritis and diabetic peripheral neuropathy,
representing a novel non-opioid, non-NSAID analgesic
therapy; and anti-IL18 – a novel anti-cytokine antibody
for atopic dermatitis which was identified with the use of
human genetics and human translational studies.
Research and development continued
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Oncology
Cancer remains a leading cause of death with unmet
patient need. We have an emerging portfolio in oncology
and will develop programmes using the science of the
immune system with human genetics and new technology.
In oncology, we take a balanced and pragmatic approach
to investment in our research areas of immuno-oncology,
tumour cell-targeting therapies and synthetic lethality. We
have 11 investigational medicines in our oncology pipeline
that have the potential to make a meaningful difference for
patients with cancer.
We also grow our oncology pipeline through targeted
business development with acquisitions and collaborations.
In 2022, we acquired Sierra Oncology, a biopharmaceutical
company focused on therapies for rare forms of blood
cancer, such as myelofibrosis. We also entered into an
exclusive global licence option agreement with Mersana
in a range of HER2-expressing tumours, such as breast,
gastric and non-small-cell lung cancers, and an expanded
global, non-exclusive licence and collaboration agreement
with SpringWorks Therapeutics for multiple myeloma. In
2022, we also expanded our existing collaboration with
precision medicine partner Tempus, with an initial focus in
oncology (see page 19).
Positive readouts for
Jemperli
Colorectal cancer is the third most common form of cancer,
with over 1.9 million new cases in 2020. We’re exploring an
immunotherapy treatment with curative intent using
Jemperli
(dostarlimab) in a subset of rectal cancer. At ASCO
2022 breakthrough findings were presented and published
in The New England Journal of Medicine by researchers at
Memorial Sloan Kettering Cancer Center (MSK) confirming
a clinical complete response in all 14 patients who received
treatment with
Jemperli
as a neoadjuvant treatment for
mismatch repair-deficient locally advanced rectal cancer.
In February 2023 the FDA Oncologic Drugs Advisory
Committee (ODAC) voted 8 to 5 that the two proposed
single-arm trials would be sufficient to characterise the
benefits and risks of
Jemperli
in the curative-intent setting
for patients with mismatch repair-deficient/microsatellite
instability-high locally advanced rectal cancer.
In late 2022, our phase II PERLA study comparing
Jemperli
plus chemotherapy to pembrolizumab plus chemotherapy
for metastatic non-squamous non-small-cell lung cancer
returned positive data. The results support our ambition for
Jemperli
to be the backbone of our immuno-oncology
programme, either alone or combined with standard of
care and novel cancer therapies, especially for patients
with limited treatment options.
Our phase III COSTAR trial is studying
Jemperli
in
combination with cobolimab, an investigational selective
anti-TIM-3 monoclonal antibody, and chemotherapy
in patients with advanced non-small-cell lung cancer
who have progressed on anti-PD-(L)1 therapy and
chemotherapy. The combination has the potential to
be the first of its kind.
CD226 axis
Our work focused in immuno-oncology aims to help
the immune system recognise and kill cancer cells
more effectively. We’re investigating how
Jemperli
, in
combination with novel assets targeting the CD226
axis, can support anti-tumour activity.
We are the only company with access to antibodies
targeting all three checkpoints on the CD226 axis, including
PVRIG, TIGIT and CD96. We’re executing a comprehensive
development plan that will combine these investigational
antibodies with
Jemperli
, in both doublet and triplet
therapies. In addition to several early phase trials that are
underway, our phase II platform study in first-line non-
small-cell lung cancer began dosing patients with an initial
combination of
Jemperli
and our TIGIT antibody, partnered
with iTeos Therapeutics.
Gynaecologic and breast cancers
In 2020, nearly 1.4 million women around the world were
diagnosed with a gynaecologic cancer.
We continue to explore the potential for our existing
treatments to advance the standard of care for hard-to-
treat gynaecologic cancers, both alone and in combination
with each other and other agents. In second-line
endometrial cancer, the FDA granted full approval for
Jemperli
in February 2023 for the treatment of adult
patients with mismatch repair-deficient (dMMR) recurrent
or advanced endometrial cancer, as determined by an
FDA-approved test, that has progressed on or following a
prior platinum-containing regimen in any setting and are
not candidates for curative surgery or radiation.
Research and development continued
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GSK Annual Report 2022
In December 2022, we announced positive headline results
from the planned interim analysis, or Part 1, of our RUBY
phase III trial investigating
Jemperli
in combination with
chemotherapy as a frontline treatment for advanced or
recurrent endometrial cancer. It showed a statistically
significant and clinically meaningful progression-free
survival (PFS) benefit in the prespecified dMMR/MSI-H
patient subgroup and in the overall population. In Part 2 of
the RUBY study, we will assess
Jemperli
in combination with
Zejula
in the same setting, with initial results anticipated in
the second half of 2023. Our FIRST trial, is evaluating this
combination as a potential new first-line maintenance
therapy for ovarian cancer with results expected in the
second half of 2023.
1
Our phase III trial, ZEST, is exploring the efficacy and safety
of
Zejula
(niraparib) as an early-stage treatment for breast
cancer. 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 slow or
stop the cancer’s progress more effectively.
Investigating
Zejula
for lung cancer
We're evaluating
Zejula
in our phase III ZEAL lung cancer
trial, which 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.
Blood cancers
Myelofibrosis is a rare blood cancer that affects around
20,000 patients in the US, most of whom either have
anaemia when they’re diagnosed or develop it eventually.
Patients often need transfusions, and around 30% stop
treatment because of anaemia.
Momelotinib may address the significant medical needs
of myelofibrosis patients with anaemia by reducing
dependence on transfusions while still treating other
symptoms of the disease and enlarged spleen.
A New Drug Application and Marketing Authorisation
Application for momelotinib is currently under review with
the FDA and EMA, respectively. Momelotinib is not currently
approved in any market. We anticipate a US launch in
2023.
Multiple myeloma is the world’s third most common blood
cancer, with more than 175,000 people developing it every
year.
Blenrep
(belantamab mafodotin) is for patients with
relapsed or refractory multiple myeloma who have received
at least four other therapies.
Blenrep
is approved in Europe and Hong Kong. Our
DREAMM trials are investigating its potential in earlier lines
of treatment, together with standard and novel therapies,
as well as exploring dosing and scheduling modifications.
In November 2022, we announced we would withdraw
Blenrep
from the US market following the request of the
FDA. This request was based on the outcome of the
DREAMM-3 confirmatory trial, which did not meet the
requirements of the FDA Accelerated Approval regulations.
Other trials in the DREAMM clinical trial programme will
continue. They are designed to demonstrate the benefit of
Blenrep
in combination with novel therapies and standard-
of-care treatments in earlier lines of therapy and dosing
optimisation to maintain efficacy while reducing corneal
events. We anticipate data from the DREAMM-7 and
DREAMM-8 phase III trials in the second half of 2023.
Early science and other collaborations
In 2022, we announced an exclusive global licence option
agreement to co-develop and commercialise Mersana
Therapeutics’ XMT-2056 immunosynthen antibody-drug
conjugate that targets a novel epitope of HER2. It’s
designed to activate the innate immune system through
STING signalling in immune cells in tumours, and tumour
cells themselves. Mersana has initiated a phase I clinical
trial of XMT-2056 to investigate its potential in a range of
HER2-expressing tumours, such as breast, gastric,
colorectal and non-small-cell lung cancers. The FDA has
granted an orphan drug designation to XMT-2056 for the
treatment of gastric cancer.
Additionally, to further enhance our tumour-cell targeting
portfolio, we entered into an agreement with WuXi
Biologics for exclusive licences for up to four bi- and
multi-specific T-cell engaging (TCE) antibodies developed
using WuXi Biologics’ proprietary technology platforms.
This deal allows us to access potential best-in-class TCE
antibodies that have been optimised for effective tumor
killing with a desirable safety profile.
Research and development continued
1
At the request of the FDA, in late 2022, we restricted the
second-line ovarian cancer maintenance indication for
Zejula
in the US to only the patient population with deleterious or
suspected deleterious germline BRCA mutations (gBRCAmut)
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Opportunity driven
As well as our portfolio across therapy areas, we pursue
other opportunities where the emerging science indicates
the potential for important new opportunities to have
major impact in addressing unmet need.
Transforming the treatment of anaemia with
daprodustat
Over 700 million people suffer from chronic kidney disease
(CKD) worldwide, and an estimated one in seven of them
has anaemia. For many, the treatment options are limited.
When left untreated or undertreated, anaemia of CKD is
associated with poor clinical outcomes and leads to a
substantial burden on patients and healthcare systems.
Daprodustat is our oral treatment in a class of medicines
called oral hypoxia-inducible factor prolyl hydroxylase
inhibitors (HIF-PHIs). It's based on human genetics and
Nobel Prize-winning science showing how cells sense and
adapt to oxygen availability. Daprodustat offers a
potentially easier oral treatment than the current injection-
based standard of care, while still managing haemoglobin
levels effectively. It's approved as
Duvroq
in Japan.
In October 2022, we reported that the FDA Cardiovascular
and Renal Drugs Advisory Committee (CRDAC) supported
that the benefit of treatment with daprodustat outweighs
the risks for adult dialysis patients with anaemia of CKD
with a 13 to 3 vote. In adult non-dialysis patients with
anaemia of CKD, the CRDAC did not support that the
benefit of treatment with daprodustat outweighs the risks
with a 5 to 11 vote.
On 1 February 2023, the FDA approved daprodustat under
the name
Jesduvroq
for the treatment of anaemia of
chronic kidney disease in adults on dialysis. In March 2022,
the EMA validated the marketing authorisation application
for daprodustat, which is currently under regulatory review
with a decision anticipated mid-2023.
Progressing towards a new treatment for
cholestatic pruritus in primary biliary cholangitis
Linerixibat is our ileal bile acid transporter (IBAT) inhibitor
to potentially treat cholestatic pruritus in patients with
primary biliary cholangitis (PBC). This is a rare autoimmune
liver disease affecting approximately 15 per 100,000
people. Significant numbers of PBC patients suffer with
cholestatic pruritus, a debilitating itch, and there has been
no new pharmacologic therapy in this area in 60 years.
Our development programme demonstrates how we are
using digital technology to modernise drug development,
using novel platforms to run our studies with the potential
to increase trial diversity. An example of this is a new
decentralised clinical trial (DCT) design with the potential
to improve patient recruitment and retention in GLISTEN,
the phase III trial of linerixibat for cholestatic pruritus in
patients with PBC. This is an emerging trial model where
assessment of patients can occur at a patient’s own home,
improving accessibility for patients who may not live near to
a specialist. This is a first and we expect this innovation to
continue.
Linerixibat has received Orphan Drug Designation in
Europe and the US.
Research and development continued
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28
GSK Annual Report 2022
Pipeline overview
We have 69 assets in development, of which 18 are late-stage.
Phase III/Registration
Bexsero
infants US (recombinant protein) MenB
SKYCovione (SK Bioscience)
1
COVID-19
4
3536819 (conjugated, recombinant protein) MenABCWY
1st gen
3844766
1
(recombinant protein)
3
RSV older adults
gepotidacin
1
(BTI inhibitor) uUTI and GC
bepirovirsen
1
(HBV ASO) HBV
tebipenem pivoxil
1
(antibacterial carbapenem) cUTI
10
Xevudy
1
(sotrovimab/VIR-7831 monoclonal antibody)
COVID-19
Blenrep
1
(anti-BCMA ADC) multiple myeloma
Jemperli
1
(anti-PD-1) 1L endometrial cancer
2
Zejula
1
(PARP inhibitor) ovarian, lung and breast cancer
momelotinib
1
(JAK1, JAK2 and ACVR1 inhibitor) myelofibrosis
cobolimab
1
(anti-TIM-3) NSCLC
latozinemab
1
(AL001, anti-sortilin) frontotemporal
dementia
2,9
depemokimab
1
(LA anti- IL5) asthma
2
Nucala
(anti-IL5) COPD
daprodustat (HIF-PHI) anaemia of chronic kidney disease
12
linerixibat (IBAT inhibitor) cholestatic pruritus in primary
biliary cholangitis
Phase II
3437949
1
(recombinant protein)
3
malaria fractional dose
4406371 (live, attenuated) MMRV new strain
3536852
1
(GMMA)
Shigella
3528869
1
(viral vector with recombinant protein)
3
therapeutic HBV
6
4023393 (conjugated, recombinant protein) MenABCWY
2nd gen
6
4178116 (live, attenuated) varicella new strain
5101955
1
(MAPS) pneumococcal 24-valent – paediatric
5101956
1
(MAPS) pneumococcal 24-valent – adults
4106647
1
(protein-adiuvant)
3
HPV
6
3036656
1
(leucyl t-RNA inhibitor) tuberculosis
sanfetrinem cilexetil
1
(serine beta lactamase inhibitor)
tuberculosis
BVL-GSK098
1
(ethionamide booster) tuberculosis
VIR-2482
1
(neutralising monoclonal antibody)
5
influenza
3640254 (maturation inhibitor) HIV
13
3810109
1
(broadly neutralising antibody) HIV
4428859
1
(anti-TIGIT) cancer
Benlysta
(anti-BLyS) Systemic sclerosis associated
interstitial lung disease
10
4532990
1
(HSD17B13 siRNA) non-alcoholic steatohepatitis
10
Research and development continued
Phase I
2904545
1
(recombinant protein)
3
C. difficile
4429016
1
(bioconjugated, recombinant protein)
3
K. pneumoniae
3993129 (recombinant subunit)
3
CMV
6
4382276
1
(mRNA) flu
4396687
1
(mRNA) COVID-19
4077164
1
(bivalent GMMA) iNTS (typhimurium + enteritidis)
2
3943104
1
(recombinant protein)
3
Therapeutic HSV
4348413 (GMMA) gonorrhoea
6
3536867
1
(bivalent conjugate) Salmonella (typhoid +
paratyphoid A)
2556286
1
(Mtb inhibitor) tuberculosis
3186899
1
(CRK-12 inhibitor) visceral leishmaniasis
7
3494245
1
(proteasome inhibitor) visceral leishmaniasis
3772701
1
(
P falciparum
whole cell inhibitor) malaria
3882347
1
(FimH antagonist) uUTI
3923868 (PI4kβ inhibitor) viral COPD exacerbations
4182137
1
(VIR-7832 monoclonal antibody) COVID-19
6
3965193 (PAPD5/7 inhibitor) HBV
5251738
1
(TLR8 agonist) HBV
3739937 (maturation inhibitor) HIV
cabotegravir (400 mg/ml formulation) HIV
4004280 (capsid protein inhibitor) HIV
4011499 (capsid protein inhibitor) HIV
4524184
1
(integrase inhibitor) HIV
3745417 (STING agonist) cancer
4074386
1
(anti-LAG3) cancer
6097608
1
(anti-CD96) cancer
4381562
1
(anti-PVRIG) cancer
XMT-2056
1,11
(STING agonist ADC) cancer (wholly owned by
Mersana Therapeutics)
4527226
1
(AL101, anti-sortilin) neurodegenerative diseases
3858279
1
(anti-CCL17) osteoarthritis pain
1070806 (anti-IL18) atopic dermatitis
3888130
1
(anti-IL7) multiple sclerosis
4172239
1
(DNMT1 inhibitor) – sickle cell disease
8
Only the most advanced indications are shown for each asset.
1
In-licence or other alliance relationship with third party
2
Additional indications or candidates also under investigation
3
Adjuvanted
4
GSK contributing pandemic adjuvant
5
GSK has exclusive option to co-develop post phase II
6
In phase I/II study
7
Transition activities underway to enable further progression by partner
8
Imminent study start
9
Phase III trial in patients with progranulin gene mutation
10
Phase II or III study start expected in 2023
11
GSK has an exclusive global license option to co-develop and
commercialise the candidate
12
FDA approved in February 2023
13
Will not progress to phase III
MenB: meningitis B; RSV: respiratory syncytial virus; uUTI: uncomplicated
urinary tract infection; GC: urogenital gonorrhoea; HBV: hepatitis B virus;
cUTI: complicated urinary tract infection; ADC: Antibody drug conjugate
NSCLC: non-small cell lung cancer; LA: long-acting ;COPD: chronic
obstructive pulmonary disease; MMRV: measles, mumps, rubella & varicella;
HSV: herpes simplex virus; siRNA: small interfering RNA; HPV: human
papillomavirus; MAPS: multiple antigen presenting system; CMV:
cytomegalovirus; GMMA: generalised modules for membrane antigens;
iNTS: invasive non-typhoidal salmonella; ASO: antisense oligonucleotide
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Commercial operations
Performance: Vaccines
Our broad vaccines portfolio targets infectious diseases
at every stage of life, helping to protect people from
meningitis, shingles, flu, polio and many more.
Herpes zoster virus (shingles)
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
29
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30
GSK Annual Report 2022
Sales performance
We achieved strong growth in vaccines in 2022, driven
by record sales for our shingles vaccine, and continued
geographic expansion of our meningitis vaccine.
Vaccines turnover was £7,937 million, up 17% at AER, 11%
at CER in total, and up 24% at AER, 17% at CER excluding
pandemic adjuvant sales. The performance reflected a
favourable comparator, which was impacted by COVID-19
related disruptions in several markets primarily in H1 2021,
and strong commercial execution of
Shingrix
, particularly in
the US and Europe.
Shingrix
sales grew 72% at AER, 60% at CER to £2,958
million. All regions grew significantly reflecting post-
pandemic rebound, strong uptake and new market
launches with more than half of the growth contributed
from outside of the US. In the US,
Shingrix
grew 46% at AER,
32% at CER to £1,964 million due to higher non-retail and
retail demand and strong commercial execution. Germany
and China contributed strongly to the
Shingrix
growth.
Shingrix
was launched in nine markets during 2022 and
is now available in 26 countries.
Meningitis vaccines sales grew 16% at AER, 11% at CER to
£1,116 million mainly driven by
Bexsero
up 16% at AER, 12%
at CER to £753 million resulting from higher CDC demand
and increased share in the US.
Menveo
sales were also up
27% AER, 18% CER to £345 million, primarily driven by
post-pandemic vaccination catch-up and higher public
demand in International, together with favourable pricing
mix and share gain in the US.
Fluarix
/
FluLaval
sales grew by 5% AER but decreased
4% CER to £714 million, primarily driven by lower post-
pandemic demand in Europe and the US, partly offset
by lower expected returns in the US.
Established Vaccines grew 4% AER but was stable at CER
to £3,085 million mainly resulting from supply constraints in
MMR/V vaccines and lower tender demand in International
for
Synflorix
. This was offset by hepatitis vaccines demand
rebound in the US and Europe and
Boostrix
post-pandemic
demand recovery and increased share in the US.
Performance: Vaccines
Turnover
£7.9bn
+17% AER, +11% CER
Established £
3,085m
Shingles £
2,958m
Meningitis £
1,116m
Influenza £
714m
Pandemic £
64m
Product
Disease
Total revenue
Key information
Shingrix
Herpes zoster
(shingles)
£2,958m +72% AER;
+60% CER
Record sales year. Now launched in 26
markets
Bexsero
Meningitis
group B
£753m +16% AER;
+12% CER
Approved in France for National
Immunisation Programme in 2022.
Now available in 50 markets
Fluarix, FluLaval
Seasonal
influenza
£714m +5% AER;
-4% CER
Joint first to market with Sanofi in US
enabling vaccinations to begin in July 2022
Boostrix
Diphtheria,
tetanus, acellular
pertussis booster
£594m +14% AER;
+7% CER
US approval for maternal immunisation
indication in 2022
Infanrix, Pediarix
Diphtheria,
tetanus, pertussis,
polio, hepatitis B,
haemophilus
influenza type B
£594m +9% AER;
+3% CER
Pediarix
leads in the US in market share by
volume
Engerix, Twinrix,
Havrix
Hepatitis
£571m +24% AER;
+16% CER
Travel and routine immunisation for hepatitis
recovering as expected in 2022
Rotarix
Rotavirus
£527m -3% AER;
-3% CER
Rotarix
fully liquid in the US and approved
in France for National Immunisation
Programme in 2022
Menveo
Meningitis
group A, C, W
and Y
£345m +27% AER;
+18% CER
Menveo
fully liquid in the US and Brazil
in 2022
Synflorix
Invasive disease,
pneumonia, acute
otitis media
£305m -15% AER;
-15% CER
Affinivax acquisition for next-generation
PCV of 24 valents and greater
Priorix, Priorix
Tetra, Varilrix
Measles, mumps,
rubella and
chickenpox
£188m -28% AER;
-29% CER
US approval for
Priorix
in 2022 supporting
continued expansion of our established
portfolio
Cervarix
Human papilloma
virus
£117m -15% AER;
-20% CER
China approval for a two-dose schedule
in 2022
Key products
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Pandemic vaccines decreased 86% AER and CER primarily
reflecting comparison to 2021 pandemic adjuvant sales to
the US and Canadian governments partly offset by GSK’s
share of 2022 contracted European volumes related to
the COVID-19 booster vaccine developed through a
collaboration with Sanofi Pasteur (Sanofi).
Our strategy for growth
Vaccines play a critical role in our growth. We aim to
reach 1.3 billion people with vaccines by 2031, a significant
contribution to our overall ambition to positively impact the
health of 2.5 billion people. We will achieve this through
growth of our existing adult and paediatric vaccines and
new launches. Our focus is on accelerating the vaccines
pipeline, particularly RSV and MenABCWY, ensuring
manufacturing capability and capacity for RSV,
Shingrix
and our established portfolio, and entering new markets.
We also prioritise targeted business development which
complements our existing vaccine portfolio and gives us
access to new patients.
Vaccines are complex and highly technical both to develop
and manufacture. As such there is no established generic
industry and they therefore do not generally face the
so-called 'patent cliff'. This longer lifecycle means that
vaccines can remain in use for decades after their initial
authorisation. For example
Boostrix
,
Infanrix
,
Priorix
and
Engerix
are beyond their patents but remain important
parts of our portfolio in terms of contribution to
performance. And importantly, our vaccines have a
strong efficacy profile with 90% of our portfolio by sales
having an efficacy level of above 90% – helping to protect
our portfolio from potential disruption from new
technologies.
Our portfolio of more than 20 marketed vaccines is one
of the industry’s broadest, helping to protect people
throughout their lives against diseases, including meningitis,
shingles, flu, polio, measles and many more. We deliver one
and a half million doses of our vaccines every day; and
around 40% of the world’s children receive a GSK vaccine
each year.
The full benefits of vaccination go beyond the health
of individuals. Vaccination programmes help minimise
health inequity and reduce costs to the healthcare system,
potentially promoting economic growth and societal
wellbeing. With our acquisition of Affinivax and, if we get
approval, the future launch of our RSV vaccine for older
adults, we are well positioned in the adult vaccination
segment, which will be a key growth driver of the global
vaccines market.
Our established platform technologies, and the new
platforms we’re building, such as the MAPS and mRNA
technologies, are a key part of our vaccines growth strategy
and are enabling us to tackle the most complex diseases
from birth throughout adulthood (see page 19).
Drivers of growth across the portfolio
Record annual sales for
Shingrix
were driven by strong
demand in existing markets and geographic expansion.
Shingrix
continues to be recommended for adults and
at-risk groups in countries around the world, driving its
uptake. By 2024, we aim to have launched in 35 markets
which make up about 90% of the vaccine market by value.
We continue to strengthen our leadership position in
meningitis vaccines with an aim to double sales by 2031
through continued market share growth, the geographic
expansion of
Bexsero
and the anticipated launch of our
pentavalent vaccine. During the year, France approved
Bexsero
for its National Immunisation Programme and we
also launched
Bexsero
in Taiwan and received marketing
authorisation in South Korea, making
Bexsero
available in
a total of 50 countries.
We remain committed to growing our established portfolio,
which represents about half of our total vaccines business.
We continue to seek to expand the availability of our
vaccines in markets around the world; our lifecycle
management strategy has strengthened our presence
in the US. For example,
Priorix
, our measles, mumps and
rubella vaccine, has been protecting people worldwide for
25 years; its launch in the US this year underscores how it
remains an important part of our established portfolio.
Also in the US, we received FDA approval for fully liquid
formulations of
Rotarix
, our rotavirus vaccine and
Menveo
,
our meningitis ACWY vaccine. We were also first to receive
FDA approval for a vaccine given in pregnancy,
Boostrix
maternal, which can be administered in the third trimester
to help prevent whooping cough in young babies (see
page 22).
Performance: Vaccines continued
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GSK Annual Report 2022
Performance: Vaccines continued
Meeting the needs of healthcare professionals
and patients (HCPs)
From the age of about 50, our immune system starts to
decline and becomes less effective, leading to increased
vulnerability to infectious diseases. Given this, we are
focusing our efforts on helping to keep older adults healthy.
We want to improve physician-patient dialogue on
vaccination, to raise awareness in adults of vaccine-
preventable diseases and to increase access to vaccination
beyond the physician's office.
Our Vaccine Study 2022 Report explored attitudes and
beliefs of HCPs and those over 50 years to vaccination. The
study showed that HCPs are a patient's number one source
of information about vaccines. But HCPs can't always meet
their patients’ needs because they lack time, want to avoid
conflict or don’t have enough information and training.
To ease some of the pressure on HCPs, we've started a
digital channel partnership with NextDoor in the US,
providing vaccination information directly to patients.
We've also launched a consumer campaign about the
importance of vaccination. We're working directly with
HCPs through a series of Vaccinology Master Classes,
helping to better equip them for conversations with their
patients about vaccines.
With US research company IQVIA, we also launched
Vaccine Track, a data platform to help improve adult
vaccination nationwide. The platform gives HCPs
information about the uptake of recommended adult
immunisations. With this data, HCPs can target their efforts
to increase discussion about vaccination and improve
coverage in areas showing a relative decline in
immunisation.
We're working with expert groups on adult vaccination
calendars which show HCPs and their patients which
vaccines they're eligible for.
In 2022, we launched a first-ever shingles awareness week
with the International Federation on Ageing, reaching more
than 900 million people globally. Such campaigns remain
an important way of increasing awareness of vaccine
preventable diseases, prompting patients to seek HCP
guidance on next steps, including preventative options.
Globally, governments, policymakers and healthcare
providers are recognising the potential advantages of
having increased access to vaccination through additional
channels such as vaccination centres as well as retail
pharmacies. We're working with pharmacy chains to
provide information for patients as they consider their
vaccination options.
Strengthening our manufacturing network to
support vaccines growth
In 2022, our 12 manufacturing sites in nine countries
produced and delivered over 500 million vaccine doses.
This was despite supply challenges with incoming materials
and shipping impacts caused by COVID-19, the global
economic environment and the conflict in Ukraine.
Our sites are routinely inspected by multiple regulatory
agencies. In 2022, there were 45 inspections by health
authorities across our manufacturing sites.
We are preparing our manufacturing and supply
capabilities to support both our inline product growth and
our pipeline products pending approval. This includes our
RSV vaccine for older adults. In 2022, the RSV production
facility in Wavre, Belgium, produced the first doses for the
market at a 100% success rate. To be ready for demand,
we announced a €70 million investment in a second
manufacturing facility for RSV antigen production in
Belgium. Also in Belgium, we invested in more capacity for
lyophilised products as well as building our internal mRNA
capabilities. Following the acquisition of Affinivax, we are
adding MAPS to our production technology platforms by
using capabilities at our Singapore site as well as new
investments at GSK Binney Street in Cambridge, Boston.
Overall, we're focused on increasing the control and
robustness of our supply chain. A good example of this
is the manufacturing of key adjuvants (AS01, AS03). We've
brought production of MPL and QS21 (components of AS01)
in-house at Hamilton. We've also formulated over 200
batches of adjuvant in Belgium since 2020 for current and
future key assets such as
Shingrix
,
Mosquirix
or our RSV
candidate vaccine for older adults.
Throughout the year we invested in modernising, digitising
and automating our manufacturing network. For example,
our quality control laboratories at all our sites went
completely paperless. We'll transition more than 50
production lines at 10 sites to electronic batch records
by 2025 as we build on our digital capability for better
operational efficiency, compliance, yield and shorter
lead times.
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We continue to be global leaders in HIV medicines, focus on pioneering
treatments for immune-mediated conditions and respiratory diseases,
and have an emerging portfolio of cancer medicines.
HIV virus
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Commercial operations
Performance: Specialty Medicines
33
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GSK Annual Report 2022
Sales performance
Specialty Medicines sales were £11,269 million, up 37% at
AER, 29% at CER, driven by consistent double-digit growth
in all therapy areas. Specialty Medicines, excluding sales of
Xevudy
, were £8,960 million up 23% at AER, 15% at CER.
HIV sales were £5,749 million with growth of 20% at AER,
12% at CER. The performance benefited from strong
patient demand for the new HIV medicines (
Dovato
,
Cabenuva
,
Juluca
,
Rukobia
and
Apretude
), which
contributed approximately three quarters of the growth.
US pricing favourability and year-end inventory build
together contributed one third of the growth which
was partially offset by International tender decline.
New HIV products delivered sales of over two billion to
£2,474 million, up 78% at AER, 67% at CER, representing
43% of the total HIV portfolio compared to 29% last year.
Growth was primarily driven by sales of
Dovato
and
Cabenuva
.
Dovato
recorded sales of £1,375 million up 75%
at AER and 65% at CER and
Cabenuva
recorded sales of
£340 million.
Apretude
delivered sales of £41 million.
Immuno-inflammation, Respiratory and Other sales were
£2,609 million up 29% at AER, 20% at CER on strong
performance of
Benlysta
and
Nucala
.
Benlysta
sales were
£1,146 million, up 31% at AER, 20% at CER, representing
strong underlying demand in US and worldwide.
Nucala
sales were £1,423 million, up 25% at AER, 18% at CER,
reflecting continued strong patient demand and the
launch of additional indications.
Performance: Specialty Medicines
HIV £5,749m
Immuno-inflammation,
respiratory and other
£
2,609m
Pandemic £2,309m
Oncology £
602m
Product
Disease
Total revenue
Key information
Xevudy
COVID-19
treatment
£2,309m >100%
AER; >100% CER
Monoclonal antibody treatment. Delivered
more than two million doses to over 30
countries since approval
Triumeq
HIV treatment
£1,799m -4% AER;
-11% CER
Dolutegravir-based fixed dose combination
tablets. Marketed in 67 countries
Nucala
Respiratory
eosinophil-driven
diseases
£1,423m +25% AER;
+18% CER
The only treatment to be indicated in the US
and Europe for use across four eosinophil-
driven diseases (see page 24)
Tivicay
HIV treatment
£1,381m flat% AER;
-7% CER
Dolutegravir tablet for use in combination
with other antiretroviral agents. Marketed
in 71 countries
Dovato
HIV treatment
£1,375m +75% AER;
+65% CER
Dolutegravir based two-drug regimen. Now
launched in over 50 markets
Benlysta
Lupus and lupus
nephritis
£1,146m +31% AER;
+20% CER
Only biologic approved to treat both SLE
and LN, in the US, Europe and elsewhere
Juluca
HIV treatment
£636m +23% AER;
+14% CER
Dolutegravir based two-drug regimen.
Marketed in 30 countries
Zejula
Ovarian cancer
£463m +17% AER;
+12% CER
PARP inhibitor commercially available in 1L
maintenance in 29 markets and in 2L
maintenance in 29 markets
Cabenuva
(Vocabria +
Rekambys in
Europe and Japan)
HIV treatment
£340m >100% AER;
>100% CER
First and only complete long-acting
injectable regimen (cabotegravir, rilpivirine).
Launched in over 20 countries
Blenrep
Blood cancer –
multiple myeloma
£118m +33% AER;
+25% CER
An antibody-drug conjugate commercially
available in 19 countries for patients with
relapsed or refractory multiple myeloma
Rukobia
HIV treatment
£82m +82% AER;
+64% CER
Extended-release tablets for people living
with multi-drug resistant HIV-1 for use in
combination with other antiretrovirals.
Approved in the US, Canada and Europe
Apretude
HIV prevention
£41m
First and only long-acting injectable
(cabotegravir) for HIV prevention. Launched
in the US in 2022
Jemperli
Endometrial
cancer
£21m >100% AER;
>100% CER
PD-1-blocking antibody available in 15
countries that is continuing to be investigated
for future monotherapy and combination
regimens in multiple tumour types
Turnover
£11.3bn
+37% AER, +29% CER
Key marketed products
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Performance: Specialty Medicines continued
Oncology sales were £602 million, up 23% at AER, 17% at
CER.
Zejula
sales of £463 million were up 17% at AER, 12%
at CER driven by the first-line indication, but with diagnosis
and treatment rates continuing to be impacted by the
pandemic especially in the US. Sales of
Blenrep
of £118
million grew 33% at AER, 25% at CER, and included the
impact of withdrawal from US market in Q4 2022.
Sales of
Xevudy
were £2,309 million, compared to £958
million sales in 2021. Sales were delivered in all regions,
comprising £828 million in the US, £456 million in Europe,
and £1,025 million in International.
Our strategy for growth
Our portfolio of Specialty Medicines is focused on four
therapeutic areas: infectious diseases, HIV, immunology/
respiratory and oncology. We're leaders in infectious
diseases and HIV innovation and we’re also building our
positions in immunology and oncology. In the next five
years, we expect Specialty Medicines and HIV as a part of
Specialty to continue to be an important part of our growth.
The increasing convergence of disease prevention and
treatment and our expertise in vaccines and medicines
mean we are uniquely placed to focus on connections
between treatment and prevention.
We do this by accelerating our pipeline as well as
prioritising strategic business development which
complements are existing portfolio, such as our acquisition
of Sierra Oncology and global licence agreement with
Mersana Therapeutics.
Drivers of growth across the portfolio
In HIV, our strategy for growth now and in the future is
built on our innovative portfolio of medicines that are
transforming the HIV treatment and prevention landscape.
– Launched in 2019, our dolutegravir-based two-drug
regimen,
Dovato
, continues to build positive momentum,
benefiting over 143,000 people living with HIV globally
and delivering £1,375 million of revenue in 2022.
– Our long-acting therapies are also central to our growth
and are delivering results as they launch across our
markets.
– In 2021 we launched the only long-acting treatment
regimen,
Cabenuva
(known as
Vocabria
+
Rekambys
in
Europe and other markets). Non-inferior to daily anti-viral
therapy and dosed once every two months,
Cabenuva
addresses the challenges associated with daily oral
therapy of stigma, adherence and daily pill fatigue.
– In January 2022 we launched
Apretude
in the US. It's the
only long-acting medicine for HIV prevention offering
superior efficacy to daily oral prevention (FTC/TDF
tablets) and two-monthly dosing. The launch was
supported by a direct-to-consumer campaign, as well as
innovative community-driven interventions focused on
reaching key populations who could benefit most from a
preventative option.
– By 2026 we estimate our long-acting regimens
Cabenuva
and
Apretude
will generate around £2 billion of sales,
representing around a third of HIV net sales.
In immunology/respiratory, we continue to see strong
demand from
Benlysta
and
Nucala
.
–
Benlysta
for systemic lupus erythematosus and lupus
nephritis in adults and children continues to perform
strongly, with around 9,000 US patients initiating therapy
in 2022. It also became China’s only biologic medicine of
its kind, helping around 12,500 patients in 2022. We’re
focused on supporting earlier identification and greater
urgency to treat patients before lupus progresses and
organ damage occurs (see page 24)
–
Nucala
, the only targeted biologic therapy approved for
use across four eosinophilic diseases, continues to be a
driver of growth. We expanded access to
Nucala
in 2022
with approvals in Europe, Japan and the US for a 40mg
syringe for use at home with children. This follows earlier
approvals for at-home use for adults. The evidence
behind
Nucala
continues to grow, and in 2022 we shared
two-year data from REALITI-A, the real-world study
with
Nucala
in patients with severe eosinophilic asthma,
demonstrating how IL-5 inhibition in everyday practice
can help to achieve treatment goals. Our pioneering
work in IL-5 inhibition continues with the research into
depemokimab, a monoclonal antibody specifically
engineered with an increased affinity for IL-5 and a longer
duration of action to allow longer periods of time between
injections (see page 24)
In oncology,
Zejula
is the only monotherapy PARP inhibitor
approved in first-line therapy for newly diagnosed patients
with advanced ovarian cancer, regardless of biomarker.
This group of patients represents a significant area of
growth as healthcare providers are using PARPs more in a
first-line setting. Since COVID-19 we have seen the number
of patients presenting to their doctors with ovarian cancer
symptoms decline and the volume of newly diagnosed
ovarian cancer patients is 15-20% below pre-COVID (2019)
monthly averages. We expect that numbers will increase
again as patients return to normal health practices. We’re
now working to develop other combination therapies with
Zejula
(see page 26).
Daprodustat, our treatment for anaemia of chronic kidney
disease, is the market-leading and preferred HIF-PHI in
Japan, where it’s available as
Duvroq
. In February 2023
daprodustat was approved as
Jesduvroq
in the US for
adults on dialysis. We are seeking approval in the EU and
expect to have a decision mid-2023 (see page 27).
Our COVID-19 treatment
Xevudy
, developed with Vir
Biotechnology, continued to play an important role in
pandemic response for vulnerable patients in 2022. To date
we have delivered more than two million doses to over 30
countries, generating over £3 billion in sales.
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GSK Annual Report 2022
Performance: Specialty Medicines continued
Building our commercial capabilities
We are delivering growth across our portfolio by continuing
to focus on disciplined commercial and medical execution,
capability enhancement, competitive resourcing in
customer-facing activity and rigorous investment
allocation.
Attaining and keeping leading positions in our markets
means attracting and retaining the best people in our
industry. We’ve focused on developing our leaders internally
and we recruit specific marketing and commercial experts
from outside the business.
Over the last year, 67% of senior commercial leadership
appointments in Specialty Medicines were internal. We
recruited senior people externally to drive growth in
oncology and supplement our specialty global marketing
capability in our top 10 markets.
We’ve also focused on strengthening sales execution
capability in our markets. We appointed 16 general
managers in 2022, bringing fresh leadership into
26% of these positions.
Maintaining strong links with healthcare
professionals and patients
Connecting with HCPs and patients helps us to meet their
needs. It also helps us to keep them informed about clinical
data, products in our pipeline and upcoming launches. The
more effectively we interact, the better they understand the
science behind our products, their benefits and how best to
use them.
We have scaled up our use of data-led omnichannel
communication platforms to reach more patients face-to-
face and digitally. To date, we've digitally enabled 27
brands and 447 campaigns across 44 markets, doubling
our efforts compared to last year, and resulting in
incremental growth and market share.
Our use of digital, data and analytics in 2022 extends to
driving Medical Affairs effectiveness. Advanced analytics
and text mining has produced medical insights which allow
for high-quality scientific engagement with experts to
improve patient outcomes. We’ll continue to prioritise use of
omnichannel communication platforms in Medical Affairs
to engage HCPs on the latest scientific advances.
Managing our global supply chain
Our supply chain is a global network that enabled us to
produce and deliver 1.8 billion packs in 2022. We've
streamlined our network to make it smaller, more agile and
more resilient, with the capacity and capability to bring the
next generation of medicines to patients all over the globe.
Amid geopolitical uncertainties, we're focused on the
availability of energy and commodities, and on managing
constraints around freight and other resources needed to
supply medicines to patients. Despite these challenges, our
programme of productivity and efficiency improvements
remains on track. This year we delivered £23 million in
savings through the programme, taking the cumulative
total to £62 million. Our target for the programme is to
deliver £119 million in savings by 2025. These savings
support improvements in gross margin.
We have 25 sites manufacturing medicines in our GSK
network. Overall, site productivity has increased by 3.9%
year on year over the last three years.
Strengthening our manufacturing base
Modern manufacturing facilities help us launch specialty
medicines quickly so we can build and strengthen our
market positions and performance.
In June 2022, we opened our new manufacturing facility
at Barnard Castle in the UK. It is sustainably designed,
paperless and fully automated, using robotic aseptic
filling technology to increase efficiency. The facility will
manufacture many of the existing and new
biopharmaceutical assets in our pipeline.
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Performance: Specialty Medicines continued
We also opened our expanded facility at Upper Merion,
Pennsylvania, which is now one of the most advanced
single-use facilities for the manufacture of bulk drug
substances and able to manufacture a wide range of
biopharmaceutical pipeline assets, including monoclonal
antibodies. Our expanded facility at Rockville, Maryland, is
on target to start manufacturing in 2023. This facility
combines single-use systems, large-scale stainless steel
manufacturing and automation to produce our lupus
treatment,
Benlysta
. The investment of more than $150
million will increase capacity at Rockville by around 50%.
We're also investing over £60 million in our new oral solid
dose facility at Ware in the UK to help us deliver new
products at pace, in partnership with R&D. Product
performance qualification (the first set of batches that
confirm the commercial manufacturing process performs
as expected) is due to start in the second half of 2023.
Streamlining our supply chain helps us control costs and
allocate more capital to developing, launching and
marketing medicines. This includes investing in AI/ML
which helps us to optimise yield, inventory and on-time
in-full (OTIF) delivery.
Maintaining a consistent and reliable supply
A reliable, high-quality supply of products is essential for us
to meet patients’ needs and maintain our performance. We
routinely update our quality management system (QMS) to
keep pace with the evolving regulatory environment and
new scientific understanding of our products and
processes. We've also made our policies and procedures
simpler to understand and implement.
We've improved deviation rates, and reliability of supply
remains strong with an OTIF measure of 97.2% across our
full supply chain and 99.4% for Specialty Medicines.
For information on product governance and data on recalls,
regulatory inspections and audits, see pages 49 and 50
Supporting our Innovation ambition
Our Specialty Medicines supply chain continues to support
our innovation strategy by delivering launch products across
therapy areas and regions worldwide. We are making our
internal and external network flexible enough to enable
on-time launches of our upcoming medicines. We're also
working with R&D by investing in rapid knowledge transfer
from chemistry manufacturing & control project teams to
manufacturing sites.
Following a successfully managed rapid launch of our
COVID-19 therapeutic
Xevudy
(sotrovimab), by the end of
2022 over two million doses of
Xevudy
had been supplied
globally. We are also preparing for the successful launch
and supply of late-stage assets like daprodustat and
momelotinib (if approved) in 2023. Our Specialty Medicines
supply chain will support multiple late-stage clinical
programmes and further upcoming launches in the second
half of 2023 and 2024.
For details about the General Medicines supply chain, see page 40
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From antibiotics to inhaled medicines for asthma and COPD, we have
over 150 general medicine products, many of them leaders in their class,
making life better for millions of people worldwide.
Escherichia coli (E. coli) bacteria
GSK Annual Report 2022
Commercial operations
Performance: General Medicines
38
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39
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Performance: General Medicines
Respiratory
£
6,548m
Other General Medicines
£
3,570m
Product
Disease
Total revenue
Key information
Trelegy Ellipta
COPD, asthma
£1,729m +42% AER;
+32% CER
Most prescribed single inhaler triple therapy
worldwide, reaching an estimated 5.1 million
patients since launch
Seretide/Advair
Asthma, COPD
£1,159m -15% AER;
-17% CER
One of the market-leading ICS/LABA
2
treatments worldwide
Relvar/Breo
Ellipta
Asthma, COPD
£1,145m +2% AER;
-2% CER
One of the leading ICS/LABA treatments
worldwide powered by its 24-hour, sustained
efficacy and the convenience of the
Ellipta
inhaler device
Ventolin
Asthma, COPD
£771m +7% AER;
+2% CER
Global market-leading SABA
3
reliever
Augmentin
Common bacterial
infections
£576m +35% AER;
+38% CER
Global leader in oral antibiotics available in
over 95 countries
Lamictal
Epilepsy, bipolar
disorder
£511m +7% AER;
+1% CER
No. 1 brand by sales value in the global
lamotrigine market
Anoro Ellipta
COPD
£483m -4% AER;
-9% CER
Global market leader in the LAMA/LABA
1
class approved in over 70 countries
Avodart &
Duodart
Benign prostatic
hyperplasia (BPH)
£330m -1% AER;
-3% CER
Market leaders by sales value in the global
dutasteride and dutasteride+tamsulosin
FDC
4
market respectively, approved in over
85 countries
Avamys/
Veramyst
Allergic rhinitis
£321m +8% AER;
+6% CER
Global leader in the inhaled corticosteroids
prescription class
Dermovate,
Betnovate,
Cutivate, Eumovate
Inflammatory
skin conditions
£200m 0%AER,
+1% CER
Global leader in topical corticosteroids across
60 markets globally
Turnover
£10.1bn
+5% AER, +1% CER
Key marketed products
Sales performance
General Medicines sales in the year were £10,118 million,
up 5% at AER, 1% at CER, with the impact of generic
competition in US, Europe and Japan offset by
Trelegy
growth in respiratory and the post-pandemic rebound
of the antibiotic market since H2 2021, in Other General
Medicines.
Respiratory sales were £6,548 million, up 8% at AER, 3%
at CER. The performance was driven by
Trelegy
sales of
£1,729 million, up 42% AER, 32% CER, including strong
growth across all regions.
Advair/Seretide
sales of £1,159
million decreased 15% at AER, 17% at CER predominantly
reflecting the adverse impact of generic competition, with
growth in certain International markets due to targeted
promotion offsetting the decrease.
Other General Medicines sales were £3,570 million,
decreasing 1% at AER, 2% at CER.
Augmentin
sales were
£576 million, up 35% at AER, 38% at CER, reflecting the
post-pandemic rebound of the antibiotic market since H2
2021 in the International and Europe regions.
This partially offsets the ongoing adverse impact of
generic competition, and approximately two percentage
points impact at AER and CER from the divestment of
cephalosporin products in Q4 2021.
Our strategy for impact
The General Medicines portfolio encompasses our primary
care medicines from pre-launch R&D assets to growth
and established products. In 2022, General Medicines
contributed over one third of GSK's sales, helping to fuel
growth and investment in R&D.
Our combination of more than 150 products, several of
which are market leaders, are expected to impact the lives
of millions of patients over the next 10 years. Our products
are supplied in more than 112 countries worldwide,
delivering over 80% of our total medicines supply volume.
Every day, these medicines improve health and make life
better for millions of people all over the world.
1
LABA/LAMA: long-acting beta agonists/long-acting muscarinic antagonists
2
ICS/LABA: inhaled corticosteroid/long-acting beta agonists
3
SABA: short-acting beta agonist
4
FDC: fixed dose combination
Key information source IQVIA
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GSK Annual Report 2022
Performance: General Medicines continued
With expected growth from
Trelegy
,
Anoro
, the established
products portfolio in emerging markets and, if successful,
gepotidacin and, tebipenem, we are committed to
positively impacting more lives every day.
We continue to focus on maximising investment in our
growth brands and new opportunities, while managing the
expected decline of other products in mature markets as
they lose their exclusivity. The decline in established
products is well managed, through targeted investments
towards growth opportunities and reflects continued strong
demand for our core products.
Drivers of growth across the portfolio
Our main sources of growth in General Medicines in 2022
were
Trelegy
,
Anoro
and
Augmentin
.
Trelegy
, our single inhaler triple-therapy for asthma and
COPD, has continued to accelerate strongly, with growth in
all regions including the US and is the third biggest growth
driver (excluding
Xevudy
) across GSK’s portfolio this year.
Trelegy
, is now prescribed in more than 63 countries, with
dual indications in key markets. Several new approvals were
received in 2022, further expanding
Trelegy’s
availability to
asthma patients in Argentina, Taiwan, New Zealand,
Oman, Bahrain, South Korea and Kuwait, and COPD
patients in Kuwait and Indonesia.
Trelegy
leads market share in our two largest markets, US
and Japan, with market shares significantly exceeding the
next largest competitor. In 2022 the competitive market
position for
Trelegy
was further strengthened by a network
meta-analysis of the triple therapy class demonstrating
differentiation among the COPD single-inhaler triple
therapies. We continue to expect
Trelegy
to be a key driver
of growth in General Medicines in the coming years.
Anoro
is approved in approximately 70 countries for the
treatment of symptomatic COPD.
Anoro
remains the global
market leader in the LAMA/LABA class, with continued
growth in global sales (ex-US).
Anoro
has a robust clinical
data profile which includes head-to-head data within the
LAMA/LABA class and versus other common initial
maintenance therapy options, such as LAMA.
Augmentin
is a global leader in oral antibiotics and
available in 95 countries. It has reached over 2.5 billion
patients since launching 41 years ago, and continues to
grow strongly in emerging markets.
Augmentin
grew 35%
AER, 38% CER to £576 million with recovery in key emerging
markets and Europe, recovering stronger than any
competitor post-pandemic. Today,
Augmentin
is still being
recognised for its impact and recently won the bronze in
the best pharmaceutical product category for the Prix
Galien Golden Jubilee awards in October 2022.
Two important products in our late-stage pipeline,
anticipated to be future growth drivers for General
Medicines, include gepotidacin, for uUTIs and urogenital
gonorrhoea, and tebipenem HBr, a late-stage antibiotic
licensed exclusively from Spero Therapeutics, that may
treat cUTIs (see pages 20 and 22).
Maximising commercial capabilities
We have a targeted investment strategy to deliver returns,
backing our largest opportunities, both branded and
geographic, to maximise launches in new medicines
and indications. In parallel, we target our investments
appropriately to optimise returns in mature brands where
there is a broader range of opportunity and risk.
We continue to invest in omnichannel and digital customer
engagement. Digital plays an important role in how we
connect with our customers, and this is especially important
in General Medicines given our expansive global footprint.
Our data-driven customer experience (DDCX) programme
for
Trelegy
was recognised externally by the International
Customer Experience Awards (iCXA) across all sectors. In
2021, among 120 companies and 353 initiatives entered, we
won three silver awards for
Trelegy
competing across all
industries, in the following categories:
– Best Business-to-Business Customer Experience Strategy
– Business Change and Transformation
– Customer Experience Team of the Year
Maintaining an efficient supply chain
Demand for many products in our General Medicines
portfolio increased significantly as COVID-19 lockdowns
lifted and global markets recovered from the effects of the
pandemic. We increased packs supplied from 1.60 billion in
2021 to 1.64 billion in 2022. This growth demonstrated the
resilience of our General Medicines brands. We anticipate
this further increasing to 1.67 billion in 2023.
To keep our supply chain lean, we continue to simplify
our portfolio by standardising packaging and formats
and discontinuing products. By the end of 2022, General
Medicines had reduced the number of brands in the
portfolio by a further 9% from 194 to 177, and we plan
to further discontinue non-priority brands in 2023.
We have also taken key decisions as part of our focus on
productivity and efficiency, for example to outsource the
manufacture of amoxicillin.
We rigorously benchmark the performance of our General
Medicines supply chain against the competition and make
thoughtful choices on how we optimise both our cost and
cash footprint for the portfolio.
For more about our global supply chain, which also covers
Specialty Medicines, see pages 36 and 37
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GSK Annual Report 2022
Responsible business
Our approach to ESG is an integral part of our strategy
and investment case. It helps us build trust and create
value for our shareholders and society – so we can
get ahead of disease together.
41
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Financial statements
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GSK Annual Report 2022
Responsible business
Being a responsible business means getting ahead of
disease together in the right way. We therefore need to
consider ESG impacts across everything we do, from the
lab to the patient. That's why ESG is embedded in our
strategy and supports our sustainable performance and
long-term growth. It helps us build trust with and deliver
returns to our stakeholders, reduce risk to our operations
and deliver positive social impact.
Our six ESG focus areas
We can only deliver on our purpose if we embed ESG into
everything that we do. We have identified six ESG focus
areas that address what is most material to our business
and the issues that matter to our stakeholders. These focus
areas are core to our strategy and are the areas where we
can have the greatest positive impact on some of society’s
most urgent challenges. These focus areas are:
– Access to healthcare
– Global health and health security
– Environment
– Diversity, equity and inclusion
– Ethical standards
– Product governance
Our approach is guided by extensive stakeholder
engagement and the key issues relevant to our industry and
company. The results of our most recent materiality
assessment reaffirmed that the most material issues for our
business were well aligned with our six ESG focus areas.
We are aware, however, that being a responsible business
is not a static requirement and our operating environment
continues to change at pace. We will continue to adapt,
respond and proactively change our approach, to ensure
GSK continues to deliver strong ESG performance.
Our ESG Performance Rating
To support the integration of ESG into strategy delivery and
to make our ESG performance measurable and verifiable,
we have introduced a new ESG Performance Rating. The
rating is one of our corporate KPIs and measures progress
against key metrics aligned to each of our six focus areas.
In 2022, this included 23 metrics, and we cover our
performance against these in this section of the report.
The metrics were developed with stakeholder input, and our
understanding of the key issues for our industry and our
company. We are committed to ensuring that our ESG
Performance Rating responds to stakeholder expectations,
so we will continue to review the metrics as our business
and external expectations change.
To create the ESG Performance Rating, management
sought metrics that:
– Are well defined to ensure we have a standardised
approach
– Can be used consistently in future years
– Are ambitious and achievable
– Can be externally assured
– Are meaningful for stakeholders
How we assess performance
GLT is accountable for delivering progress against the
metrics and regularly reviews performance along with the
Board’s Corporate Responsibility Committee (CRC). Each
individual metric is assessed as either: on track (metric met
or exceeded); on track with work to do (at least 80% of
metric has been achieved); or off track (metric missed by
more than 20%).
In addition, in order to calculate the overall ESG
Performance Rating, performance across all metrics is
aggregated to a single score to illustrate whether we are
on track, on track with work to do, or off track. This rating
is defined below:
On track:
70% of all metrics are on track
On track with work to do:
more than 50% of all metrics are
either on track, or on track with work to do
Off track:
more than 50% of all metrics are off track
External benchmarking
Detailed below is how we perform in key ESG ratings that
we are frequently asked about by investors:
–
Access to Medicines:
Ranked 1st in the Access to
Medicines Index in 2022 and an industry leader in the
2021 Antimicrobial Resistance Benchmark
–
S&P Corporate Sustainability Assessment:
Ranked 2nd
in the pharmaceuticals industry with a score of 86 (as at
17 February 2023) and included in the DJSI World and
Europe indices
–
FTSE4Good:
Member of FTSE4Good Index since 2004
–
CDP:
A- in Climate change, B in Water security, A- in
Forests (palm oil) and B in Forests (timber)
–
Sustainalytics:
Low risk rating
–
MSCI:
AA rating
–
Moody's ESG solutions:
Ranked 2nd in the
pharmaceuticals sector
–
ISS Corporate Rating:
B+ rating
2022 ESG Performance Rating
Our 2022 ESG Performance Rating is
on track
, based on
83% of all performance metrics being met or exceeded.
Assessment of performance against our annual targets
has been reviewed, and the overall ESG Performance
Rating score has been externally assured for 2022.
For full details of progress against our six focus areas, our latest materiality assessment and our ESG Performance Rating and 23 metrics,
please see our ESG Performance Report
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Governance and remuneration
Financial statements
Investor information
Strategic report
Access
Our ambition is to positively impact the health of 2.5 billion
people by the end of 2030. We will achieve this by
developing vaccines and medicines and making them
available through responsible pricing, strategic access
programmes and partnerships.
Our commitment
Make our products available at value-based prices that are
sustainable for our business and implement access
strategies that increase the use of our medicines and
vaccines to treat and protect underserved people.
How we assess performance
– Develop and externally publish pricing and access
principles
– Progress towards our 2030 goal of reaching 1.3 billion
people in lower income countries with our products
Progress in 2022
Putting the right value on innovation
We follow a set of pricing and access principles, published
for the first time in 2022. These help us to get the balance
right between responsible pricing and a sustainable,
profitable business that allows us to re-invest financial
returns in future innovation, while ensuring people can
access medicines and vaccines.
In 2022, in the US, through GSK and ViiV Healthcare’s Patient
Assistance Programs Foundation, we provided prescribed
medicines and vaccines to more than 78,000 low-income
uninsured, underinsured and Medicare Part D patients.
In the US, during the year, our combined average net
price (after discounts, rebates or other allowances) for our
pharmaceutical and vaccines portfolio increased by 1.4%,
while the average list price increased by 3.8% compared to
4.9% (list) for the industry, which demonstrates we are
responsible in our pricing decisions
1
. Over the past five
years, the average net price for our products decreased
by 1.1% annually, while the average list price rose by 3.9%
compared to 5.0% (list) for the industry
1
.
Reaching patients in lower income countries
Our goal is to reach 1.3 billion people in lower income
countries with our products by the end of 2030, through
access initiatives such as voluntary licensing, donations and
our work with Gavi, the Vaccine Alliance. In 2022, we
reached 73 million people with our products and supplied
an additional 533 million doses of albendazole
2
. In 2022, we
ranked first in the Access to Medicines Index for the eighth
consecutive time.
Vaccines
We have been a partner with Gavi since its foundation in
2000. We reserve our lowest vaccine prices for Gavi and
similar organisations and, in 2022, we passed the milestone
of supplying Gavi with more than one billion vaccines
since 2010.
Our partnership includes supplying
Cervarix
, a critical
vaccine in lower income countries for addressing cervical
cancer. In 2022, we supplied around 40 million doses of our
pneumococcal vaccine,
Synflorix
, to eight Gavi-eligible
countries at our lowest price. Our
Rotarix
vaccine against
rotavirus reaches children across 27 Gavi-eligible countries
and four former Gavi countries. Since March 2021, as well as
Synflorix
, we have also offered
Rotarix
through the
Humanitarian Mechanism, to civil society organisations
serving refugees and working in other emergency situations.
We are also a long-standing supplier of oral polio vaccines
(OPV) through UNICEF and, in 2022 alone, supplied around
95 million doses to help eradicate polio.
Neglected tropical diseases
In 2022, we donated 533 million doses of albendazole, a
medicine used to help eliminate lymphatic filariasis and
treat soil-transmitted helminths. We have also extended our
soil-transmitted helminths commitment to include pre-
school children and made an additional commitment to
donate albendazole for treatment of echinococcosis.
HIV
In 2022, ViiV Healthcare and the Medicines Patent Pool
(MPP) signed a new voluntary licensing agreement to allow
generic manufacturers to develop, manufacture and supply
cabotegravir long-acting for HIV pre-exposure prophylaxis.
ViiV Healthcare also has voluntary licensing agreements
with 17 generic manufacturers to produce and sell low-cost
single or fixed-dose combination products containing our
HIV medicine dolutegravir for adults in 95 low- and middle-
income countries, with one direct licence and the others via
the MPP. There are similar agreements with 14 generic
manufacturers for children, covering 123 countries. As a
result of these voluntary licence agreements, around
21 million people living with HIV across 122 countries had
access to a generic product containing dolutegravir by the
end of 2022. This is at least 80% of people living with HIV
on antiretrovirals in low- and middle-income countries.
In 2022, ViiV Healthcare donated around 7,200 packs of
antiretroviral medicines to NGO partners and national HIV
and AIDS programmes to support people living with HIV
who have been impacted by the conflict in Ukraine. ViiV
has also provided over £800,000 through its Positive Action
programme to support 11 community-based organisations
with humanitarian response activities, both within Ukraine
and in surrounding countries hosting refugees.
Responsible business continued
1
Industry averages are sourced from
Drug Channels
annual brand-name
drug list change report
2
The 73 million figure includes people reached with
Synflorix
,
Rotarix
,
Cervarix
, OPV and
Mosquirix
vaccines and people with access to a
generic dolutegravir product through our voluntary licensing agreements;
however it does not include people reached through albendazole, for
which an assessment will be made in 2025 by the WHO and GSK
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Positive Action, ViiV Healthcare's community grant-giving
programme, celebrated its 30th anniversary in 2022 with a
year-long campaign to showcase the people at the heart
of the programme, the partners in implementation and the
progress made through collaboration. It invested more than
£12.6 million in 2022, reaching approximately 392,000
people and providing 137 grants across 33 countries.
Malaria
Working with our partners, more than 1.2 million children in
Africa have now received at least one dose of our malaria
vaccine,
Mosquirix
(RTS,S/AS01 E). In September 2022, the
WHO awarded pre-qualification to the vaccine.
This is a prerequisite for UN agencies to procure the
vaccine, and an important step in rolling it out in countries
with moderate to high
P. falciparum
malaria transmission.
GSK, PATH and Bharat Biotech have agreed a product
transfer to help ensure long-term supply of the RTS,S
malaria vaccine. We have committed to supply up to 18
million doses over the next three years, in addition to our
donation of up to 10 million doses to the WHO-coordinated
Malaria Vaccine Implementation Programme in Ghana,
Kenya and Malawi.
For full details of our progress against our six focus areas, please
see our ESG Performance Report
Responsible business continued
Global health and health security
We use our expertise to address the biggest health
challenges for underserved people around the world.
Our commitment
To develop novel products and technologies to treat and
prevent priority diseases, including pandemic threats.
How we assess performance
– Progress three Global Health pipeline assets to address
priority WHO diseases
Progress in 2022
Global health R&D
In June 2022, GSK, including ViiV Healthcare, announced
a £1 billion investment in R&D to help us get ahead of
infectious diseases in lower income countries. The 10-year
investment will support R&D on new medicines and vaccines
to prevent and treat tuberculosis (TB), malaria, HIV, enteric
diseases, and neglected tropical diseases, and to reduce
AMR. In 2022, we progressed 12 Global Health pipeline
assets to address priority WHO diseases, including malaria
and TB, exceeding our target of three.
We want to discover shorter, simpler and safer treatments
for TB. In 2022, alongside our partners and through public-
private research consortiums, we continued to progress our
pipeline of novel TB medicines. In 2022, we announced
positive phase IIa study results for GSK3036656, a new
first-in-class candidate medicine for patients with TB.
Results of the study demonstrated the potential for the
candidate to become a component of simpler treatment
regimens in the future.
In partnership with BioVersys, the University of Lille and the
Innovative Medicines Initiative (IMI) project, TRIC-TB, we
also successfully completed phase I trials of BVL-GSK098,
which has the potential to help tackle drug resistance by
boosting the activity of an existing antibiotic.
With our partners, we’ve brought two products for the
prevention and treatment of malaria to market – the world’s
first vaccine against malaria, and a single-dose, radical
cure for
P. vivax
malaria.
In March 2022, the Australian regulator, the Therapeutic
Goods Administration, approved the use of single-dose
medicine tafenoquine in children aged two and above
in combination with chloroquine for the radical cure of
P. vivax
malaria.
The FDA approved
Triumeq
PD
, the first dispersible single
tablet formulation containing dolutegravir for children
weighing more than 10kg, which increases the age-
appropriate treatment options for children living with HIV.
At the end of 2022, the CHMP of the EMA also issued a
positive opinion recommending marketing authorisation for
Triumeq PD
for children 14kg and above.
Invasive non-typhoidal salmonella disease can be life-
threatening for children in Africa and is a key driver of
AMR. We're using our innovative vaccine technology in
partnership with the University of Oxford and Vacc-iNTS,
to develop a potential candidate vaccine using our
Generalised Modules for Membrane Antigens technology.
To help support global R&D, in December 2022, we
announced the fourth call for proposals as part of the
Africa Open Lab. The call for proposals is aimed at African
early-career scientists who are based in sub-Saharan
Africa, with a focus on infectious diseases which
disproportionately affect sub-Saharan populations,
such as malaria, TB and neglected tropical diseases.
Getting ahead of antimicrobial resistance
We have more than 30 R&D projects across medicines
and vaccines that are relevant to AMR, ranging from early-
to late-stage development. These include gepotidacin,
which could be the first novel oral antibiotic treatment for
uncomplicated urinary tract infections in over 20 years;
and in 2022, we announced an exclusive licence agreement
with Spero Therapeutics for tebipenem HBr, a late-stage
antibiotic that may treat complicated urinary tract
infections. 13 of these projects target pathogens deemed
'critical' or 'urgent' by the WHO and the US CDC. See page
22 for more about our R&D pipeline.
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Strategic report
Responsible business continued
Surveillance is central to tackling AMR. In 2022, we shared
data from our long-running Survey of Antibiotic Resistance
(SOAR) study, which tracks community-acquired respiratory
infections, with the new AMR Register, developed by Vivli.
In 2022, we also worked with the AMR Industry Alliance to
publish a new Antibiotic Manufacturing Standard. This
provides clear guidance to manufacturers in the global
antibiotic supply chain to help ensure that their antibiotics
are made responsibly and in compliance with scientifically
robust discharge limits.
For full details of our progress against our six focus areas, please see
our ESG Performance Report
Future pandemic preparedness
In July 2022, GSK, along with other major biopharmaceutical
companies, signed up to the Berlin Declaration. This sets out
the industry’s vision for equitable access during future
pandemics.
The declaration stated the sector’s willingness to reserve an
allocation of real-time production of medicines and
vaccines for distribution to priority populations, as
determined by health authorities, during future pandemics.
In 2022, GSK concluded a series of contracts under which
we would provide at least 200 million doses of pandemic
influenza vaccine to governments around the world.
In February 2022, we extended our pandemic influenza
vaccine stockpile contract with the United States
government. This was followed by a renewed agreement, in
June 2022, for supply of pandemic influenza vaccines to the
WHO, and in July 2022, a contract with the government of
Canada for both seasonal and pandemic influenza vaccines.
We signed an agreement with Europe for the reservation
and future production and supply of pandemic influenza
vaccines. We are also continuing to partner with the BARDA
to manufacture and assess the safety and immunogenicity
of pandemic influenza vaccine candidates.
Environment
We continue to work hard to do more to protect the
environment, often in partnership with others. We’ve set
clear and measurable targets to help achieve our goals.
Our commitment
Commit to a net zero, nature positive, healthier planet, with
ambitious goals set for 2030 and 2045.
How we assess performance
The following metrics are included in our ESG Performance
Rating and support delivery of our carbon and nature
ambitions:
– Climate
– Operational emissions reduction (scope 1 and 2
market-based emissions)
– Industrialisation of green
Ventolin
initiated, and clinical
and non-clinical data available to support regulatory
submissions
– Percentage of carbon offset volume in project pipeline
– Water
– Average of the percentage of GSK sites and suppliers
compliant with wastewater active pharmaceutical
ingredient limits and the percentage of suppliers that
are compliant with the AMR Industry Alliance Common
Antibiotic Manufacturing Framework and discharge
limits
– Waste and materials
– Operational waste and material reduction at our sites
– Biodiversity
– Number of high-risk materials implementing
sustainable sourcing roadmaps
Progress in 2022
Climate
We have set a clear pathway to a net zero impact on
climate with ambitious goals for 2030 and 2045. We have
updated our climate targets to be in line with the new
Science Based Targets initiative (SBTi) Net-Zero Standard.
By 2030, we aim to reduce carbon emissions across all
scopes by 80%, against a 2020 baseline, with the
remaining 20% offset through investment in high-quality
nature-based solutions. We have also now set a longer-
term target to reduce carbon emissions by at least 90%
with the remainder tackled through high-quality offsets by
2045. For additional context on these changes see pages
16 and 17 of the ESG Performance Report.
Targets
1
:
– 80% reduction in carbon emissions and investment in
nature-based solutions for the remaining 20% of our
footprint by 2030 (all scopes)
2
– 100% renewable electricity by 2025 (scope 2)
– Net zero emissions across our full value chain by 2045
(all scopes)
3
1
Targets are measured against a 2020 baseline
2
Previously stated as net zero by 2030
3
This is a new longer-term target, aligned to the SBTi Net-Zero Standard
definition of net zero
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Responsible business continued
Performance
In 2022, we reduced our scope 1 and 2 carbon emissions
by 6% compared with 2021. This was primarily through
increasing our use of renewable electricity and continued
delivery of energy efficiency across our sites, such as the
installation of new solar panels, upgraded lighting and
replacing chillers to reduce the use of ozone depleting
refrigerant. As a member of RE100, we have committed
to source 100% renewable electricity by 2025. In 2022,
we reached 73%, an increase of 6% since 2021 and 28%
since 2020.
Following the demerger of our Consumer Healthcare
business, we are restating our value chain carbon footprint
for our baseline year 2020. In 2021 (our latest available
data), our scope 3 emissions reduced by 13% compared
with 2020. These reductions reflect the evolution of our
product portfolio.
Approximately 29% of our total emissions footprint comes
from the goods and services that we buy. In September
2022, we launched a Sustainable Procurement Programme,
which will require our suppliers to, among other things,
disclose emissions, set carbon reduction targets aligned
with 1.5
o
C, and switch to renewable power and heat.
We are also working with our peers through the Energize
programme to encourage the use of renewable energy
throughout the pharmaceutical sector’s supply chain. In
2022, nine suppliers formed the first Energize buyer’s cohort,
who together will purchase two terawatt-hours of
renewable electricity.
See pages 55 to 62 for our disclosure on climate risk and
resilience in line with the Task Force on Climate-related
Financial Disclosures (TCFD) framework.
Nature
We are committed to working towards our goal of having a
net positive impact on nature by 2030, by reducing our
environmental impacts across water, waste and materials,
and biodiversity and by investing in protecting and
restoring nature.
Targets
1
:
– Achieve good water stewardship at 100% of our sites by
2025
2
– 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
2
– Zero impact active pharmaceutical ingredient (API) levels
for all sites and key suppliers by 2030
3
– Zero operational waste, including eliminating single-use
plastics, by 20304
– 25% environmental impact reduction for our products
and packaging by 2030
– 10% waste reduction from our supply chain by 2030
– Positive impact on biodiversity at all sites by 2030
– 100% agricultural, forestry and marine-derived materials
sustainably sourced and deforestation free by 2030
Performance
In 2022, we reduced overall water use in our operations by
5% since 2021 and by 1% in sites in high water stress regions.
This is a decrease of 23% for overall water use and 6% for
sites in high water stress regions against our 2020 baseline.
This achieved our 2030 overall water use reduction target,
which we will now review. 100% of our sites are now good
water stewards, in line with the Alliance for Water
Stewardship’s definition.
We have initially identified three water basins in water-
stressed areas in Algeria, India and Pakistan where we have
manufacturing sites, and where we aim to be water neutral.
At our manufacturing facility in Nashik, India, we have built
plants for rainwater harvesting.
In 2022, 100% of our sites and 98% of our suppliers that
manufacture antibiotics complied with AMR Alliance
industry standards on safe discharges.
In 2022, we continued to reduce the waste from our sites
and increase the amount of materials recovered through
circular routes like reuse or recycling. We are also targeting
materials across our existing product portfolio.
We are progressing our plans for net positive biodiversity at
our own sites by investing in individual site action plans that
improve habitats, protect species and improve soil and
water quality. In 2022, we completed baseline biodiversity
assessments for 80% of our sites. We have commenced
biodiversity uplift projects at our three largest R&D facilities.
We have also completed a full assessment of our
biodiversity impact (across the entire value chain) and
will be taking targeted actions to address the highly-
stressed areas.
In the lead-up to the UN Convention on Biological Diversity,
the critical COP15 conference in Canada at the end of
2022, we worked with partners to call for mandatory
disclosure by businesses and financial institutions of their
impacts and dependencies on nature.
We are part of the LEAF Coalition (Lowering Emissions by
Accelerating Forest finance), a private-public effort to
protect tropical forests. We are also testing a framework for
voluntary carbon credits from the Voluntary Carbon Market
Integrity Initiative, which is working to establish a globally-
standardised benchmark to guide the use of carbon credits
by companies.
See pages 62 to 63 for how we plan to disclose on our
impacts and dependencies on nature in line with the
emerging Taskforce on Nature-related Financial
Disclosures (TNFD) framework.
For full details of our progress against our six focus areas, please
see our ESG Performance Report
1
Targets are measured against a 2020 baseline
2
See our Environment Basis of reporting for definition
3
Zero impact against predicted no effect concentrations
4
Where regulatory obligations allow, and excluding plastics which are
critical to product discovery and development and health & safety
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Diversity, equity and inclusion
Diversity, equity and inclusion (DEI) are central to our
purpose of getting ahead of disease together. Being an
inclusive and diverse business – and doing business
inclusively – makes us more successful, making the most of
our people’s potential and increasing our positive impact.
Our commitment
Create a diverse, equitable and inclusive workplace;
enhance recruitment of diverse patient populations in our
clinical trials; and support diverse communities.
How we assess performance
– 75% of phase III trials initiated in 2022 will have proactive
plans in place designed to enrol appropriately diverse
trial participants, consistent with disease epidemiology
– Performance towards 2025 aspirations through fair and
equitable opportunities:
– have women hold at least 45% of VP-and-above roles
globally by the end of 2025
– have at least 30% ethnically diverse leaders in our roles
at VP and above in the US, and increase the
percentage of Black or African American, and Hispanic
or Latinx VP-and-above leaders year on year
– have at least 18% ethnically diverse leaders in our
roles at VP and above in the UK, and increase the
percentage of Black VP-and-above leaders year
on year
– Improve year-on-year spend with certified US-based
diverse-owned suppliers
Progress in 2022
Building an inclusive business
We are committed to improving diversity in clinical trial
enrolment and are already using our disease insights to set
diversity enrolment goals. At the end of 2022, 100% of GSK's
phase III trials had a diversity plan in place to enrol the
groups most affected by the disease being studied, based
on epidemiology data. For example, in our hepatitis B trials,
a disease that disproportionately affects people of African
and Asian descent, 52% of participants are of Asian origin,
and we are actively working to improve the representation
of participants of African descent.
Our supplier diversity programme is well established in the
US, and an expansion plan is being developed for the UK.
We have a target to increase spend annually with certified
US-based diverse-owned suppliers. This was significantly
exceeded in 2022 through a combination of spend
increases with selected suppliers in marketing, sales and
technology, as well as identification of new global diverse
suppliers and a strong multi-year strategy of engagement
with key advocacy groups.
Our
GSK Science in the Summer
initiative offers free,
hands-on STEM learning to students in traditionally
under-represented groups in STEM careers or from under-
resourced communities in the US. In 2022, it reached more
than 30,000 students nationwide.
Nurturing all our people
In 2022, 42% of women held VP-and-above roles globally,
compared with 40% in 2021. Women made up 47% of all
employees in 2022, and 50% of all management roles.
We published our sixth UK gender pay gap report in 2022.
Our gender pay gap for all permanent UK-based GSK
employees is -1.36% (mean), compared to the national
average of 13.9%. We published our first UK ethnicity pay
gap report for 2022 using the same approach as our
gender pay gap. Our ethnicity pay gap for all permanent
UK-based GSK employees is 0.06% (mean), at this time
there is no national average comparator.
In those countries that meet our criteria for data
confidentiality and anonymity, we disclose the race and
ethnicity of our people at each level and set aspirational
targets. Currently, the US and the UK meet those criteria. In
the US in 2022, we have 31.3% of ethnically diverse leaders
at VP level and above, reaching our 2025 aspirational
target of at least 30%, and increasing the percentage of
Black or African American and Hispanic or Latinx people in
those roles year on year. In the UK in 2022, we have 14.3% of
ethnically diverse leaders at VP and above, continuing to
make progress towards our 2025 aspirational target of
reaching at least 18%. Black representation at VP and
above remains flat and we will be focused in our efforts
to achieve our aspiration for year-on-year growth.
We are members of the UK government’s Disability
Confident scheme and are an active member of the
Valuable 500 pledge, a grouping of 500 global companies
committed to placing disability inclusion on the leadership
agenda. We are delivering on the scheme's objectives
through our long-term, measurable, disability confidence
plan, which includes educating our people on the issue.
In 2022, we introduced a new global minimum standard of
18 weeks' parental leave for primary and secondary carers
for all forms of family, a new global minimum standard for
care of a family member for end of life or serious health
emergencies, insured benefits to include same sex partners
wherever possible, a new financial wellbeing service and
mental health training – available to everyone.
This year, we were recognised as a Gold employer within
Stonewall’s Top Global Employers Index. Our Allyship
programme received an award recognising the tangible
impact the campaign has had on the lives of LGBT+
employees. We also achieved the Human Rights Campaign
Foundation's Best Places to Work for LGBT+ Equality
standard in 2022.
For full details of our progress against our six focus areas, please see
our ESG Performance Report
Responsible business continued
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GSK Annual Report 2022
Ethical standards
Our culture guides our people to do the right thing and
Speak Up about any concerns they have. It is important that
all our people live up to this, and we expect the same of our
suppliers.
Our commitment
Promote ethical behaviour across our business by
supporting our employees to do the right thing and working
with suppliers that share our standards and operate in a
responsible way.
How we assess performance
– 100% of employees and complementary workers
complete GSK’s 2022 mandatory training
– Percentage of employees who believe they ‘can and do
Speak Up if things don’t feel right’ is above the general
industry benchmark
1
– Number of employees leaving GSK's employment for
misconduct in the last 12 months versus the three-year
rolling average
– 80% of direct high-risk suppliers achieve GSK’s minimum
EcoVadis score or have an improvement plan in place
Progress in 2022
Supporting GSK people to do the right thing
In 2022, we launched our new Code of Conduct which
reflects our purpose to unite science, technology and talent
to get ahead of disease together. Our new Code sets out
the commitments we make as a company and to each
other to deliver on our purpose and ambitions. In 2022,
100% of employees and 98% of complementary workers
completed the accompanying global mandatory learning
curriculum where due by year end.
Those in certain high-risk roles or geographic regions
also complete additional anti-bribery and corruption
(ABAC) training. In 2022, 100% of employees and 96% of
complementary workers completed this training where due
by year end. Our approach to managing ABAC risk, and
other risks relating to ethical standards, forms part of our
well embedded risk management framework, which is
described in detail on pages 51 to 52.
Reporting and investigating concerns
This year, we have updated how we report the breakdown
of types of policy violations to provide more granularity
by case class. In 2022, we saw an overall decrease in
disciplinary cases, attributed to, in part, a revision to
our procedures for discipline regarding late completion of
mandatory training, now reported under the employee
conduct category.
Upholding our commitment to human rights
We are signatories to the UN Global Compact and our
Human Rights Position statement lays out our commitment
to the UN Guiding Principles on Business and Human
Rights. During the year, we established a Human Rights
Steering Group, which has a formal reporting mechanism
to the Board’s Corporate Responsibility Committee.
In 2022, we developed guidance to enhance supplier visits
to help employees better understand labour and human
rights non-compliances. To support this guidance, we
also developed and delivered labour rights training to
environment, health and safety (EHS) and procurement
employees to better equip them to spot human rights
issues when visiting suppliers.
We are committed to the application of fair and equitable
pay practices, which includes ensuring that all employees
globally receive pay that is competitive in their local
markets and sufficient to support a sustainable standard
of living. In 2022, we completed the first global living wage
review in partnership with the Fair Wage Foundation. We
assessed the pay of all our employees (over 75,000 people
in 87 countries) and differences were detected in fewer
than 200 cases, in 11 countries. All necessary adjustments
will be made by the end of the first quarter of 2023. We
will be factoring the living wage data into our standard
compensation processes to ensure that we continue to
offer a fair wage, and have built an annual living wage
review into our standard cycle.
Working with third parties
We expect our third parties to meet our ABAC and labour
rights standards and to comply with our standards on
quality, health and safety, and the environment. See pages
285 to 295 for further information.
We updated our Third-Party Risk Management (TPRM)
programme, which evaluates and mitigates risks introduced
by third parties engaged by GSK to provide goods or
services.
In 2022, for our high-risk third parties – determined by
location in high-risk markets and size of spend – we
performed 7,168 assessments across 20 risk areas. Over
62% of these assessments presented risks in one or more
areas. Most of these third parties are goods and services
providers (77%), distributors and wholesalers (5%), contract
manufacturers and suppliers (1%) and direct material
suppliers (1%). We also use tools to assess how suppliers
manage risks, including EcoVadis desktop assessments.
Responsible business continued
1
The general industry benchmark is 65% according to 2022 research
by
KornFerry
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Responsible business continued
We visit sites, in person or virtually, to help suppliers better
understand and control their risks. The relaxation of travel
restrictions has allowed us to increase in-person visits to
identify and reduce risk, enabling us to conduct 50 physical
visits across 63 priority suppliers this year
1
. We completed
warehouse safety surveys for 54 priority suppliers, 38
contract manufacturing suppliers and 15 large warehouses
that hold stock this year. These surveys have generated
corrective and preventative action plans, all of which we
expect to complete in 2023.
In 2022, we conducted 47 supplier audits, compared with
49 in 2021, following industry standard Pharmaceutical
Supply Chain Initiative guidelines, with any corrective and
preventative actions tracked to completion. We have also
trained more than 600 supplier employees on EHS and ESG
fundamentals in 2022, revised EHS contractual obligations,
tracked management actions to completion and have
helped suppliers improve their EcoVadis scores
2
. See page
293 for further information.
Data and engagement
We have created a new digital, privacy and information
security team within Legal and Compliance, to streamline
support and provide expertise around GSK’s digital and
data strategy.
Privacy and the ethical use of data are part of the global
mandatory learning curriculum Living our Code that all our
people have to complete. We ensure that key privacy
personnel have certifications and sufficient training and
experience to carry out their roles effectively.
We are investing in our AI/ML capability to, for example,
help analyse patients’ genetic data. We are mindful that
AI and machine learning can raise ethical issues and are
subject to evolving decisions from policymakers on how
best to promote trust in these systems and avoid
unintended outcomes or harmful impacts.
In R&D, we have oversight boards and a new advisory
panel that oversees controls to manage how we use or
re-use data and respond to bioethical questions in our
research activities.
Political engagement
As a major multinational company, we seek to contribute to
public policy debate, especially in relation to life sciences
and healthcare. In all of our political engagements, we are
committed to ensuring that we adhere to the highest
ethical standards and legislative requirements. We do not
make corporate political contributions, nor do we sponsor
party political meetings anywhere around the world.
For full details of our progress against our six focus areas, please
see our ESG Performance Report
Product governance
Ensuring the quality, safety and reliable supply of our
products is critical to protecting patients and delivering
health impact.
Our commitment
We commit to maintaining robust quality and safety
processes, and using data and new technologies
responsibly.
How we assess performance
– Average number of critical and major findings by
FDA/MHRA/EMA regulators
3
– Percentage of inspections from all regulators with no
critical findings or official action indicated
– Number of FDA warning letters
– Total number of Class I/II external product recalls across
all markets
– Register and disclose all human subject research of GSK
products. Specifically, register protocol summaries for
studies initiated in 2022; and disclose results summaries
for studies with results due in 2022
Progress in 2022
A focus on quality management
Our GSK Quality Management System is a detailed and
specific framework which describes how we comply with
regulatory requirements and other standards across
our markets. It addresses global and local regulations
across manufacturing and distribution processes, and is
based on principles defined by the International Council
for Harmonisation of Technical Requirements for
Pharmaceuticals for Human Use.
1
Our EHS priority suppliers are API suppliers who are, or will be, medically-,
R&D- or revenue-critical to GSK, or are high spend suppliers
2
The 600 supplier employees trained includes data from our previous
Consumer Healthcare business
3
We consider any observations from the FDA as major
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GSK Annual Report 2022
Responsible business continued
Inspections, recalls and audit
In 2022, we had 122 regulatory inspections at our
manufacturing sites and local operating companies,
compared with 111 in 2021. We remain prepared for
inspections from regulators and received no warning letters
from the US FDA or critical findings from the Medicines and
Healthcare products Regulatory Agency (MHRA) and EMA
regulators in 2022; however we received one critical finding
from the Chinese regulator
1
. We continue to learn from and
respond to all inspection findings, taking the necessary
action to address them.
Throughout 2022, we had no Class I product recalls. There
were fewer Class II and III recalls than in 2021
2
. We will not
hesitate to voluntarily recall products to protect patients.
Working with our suppliers on quality
We expect all our contract manufacturers and suppliers to
comply with GSK standards, and regularly conduct audits
to verify that they do. In 2022, we conducted 1,060 quality
audits of suppliers, with an increased focus on API suppliers.
We have a comprehensive quality oversight model that is
aligned to our Quality Management System and uses a
risk-based approach to assess, qualify, manage and
monitor our third-party suppliers, driving continuous
performance.
Maintaining pharmacovigilance
Pharmacovigilance aims to protect those who use
medicines and vaccines and support public health
programmes with reliable, comprehensive information on
the overall benefit-risk balance of our products. We have a
well established and rigorous worldwide system to monitor
and review the safety of our products throughout clinical
development and after regulatory approval.
Vigilance against falsified medicines and vaccines
We have a robust approach to handling all falsified product
incidents, ensuring that cases of confirmed counterfeit
products are reported to the WHO and to relevant
regulatory authorities. We actively participate in legal
proceedings against illegal actors, provide regular training
to customs and local authorities and we monitor online
marketplaces and social media to request takedowns of
sites illicitly selling prescription-only medicines.
Committed to transparency
As part of our commitment we have made 7,377 protocol
summaries and 6,295 summaries of results available since
the set-up of the GSK trial register in 2004. We have also
listed 2,559 studies for data sharing via www.vivli.org and
www.clinicalstudydatarequest.com.
For full details of our progress against our six focus areas, please see our
ESG Performance Report
1
Critical finding from one inspection by the Chinese regulator of a
third-party manufacturing facility used by GSK
2
Class I recalls are triggered by a reasonable probability that the use of or
exposure to a violative product will cause serious adverse health
consequences or death. Class II recalls address the use of or exposure to a
violative product which may cause temporary or medically reversible
adverse health consequences, or where the probability of serious adverse
health consequences is remote. Class III recalls relate to the use of or
exposure to a violative product which is not likely to cause adverse health
consequences
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Risk management
Our Board continuously reviews and oversees our risk management and
internal control framework, which reflects who we are as a responsible
biopharma company with bold ambitions for patients.
Managing our risks in line with our long-term
priorities
Our well embedded risk management and internal control
framework gives our Board the ability to evaluate and
oversee how the company manages principal and
emerging risks in line with our strategy and long-term
priorities as a fully-focused biopharma company, following
this year's demerger of Haleon. Our company-wide policy
sets out the requirements, roles and responsibilities for the
management and governance of risks and controls, as well
as supporting guidance on the essential elements of our
internal control framework. We routinely evaluate our
framework for improvements.
Board oversight of risk appetite and
management systems
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 that fall within
their defined remits. Our Risk Oversight & Compliance
Council (ROCC) helps the ARC, CRC and Science
Committee to oversee the risks, and the strategies used
to address them. Alongside this, risk management and
compliance boards across the Group promote the ‘tone
from the top’, establish our risk culture and oversee the
effectiveness of risk management activities, while also
communicating information about internal controls.
Management is held accountable for delivering on
its objectives in line with the established risk appetite
pertaining to principal risks. An enterprise risk owner is
responsible for each principal risk, overseen by a GLT
member. Risk owners report risk and mitigation to ROCC
and the appropriate Board committee each quarter. 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.
Assessing emerging and current risks
Our risk assessment process considers the likelihood and
impact of risks, and the timescale over which a risk could
occur. As well as considering current risks, we evaluate
emerging risks that could affect our ability to achieve our
long-term priorities – that is, risks on the three-year horizon,
in line with our viability statement. We also define risks as
‘emerging’ if we need to know more about how likely they
are to materialise, or what impact they would have if they
did. We'll evaluate whether to investigate further before
classifying them as principal risks.
Our 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.
At the same time, we 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.
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, forming the basis for the following year’s
risk management focus.
Enabling effective risk management, in line
with our culture
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.
These plans enable our Board committees to assess the
effectiveness of our risk management strategies.
We report risks to ROCC and the Board committees every
quarter, 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 key risk indicators, with risk
reporting thresholds aligned to risk appetite. We include
risks and mitigations associated with relevant events
around us, such as COVID-19 and geopolitical tensions.
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GSK Annual Report 2022
Risk management continued
Our Code sets out the overarching expectations for our
employees and complementary workers. Our risk
management framework complements our culture and
Speak Up processes in making sure that we identify and
mitigate risks effectively. We monitor our most important
risks and take action to address issues. Our annual
confirmation exercise checks that key risks are well
managed, or that actions are in place to address gaps. Our
principal risks include controls for responding to problems
within their risk plans. We also have business continuity
planning embedded in our framework and our critical
processes, so we can continue business operations in the
event of a crisis.
Our current risks
The table starting on page 53 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, see Principal risks and uncertainties on
pages 285 to 295. The Separation principal risk was
removed in July 2022 following successful demerger and
analysis of any residual risk.
Other risks, not at the level of principal risks, and
opportunities, related to ESG, including environmental
sustainability and climate change, are managed through
our six focus areas, as described in our ESG Performance
Report. Additional information on climate-related risk
management is in our climate-related financial disclosures,
see pages 55 to 61.
COVID-19 pandemic
The potential impact of the COVID-19 pandemic on GSK’s
trading performance and all its principal risks is continually
assessed, with appropriate mitigation plans put in place
on an as-needed basis. In 2022, GSK was encouraged by
the uptake of its vaccines and medicines. The company
remains confident in the underlying demand for its vaccines
and medicines, especially given the significant number of
COVID-19 vaccinations and boosters administered
worldwide. However, the pandemic remains a dynamic
ongoing risk, with the WHO continuing to monitor the
emergence of new variants. The current rate of infection
is predominantly driven by the circulation of the BA.5
subvariant and its descendent lineages, which are still the
dominant subvariants of Omicron globally. While COVID-19
vaccines are being updated with Omicron variants to
provide broader immunity against circulating and emerging
variants, these subvariants and potential future variants of
concern could potentially impact GSK’s trading results,
clinical trials, supply continuity and its employees materially.
Changes to our risks for 2023
In our December 2022 annual risk review, the ARC agreed
to ROCC’s recommendation of our principal risks for 2023,
which remain largely unchanged. We identified a new
principal risk, Legal Matters, which brings into greater
focus a range of legal risks. As a result, Anti-bribery and
Corruption will no longer be a stand-alone principal risk in
2023. Additionally, we expanded our Information Security
principal risk to explicitly include cyber risks. We also
identified data management as a new emerging risk for
2023, which we will evaluate during the year. The 2022
emerging risks of geopolitical tensions and healthcare
reform were embedded in our risk management activities
throughout the year and will not be reported separately
for 2023.
Viability statement, see page 64
ARC report, see page 124
Internal control framework, see page 125
Legal proceedings, see page 265
Environment, see page 45
Climate-related financial disclosures report, see page 55
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Risk
Trend versus
prior year
Assessment and mitigation activities
Patient
safety
External
GSK
The external risk environment remains stable. The regulatory environment remains
challenging, with recent examples of evolving regulatory requirements related to safety
reporting for clinical trials. Also, there is a risk that external parties, including regulatory
agencies and technology companies, may reach conclusions and communicate information
about the safety of our products based on real-world evidence that is not available to us.
This could inhibit our ability to make timely decisions and take appropriate action in relation
to the safety of our products, or to confirm or refute conclusions asserted by external parties.
Our risk exposure remains stable. We continue to balance resources between change
programmes while maintaining routine activities. In 2022, we've allocated resources to
optimise pharmacovigilance operations, advance innovative solutions for safety case
management, and simplify key safety processes. Change initiatives have the short-term
potential to distract focus from our key business priorities. However, such changes will reduce
our overall risk exposure by increasing workload capacity and organisational capability.
Product
quality
External
GSK
The external risk environment is stabilising and remains high 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. The regulatory environment is
evolving with respect to continued use of titanium dioxide in medicines, with the EMA due to
make a decision on potential discontinuation in 2024.
Our risk exposure has stabilised as we return to pre-pandemic levels of health authority
inspections. We continue with inspection readiness programmes to ensure full preparedness.
We've continued to invest in technology and digital platforms to strengthen our controls
around good data management practices. We've completed all nitrosamine product
assessments in line with regulatory expectations.
Financial
controls
and reporting
External
GSK
The external risk environment remains challenging due to political uncertainty, proposed
increases in the obligations of directors and auditors, increasing threats of cyber attacks and
fraud, and increasing ESG disclosure requirements.
Our risk exposure remains 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 setting standards.
Anti-bribery
and corruption
(ABAC)
External
GSK
The external risk environment remains stable. The enforcement of anti-corruption laws and
regulations remains a priority in many countries, in particular the US and the UK, with a
continued focus on investigating the use of third parties to bribe foreign public officials. As
a result, rigorous anti-bribery and corruption controls are expected. Disruption to global
supply chains and the commercial pressures caused by higher-than-usual inflation rates
may increase the risks of bribery and corruption in certain contexts in the coming years.
Our risk exposure remains stable as we continuously improve our ABAC programme to
make sure that our controls match evolving and emerging risks. We've enhanced our
mandatory ABAC training for all employees, and we provide role- and risk-tailored ABAC
training on an ongoing basis. We also impose stringent ABAC training requirements on
certain third parties who provide services for or on our behalf.
Commercial
practices
External
GSK
The external risk environment has stabilised. Macroeconomic factors such as energy price
increases, inflationary pressure, and ongoing effects of the COVID-19 pandemic contribute
to a challenging environment for all stakeholders. Competitive pressure remains intense
across therapy areas and market segments. Governments remain focused on initiatives to
drive down medicine and vaccine costs for consumers.
Our risk exposure remains stable. We have a mature and robust control environment, which
has evolved to match the competitive enhancements to our commercial practices,
including higher volumes of engagement with healthcare professionals and strengthened
sales force incentive schemes.
2022 Principal risks summary
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54
GSK Annual Report 2022
Risk
Trend versus
prior year
Assessment and mitigation activities
Scientific
and patient
engagement
External
GSK
The external risk environment remains stable. It continues to be characterised by complex,
dynamic disease areas and treatments with increased patient-centric focus during all
phases of the product lifecycle, increasing diversity of engagement platforms and more
virtual engagements.
Our risk exposure remains stable. We continue to mitigate risk by modernising and adjusting
our engagement practices and internal controls to the rapidly evolving environment. We
have internal networks to foster collaboration and best practice sharing, as well as the
identification of emerging risks associated with scientific and patient engagement activities.
Data ethics
and privacy
External
GSK
The external risk environment continues to increase as the global landscape of data
protection, privacy and cyber laws develops. Given that the current pace of technology-
focused innovation is expected to continue, companies need to be mindful of relevant
potential legislation and regulations. The increasing trend for data sovereignty, initially
affecting tech companies, could affect healthcare companies in their ability to drive medical
innovation and to effectively operate internationally.
Our risk exposure is increasing in the context of an unstable privacy regulatory environment
and our multinational footprint, as we re-align with our digital transformation and focus on
data-driven science. Laws in our key markets such as the US, EU, UK, China and India
continue to evolve, including those relating to international data transfer mechanisms.
Research
practices
External
GSK
The external risk environment remains stable. Research remains critical to the development
of safe and effective products. Advances in technology, use of data, societal expectations
and ethical considerations and new entrants to the sector continue to influence the
environment. Global regulations and quality standards continue to evolve, and are
particularly impactful when expectations change or there are country-specific
requirements.
Our risk exposure remains stable, as laws and regulations are continually evolving.
We continue to perform robust risk scanning and assessments that inform the evolution of
our control framework in response to regulatory changes, ensuring clear accountabilities
for actions.
Environment,
health and
safety
(EHS)
External
GSK
The external risk environment remains stable. Manufacturing sites are operating at full
staffing levels. Work location arrangements have been made to maintain the safety and
wellbeing of employees affected by the Ukraine conflict.
Our risk exposure remains stable. We've continued to focus on safety leadership training,
embedding our Life Saving Rules, and adhering to our EHS standards. We're introducing
our Safety Leadership Experience across Global Supply Chain, and R&D operations. This
programme trains leaders to take EHS accountability and make sure all our people
understand the importance of adhering to our EHS standards.
Information
security
External
GSK
The external risk environment continues to rise as digital footprints increase and threats
from hackers become more sophisticated. Growing geopolitical conflicts have significantly
increased cyber risk to large corporations. Governments are tightening regulatory
frameworks with regards to data and information, and we are seeing a rise in enforcement
of them.
Our risk exposure continues to increase as we operate in an increasingly digital healthcare
ecosystem and continue to expand our own digital footprint. In response, our cyber security
maturity programme continues to improve our controls and governance to identify, protect,
detect, respond to and recover from cyber incidents.
Supply
continuity
External
GSK
The external risk environment is increasing due to unpredictable external forces that put
pressure on the resilience of our supply chains. These include geopolitical tensions and
growing nationalistic approaches (including US-China decoupling).
Our risk exposure remains stable. Across our Medicines and Vaccines supply chains, we
continue to focus on strategic materials planning parameters, adapting to changes in the
external environment, including inventory strategies, safety stocks and hedging. We're
making a concerted effort to stabilise and accelerate newly acquired assets and we're
focusing on making sure we recruit the right people to support our future portfolio.
2022 Principal risks summary continued
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Climate-related financial disclosures
GSK climate-related financial disclosures are consistent
with the recommendations and recommended disclosures
of the Task Force on Climate-related Financial Disclosures
(TCFD) including the TCFD all-sector guidance, and
in compliance with the requirements of LR 9.8.6R.(8)
(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. This year we have updated the climate
scenarios used to model transition and physical risks, which
enabled us to extend the timeframe to model risks to 2050
where data was available and to broaden the scope to
include GSK’s supply chain. We will continue to monitor
for emerging risks and new data to include in future
assessments.
Governance
Board
The Board considers climate-related matters throughout
the year assessing the risk management processes in place
and challenging and endorsing the business plan and
budgets, including overseeing major capital expenditures,
acquisitions and divestments. The Committee that
exercises oversight, provides guidance and reviews our
ESG performance, including climate-related risks and
opportunities, and environmental performance against
targets is the CRC.
The Committee is supported by GLT and ROCC which
receive quarterly updates on environmental sustainability,
including climate. Regular attendees include the CEO, and
the President Global Supply Chain. See the CRC report on
page 107 for further details of the Board architecture.
In 2022 the CRC met four times. Key areas of focus were:
– discussed climate-related issues on three separate
occasions with management, including: progress in
delivering against our climate ambitions; implications of
the geopolitical landscape; key milestones and decisions
required to achieve net zero targets
– reviewed mid-year performance for key environmental
metrics, including climate-related metrics, as part of
reviewing GSK’s ESG Performance Rating
– approved GSK’s TCFD statement and public
environmental reporting and disclosures
In 2022 the Remuneration Committee, with the support of
the CRC, introduced a 10% measure into GSK’s long-term
incentive plan opportunity for senior leaders based on key
metrics related to GSK’s ESG performance.
These metrics include climate-related metrics such as
reduction in scope 1 & 2 emissions and reaching key
milestones in the R&D programme to reduce greenhouse
gas emissions (GHG) in metered dose inhalers for asthma
and chronic obstructive pulmonary disease, see page 148.
GSK Leadership Team (GLT)
The GLT meets regularly and is an opportunity for members
to discuss strategic, financial and reputational matters.
Regis Simard, President, Global 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 manage the risks and opportunities across
each of our business units along with delivering on the
commitments made to a net zero, nature positive, healthier
planet, with ambitious goals set for 2030 and 2045 across
our entire value chain.
Regis is supported by GSK’s Vice President (VP)
Sustainability who regularly reviews progress with him and
who co-chairs the quarterly GSK Sustainability Council.
In 2022 GLT reviewed and discussed the mid-year
performance for key environmental metrics, including
climate-related ones, as part of reviewing GSK’s ESG
Performance Rating.
GSK Sustainability Council
The Sustainability Council, held quarterly, is attended by
senior leaders from across the business who play a key role
in delivering our commitment to a net zero, nature positive,
healthier planet, with ambitious goals set for 2030 and
2045 across our entire value chain. Members include
leaders from procurement, finance, HR, Compliance, R&D
and manufacturing. The Council is co-chaired by the
President Global Supply Chain and the VP Sustainability
and supported by the global sustainability team who
provides specialist expertise and advice to the business.
In 2022 the Council:
– received monthly performance dashboards covering key
performance metrics and escalations of any potential
concerns or issues
– held quarterly performance reviews across all areas of
programme delivery and focused reviews of aspects of the
programme such as the implementation of the sustainable
sourcing strategy, and recommendations for refreshing
GSK’s Science Based Target commitments. The Council
reviews include decisions on interventions or support
required to maintain progress towards 2030 targets
– reviewed insights on ESG trends and regulations
– approved the proposed Sustainability Data Strategy
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GSK Annual Report 2022
In order to address the key priorities of the climate impact
from GSK’s metered dose inhaler, a specific council was
established in 2022 and is attended by senior leaders from
across the commercial, supply chain, regulatory and R&D
businesses aligned to GSK’s respiratory business. This
council is chaired by the President Global Supply Chain and
is the decision-making body for:
– the programme to reduce the climate impact of metered
dose inhalers which contribute to approximately 50% of
GSK’s total GHG emissions by up to 90%, if the clinical
trials are successful
– advocacy and engagement with regulators and
policymakers
– industrialisation strategy and progress
Other business support
– the Sustainability Programme Steering Team
co-ordinates the sustainability programme and
associated workstreams and has oversight for monitoring
performance and progress of the enablers required to
deliver the sustainability programme
– business unit sustainability councils meet quarterly to
review business unit performance and delivery against
the company sustainability ambition
– the Capital Allocations Board (CAB) which includes the
CFO and Group Financial Controller reviews climate-
related capital expenditure as part of its 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
GSK's commitment to a net zero, nature positive, healthier
planet is embedded in GSK’s strategic long-term priorities,
always considering the social, environmental and
governance impacts of everything we do from laboratory
to patient.
There are many teams across GSK involved in this process,
to ensure that we make sound strategic decisions. The
process for identifying and assessing climate-related risks
and opportunities is set out under Risk Management as
part of this TCFD section. To achieve our climate ambition,
active holistic management of all climate-related risk
components is important. In addition to risk, we also
continue to identify opportunities for GSK. These risks and
opportunities are described further in the table on pages
58 and 59.
In order to achieve reductions in emissions across our
operations by 2030, as part of our transition plans, we are
focusing on:
– maximising energy efficiency in our sites
– transitioning to 100% renewable electricity by 2025
– increasing the use of electric vehicles by our sales fleet
Supply chain emissions are a shared challenge across our
sector, and we are working with our peers on collaborative
initiatives such as:
– the Activate programme to help Active Pharmaceutical
Ingredients (API) suppliers accelerate decarbonisation
initiatives
– the Energize programme to encourage the use of
renewable energy throughout the pharmaceutical
sector’s supply chain
– the Manufacture 2030 initiative to encourage suppliers to
measure, manage and reduce their emissions
In September 2022, we launched a Sustainable
Procurement Programme which will require our suppliers to
disclose emissions and set carbon reduction targets aligned
with 1.5°C.
The use of our metered dose inhalers by patients for
asthma and chronic obstructive pulmonary disease
makes up around 50% of our total climate impact. We are
investing in an R&D programme to reduce greenhouse gas
emissions from this vital medicine that could potentially
reduce the climate impact by up to 90%. If the clinical
studies confirm that the new propellant could be an
appropriate replacement, GSK will work on securing
approval from regulators in markets where the new product
could be made available to patients. This process can take
time, but GSK is focused on meeting our commitment and
we have made considerable investments towards achieving
this goal.
The Science Based Targets initiative (SBTi) accredited
our climate targets, set prior to our demerger, as aligned to
the 1.5°C pathway. Our reduction pathway to 2030 is
significantly more ambitious and we are currently seeking
reaccreditation from the SBTi for our targets as a fully
focused biopharma company.
We recognise that the global energy crisis as described
on page 13 is disrupting and delaying the green
transition across the world. This may impact the pace of
decarbonisation in the short term but any setback to the
energy transition is expected to be time-limited.
In 2021, we developed a three-year plan to further embed
climate risk analysis across material areas of our business
and focused on risks impacting our direct operations. In
2022, we updated the climate scenarios used to model
transition and physical risks, which enabled us to extend the
timeframe to model climate risks out to 2050 where data
was available and to broaden the scope to include GSK’s
sites and suppliers across all geographies with a strategic
revenue dependency aligned to other supply chain risk
management processes.
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
We will continue to monitor for emerging risks and new
data to include in future assessments, using external parties
to provide horizon scanning insights on ESG trends and
regulations.
GSK prioritised scenario modelling of the following risks
in 2022:
– changes to regulations governing the supply of high
global warming potential (GWP) substances by the EU,
UK and US governments could restrict GSK’s ability to
manufacture metered dose inhalers
– future regulatory policy responses to address climate
change could lead to the imposition of carbon taxes by
countries where GSK manufactures and sources goods
from third parties
– increasing levels of water stress that could lead to
interruptions to supply of water to GSK and third-party
supply sites
– increasing frequency and impact of extreme weather
events that could cause disruption to GSK and third-party
supplier sites
Climate scenarios
We reviewed and updated our climate scenarios,
developing four climate scenarios. We used three of these
scenarios for modelling transition risks (Net Zero, Low
Carbon and Current Trajectory), and three scenarios for
modelling physical risks (Low Carbon, Current Trajectory,
and Breach of Planetary Boundaries).
Net zero scenario (SSP 1 – RCP 1.9)
This scenario sets out a narrow but achievable pathway for
the global energy sector to achieve net zero CO
2
emissions
by 2050
1
. It does not rely on emissions reduction from
outside the energy sector to achieve its goal. The scenario
is consistent with limiting the global temperature rise to
1.5°C without a temperature overshoot. Net zero means
huge declines in the use of coal, oil and gas and a shift to
renewable energy sources.
Low carbon scenario (SSP 1 – RCP 2.6)
In this scenario, all current net zero pledges are achieved
in full and there are extensive efforts to realise near-term
emissions reductions; advanced economies reach net zero
emissions by 2050, China around 2060, and all other
countries by 2070 at the latest
2
. The scenario is consistent
with limiting the global temperature rise to below 2°C.
With some level of net negative emissions after 2070,
the temperature rise could be reduced to 1.5°C in 2100.
Current trajectory scenario (SSP2 – RCP4.5)
This scenario sets out to show to what extent announced
ambitions and targets are on the path to deliver the
emissions reductions required to achieve net zero emissions
by 2050
3
. The temperature rise will exceed 2°C by 2100,
with a more noticeable shift to happen in the latter half
of the century. A net zero pledge for emissions within the
scenario does not necessarily mean that CO
2
emissions
from the energy sector need to reach net zero, there is an
allocation for carbon offsetting within the pledges.
Breach of planetary boundaries scenarios
(SSP 5 – RCP 8.5)
This scenario is not aligned to any of the pledges laid out
within the Paris Agreement and is one where countries are
unable to meet the United Nations Sustainable
Development Goals. This scenario will have the most severe
physical consequences for the planet. The temperature rise
will exceed 4°C by 2100, leading to high loss of biodiversity
and species extinction.
Each risk and opportunity was analysed including how they
are being managed by GSK and the metrics and targets in
place and the potential impact on our profit using a low
(<£100 million), medium (£100 million-£250 million) or high
(>£250 million) threshold.
Due to the inherent uncertainty, and the nature of the
risks across GSK strategy and business model, the climate-
related issues are monitored within these time horizons:
short term (less than 3 years); medium term (3-10 years)
and long term (> 10 years).
In comparison to the 2021 disclosure, we have extended the
timeframe for climate risk assessments out to 2050 where
data is available to be able to differentiate between the
potential long-term outcomes in different climate scenarios.
Based on the different climate scenarios analysis
performed and taking into consideration the climate risk
and opportunities identified across all geographies, as
described in the table below, we have tested the resilience
of GSK's business strategy and did not identify any material
impact to our business resilience.
Risk management continued
1
IEA Net Zero emissions scenario, https://www.iea.org/reports/global-
energy-and-climate-model/net-zero-emissions-by-2050-scenario-nze
last accessed 17 November 2022
2
IEA World Energy Outlook 2021, Chapter 2, p94, download report from
https://www.iea.org/reports/world-energy-outlook-2021/overview, last
accessed 17 November 2022
3
IEA Announced Pledges, https://www.iea.org/reports/global-energy-
and-climate-model/announced-pledges-scenario-aps last accessed
17 November 2022
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GSK Annual Report 2022
Risk management continued
Physical risk/
description
GSK response
Scenario
Potential
financial impact/
timeframe
Metrics
Targets
The risk from
increasing levels of
water stress leading
to interruptions to
supply of water to
GSK sites and
third-party supply
sites.
GSK and its third-
party suppliers use
freshwater as the
main source of water
to manufacture
medicines and
vaccines. If water
availability was
restricted at a factory,
then production
operations would be
interrupted.
We have identified three water basins in
water-stressed areas in Algeria, India and
Pakistan where we have manufacturing sites,
and where we aim to be water neutral.
At our manufacturing facility in Nashik, India
we have built plants for rainwater harvesting.
The climate scenario analysis has identified a
number of sites and supplier sites located in
water basins that could become water
stressed by 2040 which have been added to a
watch list. We will monitor changes to the risk
levels and update our site water risk
assessments appropriately.
Current
trajectory
Breach of
planetary
boundaries
Medium
(£100m-
£250)m/
Long term
(> 10 years)
Low
(< £100m)/
long term
(> 10 years)
Sites that
have
achieved
water
stewardship
Total
supplied
water
Achieve
good water
stewardship
at 100% of
our sites by
2025
Reduce
overall water
use in our
operations
by 20% by
2030
Increasing frequency
of extreme weather
events causing
disruption to GSK and
third-party supplier
sites.
Extreme weather
events from any one
of precipitation
(rainfall), flood from
precipitation, tidal
flood, extreme wind,
wildfire, extreme heat
or extreme cold can
result in short-term
interruptions to
manufacturing at
GSK or supplier sites.
The climate scenario modelling indicated that
of the seven physical perils, flood from rainfall
presents the highest likelihood of an acute
interruption. However, the risk of flooding from
rainfall and from the other extreme weather
events is expected to remain very low.
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
impacts of extreme weather events including
adopting appropriate mitigation plans.
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
carbon
scenario
Current
trajectory
scenario
Breach of
planetary
boundaries
scenario
Low
(< £100m)/
Long term
(> 10 years)
Business
continuity
plans are
reviewed
annually
Where
climate-
related risks
to business
continuity
are identified,
we have
taken action
to mitigate
the risk
Regulations
governing the use of
high global warming
potential (GWP)
substances are being
updated in the EU
and UK and were
updated recently in
the US.
This could lead to
increasing costs and
restrict the ability to
manufacture our
metered dose inhaler
(MDI) products that
use a high GWP
propellant (HFA134a).
We are investing in an R&D programme to
reduce greenhouse gas emissions from
metered dose inhalers used to treat asthma
and COPD and have made good progress
towards reformulating an alternative gas that
could potentially reduce the climate impact
by up to 90%, if the clinical trials are
successful.
We already have a portfolio of Dry Powder
Inhaler products that do not use propellants
that are not impacted by this risk.
Current
trajectory
scenario
High
(> £250m)/
medium
(3-10 years)
On/off track
against
delivery of
key
milestones
on the R&D
programme
plan
80%
and 90%
reduction
in carbon
emissions
(all scopes)
by 2030
and 2045,
respectively
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GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Risk management continued
Transitional risk/
description
GSK response
Scenario
Potential
financial impact/
timeframe
Metrics
Targets
Future regulatory
policy responses
to address climate
change could lead
to the imposition of
carbon taxes by
countries where GSK
manufactures and
source goods from
third parties.
GSK is managing this risk by reducing Scope 1
and 2 emissions through the following:
–
GSK’s energy efficiency programme
–
Transitioning to 100% renewable electricity by
2025
–
Investigating options for renewable heat
technology
–
Transitioning sales fleet to electric vehicles by 2030
–
Using shadow carbon pricing on capital
investments of US$ 100 per tonne of GHG
emissions
GSK is managing this risk by reducing Scope 3
emissions through the following:
–
R&D programmes to reduce greenhouse gas
emissions from metered dose inhalers
–
The new supply chain programme requiring our
suppliers to take action on carbon, set targets
aligned with 1.5°C and switch to renewable power
and heat
–
Collaborating with sector peers in the Energize
and Activate programmes and the Manufacture
2030 initiative
–
Joining the Sustainable Markets Initiative Health
Systems Task Force to reduce healthcare supply
chain emissions
Net zero
scenario
Low
carbon
scenario
Current
trajectory
scenario
Medium
(£100-250m)
in both
medium (3-10
years) and
long term
(> 10 years)
Medium
(£100-250m)
in the medium
(3-10 year)
term falling to
low (< £100m)
in the long
term (> 10
years)
Low (< £100)/
in the medium
(3-10 years)
and long term
(> 10 years)
Scope 1 &
2 carbon
emissions
Scope 3
carbon
emissions
80%
and 90%
reduction
in carbon
emissions
(all scopes)
by 2030
and 2045,
respectively
Opportunities
GSK response
Scenario
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
medicines and
vaccines.
We are reducing our own Scope 1 & 2 carbon
emissions which in turn reduces the Scope 3
footprint of our customers and suppliers; for
example, at our site in Irvine in Scotland, a closed
loop heat system has helped to drive reductions in
operating costs, and onsite renewables and
biogas will provide 85% of its energy.
We have an Eco-design programme to reduce the
impacts of all our products and packaging.
We are investing in an R&D programme to reduce
greenhouse gas emissions from metered dose
inhalers used to treat asthma and COPD and have
made good progress towards reformulating an
alternative gas that could potentially reduce the
climate impact by up to 90% if the clinical trials are
successful.
We have a portfolio of dry powder inhaler products
that have low carbon footprints.
Net zero
scenario
Low
carbon
scenario
Current
trajectory
scenario
Low
< £100m/
Long
(> 10 years)
Scope 1 &
2 and 3
carbon
emissions
Total
waste and
materials
80%
and 90%
reduction
in carbon
emissions
(all scopes)
by 2030
and 2045,
respectively
Zero
operational
waste
There have been
several reports
exploring the impact
of climate change and
health showing that
climate change
affects water- and
vector-borne diseases.
This could lead to an
increasing demand for
new medicines and
vaccines.
In September 2022, GSK and Microsoft announced
an innovative collaboration with the Centre for
Health and Disease Studies (CHDS) Nepal. The
pilot project, which will leverage Microsoft’s
Premonition systems and GSK’s expertise in health
and disease, will investigate how AI and robotics
can support local community response to vector-
borne diseases and climate change.
In July 2022, GSK’s annual Palio conference
explored the role of vaccines in finding solutions for
global healthcare to protect people and the planet.
Current
trajectory
scenario
Long
(> 10 years)
Not
applicable
Not
applicable
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GSK Annual Report 2022
Risk management continued
Risk management
As described in the Risk management section on page 51,
GSK’s risk management policies are designed to address all
types of risks, including the Group principal risks and
uncertainties and our climate risk assessment follows the
same policy and framework.
The nature of the risks and opportunities from climate
change depends not only on the physical aspects of
climate change, but also regulatory and commercial
changes in the markets in which GSK operates, including
pressures to reduce the climate impact of GSK’s metered
dose inhaler medicines.
In terms of GSK climate risk management policies, a
specific and dedicated environmental sustainability risk
management plan was put in place in 2020. 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.
Policy developments at global and national level are
monitored for their potential impact. For example, as a
result of the UN Montreal Protocol 2016 Kigali amendment
that mandates a global phase down of the use of high
global warming potential hydrofluoroalkane gases,
governments are introducing or proposing to introduce
quota restrictions to HFA134a that is used by GSK to
manufacture metered dose inhalers used to treat asthma
and COPD. GSK has been part of an industry consultation
with the UK Department for Environment, Food & Rural
Affairs as the UK government develops its UK specific
regulations on the control of F-gases.
GSK has policies and procedures in place to identify risks
from climate change when things change, for example to
assess the climate impact of merger and acquisition
activity, or the construction of new buildings, or major
capital expenditure. Furthermore, 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.
For the purposes of our TCFD disclosures we have made
use of the TCFD distinction between “physical” and
“transition” climate-related risk.
Risks which may be identified include potential effects on
operations at asset level, performance at business level and
developments at regional level from extreme weather or the
transition to a lower carbon economy.
Physical risks are typically identified at the asset or project
level and are managed depending on the level of risk
assessed. Increasing levels of water stress is a physical risk
and could reduce the availability of water for our
operations in affected locations. This is an important risk as
GSK uses freshwater as the main source of water to
manufacture medicines and vaccines. If water availability
was restricted at a factory, then production operations
could be interrupted. We perform water stewardship risk
assessments for our manufacturing sites and update them
every three years.
Transition risks are typically identified at enterprise level
and at market level. Currently the transitions risks which are
a priority for GSK are regulatory and commercial risks which
we manage through our investment decisions and through
our sustainability transformation programme. From a legal
point of view, we consider risks which may arise from
product claims based on environmental performance. To
manage this risk, we use external accreditation processes
and organisations to review the evidence used to support
environmental claims for our products criteria. From a
technological point of view, GSK has developed tools to
incorporate eco-design principles into the design and
development of new products and to identify opportunities
to reduce the environmental impacts of existing products.
Our communications and governance affairs team
manages corporate reputation through identification and
monitoring of climate-related issues and then undertake
both proactive and reactive engagement with relevant
stakeholder groups to communicate GSK’s position.
On an annual basis a cross-functional team from GSK’s
business units, sustainability team and finance perform
a review of risks from climate change to identify any new
or emerging risks and to determine if an updated risk
assessment is required for any existing risks. Climate-related
risks are considered from a strategic and operational
perspective to ensure we maintain a comprehensive view of
the different types of climate risks we face and the different
time horizons in which they may affect GSK. This review is
approved by the VP Sustainability and Finance VPs from
each of GSK’s business units.
The identified risks are assessed by a climate risk working
group who consider the likelihood and financial impact of
each risk on GSK under different climate scenarios. The
impact assessments are approved by the President, Global
Supply Chain who has company level responsibility for
Environmental Sustainability, the VP Sustainability and
Finance VPs from each of GSK’s business units. The results
are shared with Business Unit Risk Management Control
Boards (RMCB) and the Finance RMCB to ensure risks are
both contextualised with other business risks and managed
appropriately. This allows management to take a holistic
view and optimise risk mitigation responses, to ensure that
responses to climate-related risks are properly integrated
into the relevant businesses' and functions' activities.
Proof 6 (e) 08.03.2023 at 1 pm
61
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
1
See Basis of Reporting 2022 in the ESG resources section of GSK.com
(https://www.gsk.com/en-gb/responsibility/esg-resources/) for detailed
methodologies for measuring and reporting all GSK environmental KPIs
Risk management continued
Metrics and targets
GSK commits to a net zero, nature positive, healthier planet,
with ambitious goals set for 2030 and 2045 across our entire
value chain. GSK reports progress in reducing Scope 1 & 2
carbon emissions, Scope 3 carbon emissions
1
, energy use,
water, waste annually in our ESG Performance Report
for detailed performance data and other environmental KPI
and in our public responses to the CDP Climate, Water and
Forest questionnaires.
a. Disclose the
metrics used by
the organisation to
assess climate risks
and opportunities
in line with its
strategy and risk
management
process
GSK has considered the key metrics following the guidance of Tables A1.1 and A1.2 as well as the metrics
consistent with cross-industry, climate-related metrics as described in TCFD. Based on that, our strategic
metrics are:
–
Scope 1 & 2 emissions (market-based and location-based approach), described in the table below
–
Scope 3 emissions, described in the table below
–
% renewably sourced electricity, described in the table below
–
Total supplied water, described in the table below
–
Total waste and materials, described in the table below
–
ESG composite metric, as part of our senior leaders‘ remuneration policy see page 148
–
Sites that have achieved water stewardship, described in the table below
Our ESG Performance Report includes additional metrics used to support the strategic metrics listed above.
b. Disclose Scope 1, 2
and if applicable
Scope 3 GHG
emissions and
related risks
In Energy and carbon emissions, see table below
–
Scope 1 emissions from energy
–
Scope 1 from other sources
–
Scope 2 emissions (market-based)
–
Scope 2 emissions (location-based)
–
Scope 3 emissions metrics
–
Scope 1 & 2 emissions from intensity metrics
Prioritised physical and transition risks are included in the Strategy Section on page 56.
c. Describe the targets
used by the
organisation to
manage climate-
related risks and
opportunities
and performance
against targets
Our targets (measured against a 2020 baseline where applicable) are:
–
80% reduction in carbon emissions and investment in nature-based solutions for the remaining 20% of
our footprint by 2030 (all scopes)
–
100% renewable electricity by 2025 (Scope 2)
–
Net zero emissions across our full value chain by 2045 (all scopes)
–
Achieve good water stewardship at 100% of our sites by 2025
–
Reduce overall water use in our operations by 20% in 2030
–
Zero operational waste by 2030.
–
Be water neutral in our own operations and at key suppliers in water-stressed regions by 2030
The performance against our targets can be found on pages 45 and 46.
1
Proof 6 (e) 08.03.2023 at 1 pm
62
GSK Annual Report 2022
Metrics data
Carbon emissions
1,2
Carbon emissions ‘000 tonnes CO
2
e
2022
2021
2020
Scope 1 emissions (from energy)
320
333
355
Scope 1 emissions (other
3
)
306
300
358
Scope 2 emissions (market-based)
88
131
169
Scope 2 emissions (location-based)
265
285
309
Scope 3 emissions
4
–
8,624
9,949
UK Scope 1 & 2 emissions
111
126
138
Other metrics
2022
2021
2020
Scope 1 and 2 emissions from energy/sales revenue (tonnes CO
2
e/£m)
13.9
18.8
21.5
Scope 1 and 2 emissions from energy/FTE (tonnes CO
2
e/FTE)
5.9
6.5
7.2
Total energy used (GWh)
2,759
2,871
3,085
UK energy used (GWh)
735
807
917
% renewably sourced electricity
73%
63%
46%
Total supplied water million m
3
7.5
7.9
9.7
Total waste and materials ‘000 metric tonne
57.2
63.1
63.0
% sites that have achieved water stewardship
100%
100%
89%
1
All data reported excludes our previous Consumer Healthcare business unless otherwise specified
2
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, Deloitte, to provide limited assurance to ISAE 3000 for energy, Scope 1, 2 and selected Scope 3 carbon emission data, water
and wastewater data. Methodologies for reporting and measurements are provided in the Basis of Reporting 2022 in the ESG resources section of gsk.com
(https://www.gsk.com/en-gb/responsibility/esg-resources/)
3
‘Other’ refers to emissions from sales force vehicles, propellant emissions released during manufacture of inhalers (the majority of propellant emissions,
released during patient use, are included in Scope 3 carbon emissions), 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 2021 as the process of compiling the 2022 data is
not yet complete, except for 2022 Scope 3 emissions from patient use of inhalers which are disclosed in the ESG Performance Report. We will publish this
data once it becomes available and it will be included in the 2023 ESG Performance Report
Risk management continued
Nature-related financial disclosure
At GSK we are committed to playing our part to minimise
our impact and dependencies on nature, as well as helping
to protect and restore nature. We have performed a full
assessment of our impacts on nature across our value chain
and are setting targets to reduce these pressures in line
with evolving guidance from Science Based Targets for
Nature (SBTN). In line with our commitment to nature
and building on the achievements of our climate-related
financial disclosures, GSK is currently piloting the
recommendations of the Taskforce on Nature-related
Financial Disclosures (TNFD) ahead of the launch of the
TNFD's final framework expected in September 2023.
As part of the pilot, we are working to understand how
we can utilise the TNFD guidelines to report the risks that
our impacts and dependencies on nature present to our
business. We are making an initial disclosure with a
particular focus on strategy, metrics and targets. Some
early findings from the results of our in-progress analysis
are included below.
Strategy
We are committed to have a net positive impact on
nature by 2030 by reducing our environmental impacts
across water, waste and materials biodiversity and by
investing in nature protection and restoration. In 2022,
we conducted an assessment of GSK’s nature-related risks
and opportunities, in line with the latest TNFD guidance
from November 2022. By following the latest TNFD LEAP
(Locate, Evaluate, Assess and Prepare) methodology, we
have been able to better understand the magnitude of
GSK’s physical and transitional risks across each Nature
pressure. We will continue to refine our assessment,
following the methodology from TNFD, and will look to
report against it once the final version is available.
Additionally, GSK is one of the first companies to conduct
a materiality assessment for its full value chain, in line with
the SBTN methodology, to better understand our impacts
and dependencies.
Proof 6 (e) 08.03.2023 at 1 pm
63
GSK Annual Report 2022
Governance and remuneration
Financial statements
Investor information
Strategic report
Risk management continued
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
Business model
08
Social matters
Access
43
Global health and health security
44
Employees
Our culture and people
10
Employee engagement
11
Diversity, equity and inclusion
47
Wellbeing and development
11
Gender pay gap
47
Ethical standards
48
Board diversity
122
Human rights
Human rights
48
Working with third parties
48
Data and engagement
49
Anti-bribery and corruption
Ethical standards
48
Reporting and investigating
concerns
48
Environmental matters
Environment
45
Climate-related financial
disclosures
55
Nature-related financial disclosure 62
Policy, due diligence and outcomes
Risk management
51
Principal risks and uncertainties
285
Viability statement
64
Audit & Risk Committee report
124
Non-financial key performance
indicators
2022 performance and key
performance indicators
03
Our policies
All of our public policies, codes and
standards are available on gsk.com
Employees by gender
Male
Female
Total
Board
8
3
11
Management*
8,318
8,201
16,519
All employees
36,782
32,618
69,400
* Senior managers as defined in the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013
This process has clearly indicated that to achieve Net
Nature Positive by 2030 requires us to build a portfolio
of pressure-specific initiatives that drive action in targeted
landscapes and regions of impact. As part of our
commitment, we acknowledge that collaboration across
different stakeholders will continue to be an imperative
in this multi-year journey. Ultimately, the direction provided
by the SBTN technical guidance will help shape our
strategy to ensure we minimise our impacts and
dependencies on nature globally.
Metrics and targets
To address GSK’s pressures on Nature, we have existing
targets across water, waste, materials and biodiversity
(see page 46).
Our targets will continue to evolve as we incorporate
the findings of our materiality assessment and progress
towards achieving Net Nature Positive by 2030. To support
progress, we actively engage with external partners
including the SBTN and World Business Council for
Sustainable Development to ensure targets and metrics
are meaningful and robust.
Addressing our impacts on the natural world and
understanding the impacts of the changing state of nature
globally on GSK is no small undertaking, but we are proud
to be pioneering the use of nature-related financial
disclosures in our industry. Ultimately, delivering positive
outcomes for the environment is fundamental to delivering
positive outcomes on human health. At GSK we are excited
to continue on this path, uniting science, technology and
talent to get ahead of disease together.
Proof 6 (e) 08.03.2023 at 1 pm
64
GSK Annual Report 2022
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 51 to 54
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’s business strategies and aligned
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 the market opportunities
in medicines and vaccines. This approach is aligned to
GSK’s model of achieving balanced growth by investing in
high quality, innovative products for patients 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 medicines and
vaccines 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. The Plan assumes the next
several years to be challenging for the healthcare industry
with continued pressure on pricing of pharmaceuticals. GSK
assumes no premature loss of exclusivity for key products
over the period and for all anticipated launches to proceed
as planned. Despite the ongoing recovery of healthcare
systems from the impact of the COVID-19 Pandemic,
uncertain economic conditions prevail across many markets
in which GSK operates.
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 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 harm as well as anti-bribery
and corruption and any consequent regulatory actions,
fines or significant litigation, all of which could
fundamentally threaten our operations. These risks are
managed through mitigating activities described on pages
285 to 295.
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.
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 will be
able to continue in operation and meet its liabilities as they
fall due over the three-year period of assessment.
Risk management continued
Proof 6 (e) 08.03.2023 at 1 pm
Group financial
review
In this section
Summary full year results
66
Financial performance
68
Reporting framework
69
Adjusting items
81
Cash generation and conversion
86
Financial position and resources
87
Approach to tax
92
Treasury policies
93
Critical accounting policies
94
65
GSK Annual Report 2022
Proof 6 (e) 08.03.2023 at 1 pm
66
GSK Annual Report 2022
Group financial review
Summary full year results
Full year
2022
£m
Growth
AER
%
Growth
CER
%
Full year
2021
(1)
£m
Full year
2020
(1)
£m
Turnover
29,324
19
13
24,696
24,354
Total continuing operating profit
(1)
6,433
48
31
4,357
5,979
Total EPS
(1)
371.4p
>100
>100
109.6p
144.4p
Total continuing EPS
(1)
110.8p
34
18
82.9p
122.4p
Total discontinued EPS
(1)
260.6p
>100
>100
26.7p
22.0p
Adjusted operating profit
(1)
8,151
26
14
6,493
6,656
Adjusted EPS
(1)
139.7p
27
15
110.3p
114.4p
Cash generated from operations attributable to continuing operations
(1)
7,944
10
7,249
7,674
Free cash flow
3,348
1
3,301
3,683
(1)
The amounts presented above for continuing operations and Adjusted results excludes the Consumer Healthcare business discontinued operation. The
amounts presented for discontinued EPS are for the demerger of the Consumer Healthcare business. The presentation of continuing and discontinued
operations under IFRS 5 are set out on page 192. The 2021 and 2020 comparative results have been restated on a consistent basis from those previously
published to reflect the demerger of the Consumer Healthcare business (see page 238) and the impact of the Share Consolidation implemented on 18 July
2022 (see page 233).
Total Turnover
Total turnover in 2022 was £29,324 million, up 19% at AER,
13% at CER, reflecting strong performance in all three product
groups. Commercial Operations turnover, excluding COVID-19
solution sales, grew 16% at AER, 10% at CER. Specialty
Medicines included £2,309 million sales of
Xevudy
, and
double-digit growth across all therapy areas. Vaccines growth
reflected strong
Shingrix
and Meningitis performance, partially
offset by pandemic adjuvant sales in 2021. General Medicines
reflected the recovery of the antibiotics market and the strong
performance of
Trelegy
in respiratory across all regions.
Specialty Medicines
Specialty Medicines sales were £11,269 million, up 37% at AER,
29% at CER, driven by consistent double-digit growth in all
therapy areas. Specialty Medicines, excluding sales of
Xevudy
,
were £8,960 million up 23% at AER, 15% at CER.
Vaccines
Vaccines turnover was £7,937 million, up 17% at AER, 11% at
CER in total, and up 24% at AER, 17% at CER excluding
pandemic adjuvant sales. The performance reflected a
favourable comparator, which was impacted by COVID-19
related disruptions in several markets primarily in H1 2021,
and strong commercial execution of
Shingrix
, particularly in
the US and Europe.
General Medicines
General Medicines sales in the year were £10,118 million, up 5%
at AER, 1% at CER, with the impact of generic competition in
US, Europe and Japan offset by
Trelegy
growth in respiratory
and the post-pandemic rebound of the antibiotic market since
H2 2021, in Other General Medicines.
Total Continuing Operating Profit
Total operating profit from continuing operations was £6,433
million compared with £4,357 million in 2021.
This included the £0.9 billion upfront income received from the
settlement with Gilead Sciences, Inc. (Gilead), increased profits
on turnover growth of 13% at CER and fair value gains on
investments, partly offset by higher remeasurement charges
for contingent consideration liabilities.
Total continuing Adjusted operating profit
Adjusted operating profit was £8,151 million, 26% higher at AER
and 14% at CER than 2021. The Adjusted operating margin of
27.8% was 1.5 percentage points higher at AER and 0.3
percentage points higher at CER compared to 2021. This
primarily reflected the impact from low margin COVID-19
solutions sales (
Xevudy
). This was offset by operating leverage
from strong sales growth, mix benefit, lower inventory
adjustments and write-offs and higher royalty income.
Total Earnings per Share
Total EPS was 371.4p compared with 109.6p in 2021. The
increase primarily reflected the profit after taxation for
discontinued operations recognised on the Consumer
Healthcare business demerger, upfront income received from
the settlement with Gilead, increased profits and fair value
gains on investments, partly offset by higher remeasurement
charges for contingent consideration liabilities and an
unfavourable comparison due to a credit of £397 million to
Taxation in 2021.
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Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Total continuing Earnings per Share
Total EPS from continuing operations was 110.8p compared
with 82.9p in 2021. This primarily reflected the upfront income
received from the settlement with Gilead, increased profits
from turnover growth and fair value gains on investments,
partly offset by higher remeasurement charges for contingent
consideration liabilities and an unfavourable comparison due
to a credit of £430 million to Taxation in 2021.
Total discontinued Earnings per Share
EPS from discontinued operations was 260.6p, compared with
26.7p in 2021. The increase primarily reflected the gain arising
on the demerger of Consumer Healthcare recognised in Profit
after taxation for discontinued operations.
Adjusted Earnings per Share
Adjusted EPS was 139.7p compared with 110.3p in 2021.
Operating leverage from strong sales growth, beneficial mix
and lower inventory adjustments and write-offs, higher royalty
income and a lower effective tax rate was partly offset by
increased investment behind launches, higher supply chain,
freight and distribution costs and higher non-controlling
interests.
Cash generated from operations attributable to
continuing operations
Cash generated from operations attributable to continuing
operations for the year was £7,944 million (2021: £7,249 million).
The increase primarily reflected a significant increase in
operating profit, favourable exchange impact and favourable
timing of collections, partly offset by unfavourable timing of
profit share payments for
Xevudy
sales, increased cash
contributions to the UK defined benefit pension schemes,
increased contingent consideration payments and a higher
increase in inventory.
Free cash flow
Free cash inflow from continuing operations was £3,348 million
for 2022 (2021: £3,301 million). The increase primarily reflected
a significant increase in operating profit, favourable exchange,
reduced purchases of intangible assets and favourable timing
of collections. This was partly offset by unfavourable timing of
profit share payments for
Xevudy
sales, increased cash
contributions to pensions, increased contingent consideration
payments, higher tax payments, lower proceeds from
disposals, higher capital expenditure and a higher increase
in inventory.
Proof 6 (e) 08.03.2023 at 1 pm
68
GSK Annual Report 2022
Group financial review continued
Financial performance
The Total results of the Group are set out below.
2022
2021
(1)
Growth
% of
% of
£m
turnover
£m
turnover
£%
CER%
Turnover
29,324
100
24,696
100
19
13
Cost of sales
(9,554)
(32.6)
(8,163)
(33.1)
17
16
Gross profit
19,770
67.4
16,533
66.9
20
12
Selling, general and administration
(8,372)
(28.6)
(7,070)
(28.6)
18
13
Research and development
(5,488)
(18.7)
(5,019)
(20.3)
9
4
Royalty income
758
2.6
417
1.7
82
81
Other operating (expenses)/income
(235)
(504)
Operating profit
6,433
21.9
4,357
17.6
48
31
Net finance costs
(803)
(755)
Loss on disposal of interest in associates
–
(36)
Share of after-tax (losses)/profits of associates and joint ventures
(2)
33
Profit before taxation
5,628
3,599
56
37
Taxation
(707)
(83)
Profit after taxation from continuing operations for the year
4,921
3,516
40
23
Profit after taxation from discontinued operations and other
gains from the demerger
3,049
1,580
Remeasurement of discontinued operations distributed to
shareholders on demerger
7,651
–
Profit after taxation from discontinued operations
10,700
1,580
>100
>100
Total profit after taxation for the year
15,621
5,096
>100
>100
Profit attributable to non-controlling interests from continuing operations
460
200
Profit attributable to shareholders from continuing operations
4,461
3,316
Profit attributable to non-controlling interests from discontinued
operations
205
511
Profit attributable to shareholders from discontinued operations
10,495
1,069
15,621
5,096
>100
>100
Total profit attributable to non-controlling interests
665
711
Total profit attributable to shareholders
14,956
4,385
15,621
5,096
>100
>100
Earnings per share from continuing operations (p)
110.8p
82.9p
34
18
Earnings per share from discontinued operations (p)
260.6p
26.7p
>100
>100
Total earnings per share (p)
371.4p
109.6p
>100
>100
Earnings per ADS from continuing operations (US$)
2.75
2.29
Earnings per ADS from discontinued operations (US$)
6.46
0.73
Total earnings per ADS (US$)
9.21
3.02
The Adjusted results for the Group are set out below. Reconciliations between Total results and Adjusted results for 2022 and 2021
are set out on pages 81 to 82.
2022
2021
(1)
Growth
£m
% of
turnover
£m
% of
turnover
£%
CER%
Turnover
29,324
100
24,696
100
19
13
Cost of sales
(8,741)
(29.8)
(7,346)
(29.7)
19
18
Selling, general and administration
(8,128)
(27.7)
(6,749)
(27.3)
20
15
Research and development
(5,062)
(17.3)
(4,525)
(18.3)
12
6
Royalty income
758
2.6
417
1.6
82
81
Adjusted operating profit
8,151
27.8
6,493
26.3
26
14
Adjusted profit attributable to shareholders
5,625
4,415
27
15
Adjusted profit attributable to non-controlling interest
595
441
Adjusted profit after tax
6,220
4,856
28
16
Adjusted earnings per share (p)
139.7p
110.3p
27
15
(1)
The 2021 comparative results have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare
business (see page 238) and the impact of the Share Consolidation implemented on 18 July 2022 (see page 233).
Proof 6 (e) 08.03.2023 at 1 pm
69
Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
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 70.
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 profits from discontinued
operations from the Consumer Healthcare business (see
details on page 238) and the following items in relation to our
continuing operations 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
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 2022, 2021
and 2020, are set out on pages 81 to 83.
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 continued
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
Group financial review continued
Historical record of Adjusting items
The reconciliations between Total and Adjusted operating profit from continuing operations over the last three years
(1)
can be
summarised as follows:
2022
£m
2021
(2)
£m
2020
(2)
£m
Total operating profit from continuing operations
6,433
4,357
5,979
Intangible amortisation
739
761
724
Intangible impairment
296
347
200
Major restructuring
321
424
1,178
Transaction-related items
1,750
1,143
1,237
Divestments, significant legal and other items
(1,388)
(539)
(2,662)
Adjusted results
8,151
6,493
6,656
The analysis of the impact of transaction-related items on operating profit for each of the last three years is as follows:
2022
£m
2021
(2)
£m
2020
(2)
£m
Contingent consideration on former Shionogi-ViiV Healthcare JV (including Shionogi preferential dividends)
1,431
1,026
1,114
ViiV Healthcare put options and Pfizer preferential dividends
85
48
(52)
Contingent consideration on former Novartis Vaccines business
193
27
172
Contingent consideration on acquisition of Affinivax
17
–
–
Other adjustments
24
42
3
Transaction-related items
1,750
1,143
1,237
(1)
Three year financial data is presented reflecting the restated results following the demerger of Consumer Healthcare business. The financial results of 2019
and 2018 are not restated and are not presented.
(2) The 2021 and 2020 comparative results have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
Full reconciliations between Total and Adjusted results for 2020–2022 including continuing and discontinued operations are set
out on pages 81 to 83. Further explanations on the Adjusting items for 2022 are reported on pages 84 to 85.
Reporting framework
continued
Other non-IFRS measures
Free cash flow
Free cash flow is defined as the net cash inflow/outflow from
continuing 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 continuing operating activities to free
cash flow is set out on page 86.
Working capital
Working capital represents inventory and trade receivables
less trade payables.
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.
Total net debt
Net debt is defined as total borrowings less cash, cash
equivalents, liquid investments, and short-term loans to third
parties that are subject to an insignificant risk of change in value.
Please see Note 30 ‘Net Debt’ for the calculation of net debt.
Total Operating Margin
Total Operating margin is operating profit dividend by turnover.
Compound Annual Growth Rate (CAGR)
CAGR is defined as the compound annual growth rate and
shows the annualised average rate of revenue growth between
a number of given years, assuming growth takes place at an
exponentially compounded rate.
Proof 6 (e) 08.03.2023 at 1 pm
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Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Non-controlling interests in ViiV Healthcare
Trading profit allocations
As 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, Inc. (Pfizer) 11.7% and
Shionogi & Co. Ltd (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 83% of the Total earnings and 82% of the
Adjusted earnings of ViiV Healthcare for 2022.
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 2022 were £1,100 million.
As 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.
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:
2022
£m
2021
£m
Contingent consideration at beginning of the year
5,559
5,359
Remeasurement through income statement and
other movements
1,431
1,026
Cash payments: operating cash flows
(1,031)
(721)
Cash payments: investing activities
(69)
(105)
Contingent consideration at end of the year
5,890
5,559
Of the contingent consideration payable (on a post-tax basis)
to Shionogi at 31 December 2022, £940 million (31 December
2021: £937 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.
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 closing balances of the liabilities related to Pfizer’s
shareholding are as follows:
2022
£m
2021
£m
Pfizer put option
1,093
1,008
Reporting framework
continued
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
Group financial review continued
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
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 in 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 impact of the settlement with Gilead on the contingent
consideration liability (CCL) was 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.
The liability which is discounted at 8% is £5,890 million at
31 December 2022 on a post-tax basis. The impact of the
settlement on the Pfizer put option liability was an increase of
£114 million and was included in the re-measurement at
31 December 2021.
Reporting definitions
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 by
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.
Share Consolidation
Shareholders received 4 new Ordinary shares with a nominal
value of 31¼ pence each for every 5 existing Ordinary shares
which had a nominal value of 25 pence each. Earnings per
share, diluted earnings per share, adjusted earnings per share
and dividends per share were retrospectively adjusted to
reflect the Share Consolidation in all the periods presented.
Earnings per share
Earnings per share has been retrospectively adjusted for the
Share Consolidation on 18 July 2022, applying a ratio of 4 new
Ordinary shares for every 5 existing Ordinary shares.
Total Earnings per share
Unless otherwise stated, Total earnings per share refers to
Total basic earnings per share. The same principle applies to
continuing and discontinued earnings per share.
Reporting framework
continued
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Financial statements
Investor information
GSK Annual Report 2022
2022
£m
2021
(revised)
£m
Growth
£%
Growth
CER%
HIV
5,749
4,777
20
12
Oncology
602
489
23
17
Immuno-inflammation,
respiratory and other
2,609
2,027
29
20
8,960
7,293
23
15
Pandemic
2,309
958
>100
>100
Specialty medicines
11,269
8,251
37
29
2021 has been revised to reflect changes to product groups previously reported as
Established Pharmaceuticals.
HIV
HIV sales were £5,749 million with growth of 20% at AER,
12% at CER. The performance benefited from strong patient
demand for the new HIV medicines (
Dovato
,
Cabenuva
,
Juluca
,
Rukobia
and
Apretude
), which contributed approximately three
quarters of the growth. US pricing favourability and year-end
inventory build together contributed one third of the growth
which was partially offset by International tender decline.
New HIV products delivered sales of over two billion to £2,474
million, up 78% at AER, 67% at CER, representing 43% of the
total HIV portfolio compared to 29% last year. Growth was
primarily driven by sales of
Dovato
and
Cabenuva
.
Dovato
recorded sales of £1,375 million up 75% at AER and 65% at CER
and
Cabenuva
, the first long acting injectable for the treatment
of HIV-1 infection, recorded sales of £340 million.
Apretude
, the
first long acting injectable for the prevention of HIV-1 delivered
sales of £41 million.
Group turnover
Group turnover by business
Group turnover by geographic region
Group turnover
GSK has revised its operating segments during the year.
Previously, GSK reported results under four segments:
Pharmaceuticals; Pharmaceuticals R&D; Vaccines and
Consumer Healthcare. GSK now reports results under two
segments namely Commercial Operations and Total R&D. See
Note 6 to the consolidated financial statements for more
details.
The Commercial Operations segment has three product groups
of Specialty Medicines, Vaccines and General Medicines.
•
Specialty Medicines products which includes GSK’s marketed
products for HIV, oncology, immuno-inflammation,
respiratory and other specialty medicines (including
Nucala
)
and the pandemic solution,
Xevudy
;
•
Vaccines products, including sales of GSK’s AS03 adjuvant as
part of the pandemic solutions;
•
General Medicines products, which include products
previously reported as Established Pharmaceuticals and
sales of
Trelegy Ellipta
and
Anoro Ellipta
(previously reported
within the Respiratory category under Specialty products).
These products are typically accessed by patients through
primary care settings.
Group turnover was £29,324 million in the year, up 19% at AER,
13% at CER. In 2022 sales grew 16% at AER, 10% CER excluding
COVID-19 solutions.
Specialty medicines
Turnover (£bn)
£11.3bn
38% of Group turnover
2022
2021
2020
11.3
8.3
7.0
AER growth
37%
CER growth
29%
Specialty Medicines
£11.3bn
AER growth 37%
CER growth 29%
Vaccines
£7.9bn
AER growth 17%
CER growth 11%
General Medicines
£10.1bn
AER growth 5%
CER growth 1%
US
£14.5bn
AER growth 22% CER growth 10%
Europe
£6.3bn
AER growth 18%
CER growth 19%
International
£8.4bn
AER growth 14%
CER growth 14%
Financial performance
Specialty medicines turnover
Specialty turnover excluding
COVID-19 solutions
£9.0bn
AER growth 23%
CER growth 15%
Pandemic turnover
£2.3bn
AER growth >100%
CER growth >100%
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GSK Annual Report 2022
Group financial review continued
Oncology
Oncology sales were £602 million, up 23% at AER, 17% at CER.
Zejula
sales of £463 million were up 17% at AER, 12% at CER
driven by the first line indication, but with diagnosis and
treatment rates continuing to be impacted by the pandemic
especially in the US. Sales of
Blenrep
of £118 million grew 33%
at AER, 25% at CER, and included the impact of withdrawal
from US market in Q4 2022.
Immuno-inflammation, respiratory and other
Immuno-inflammation, Respiratory and Other sales were
£2,609 million up 29% at AER, 20% at CER on strong
performance of
Benlysta
and
Nucala
.
Benlysta
sales were
£1,146 million, up 31% at AER, 20% at CER, representing strong
underlying demand in US and worldwide.
Nucala
sales were
£1,423 million, up 25% at AER, 18% at CER, reflecting continued
strong patient demand and the launch of additional
indications.
Pandemic
Sales of
Xevudy
were £2,309 million, compared to £958 million
sales in 2021. Sales were delivered in all regions, comprising
£828 million in the US, £456 million in Europe, and £1,025
million in International.
Financial performance
continued
Turnover (£bn)
£7.9bn
27% of Group turnover
AER growth
17%
CER growth
11%
2022
2021
2020
7.9
6.8
7.0
Vaccines
2022
£m
2021
£m
Growth
£%
Growth
CER%
Meningitis
1,116
961
16
11
Influenza
714
679
5
(4)
Shingles
2,958
1,721
72
60
Established Vaccines
3,085
2,970
4
–
7,873
6,331
24
17
Pandemic Vaccines
64
447
(86)
(86)
Vaccines
7,937
6,778
17
11
Meningitis
Meningitis vaccines sales grew 16% at AER, 11% at CER to £1,116
million mainly driven by
Bexsero
up 16% at AER, 12% at CER to
£753 million resulting from higher CDC (Center for Disease
Control) demand and increased share in the US.
Menveo
sales
were also up 27% AER, 18% CER to £345 million, primarily
driven by post-pandemic vaccination catch-up and higher
public demand in International, together with favourable
pricing mix and share gain in the US.
Influenza
Fluarix/FluLaval
sales grew by 5% AER but decreased 4% CER
to £714 million, primarily driven by lower post-pandemic
demand in Europe and the US, partly offset by lower expected
returns in the US.
Vaccines turnover
Vaccines turnover excluding
COVID-19 solutions
£7.9bn
AER growth 24%
CER growth 17%
Pandemic turnover
£64 million
AER decline -86%
CER decline -86%
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Financial statements
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GSK Annual Report 2022
Group financial review continued
Shingles
Shingrix
sales grew 72% at AER, 60% at CER to £2,958 million.
All regions grew significantly reflecting post-pandemic
rebound, strong uptake and new market launches with more
than half of the growth contributed from outside of the US.
In the US,
Shingrix
grew 46% at AER, 32% at CER to £1,964
million due to higher non-retail and retail demand and strong
commercial execution. Germany and China contributed
strongly to the
Shingrix
growth.
Shingrix
was launched in 9
markets during 2022 and is now available in 26 countries.
Established Vaccines
Established Vaccines grew 4% AER but were stable at CER
to £3,085 million mainly resulting from supply constraints in
MMR/V vaccines and lower tender demand in International
for
Synflorix
. This was offset by hepatitis vaccines demand
rebound in the US and Europe and
Boostrix
post-pandemic
demand recovery and increased share in the US.
Pandemic Vaccines
Pandemic Vaccines decreased 86% AER and CER primarily
reflecting comparison to 2021 pandemic adjuvant sales to the
US and Canadian governments partly offset by GSK’s share of
2022 contracted European volumes related to the COVID-19
booster vaccine developed through a collaboration with Sanofi
Pasteur (Sanofi).
Financial performance
continued
General Medicines turnover
2022
£m
2021
(revised)
£m
Growth
£%
Growth
CER%
Respiratory
6,548
6,048
8
3
Other general medicines
3,570
3,619
(1)
(2)
General medicines
10,118
9,667
5
1
2021 has been revised to reflect changes to product groups previously reported as
Established Pharmaceuticals.
Respiratory
Respiratory sales were £6,548 million, up 8% at AER, 3% at
CER. The performance was driven by
Trelegy
sales of £1,729
million, up 42% AER, 32% CER, including strong growth across
all regions.
Advair/Seretide
sales of £1,159 million decreased
15% at AER, 17% at CER predominantly reflecting the adverse
impact of generic competition, with growth in certain
International markets due to targeted promotion offsetting
the decrease.
Other general medicines
Other General Medicines sales were £3,570 million, decreasing
1% at AER, 2% at CER.
Augmentin
sales were £576 million, up
35% at AER, 38% at CER, reflecting the post pandemic
rebound of the antibiotic market since H2 2021 in the
International and Europe regions. This partially offsets the
ongoing adverse impact of generic competition, and
approximately two percentage points impact at AER and CER
from the divestment of cephalosporin products in Q4 2021.
Turnover (£bn)
£10.1bn
35% of Group turnover
AER growth
5%
CER growth
1%
2022
2021
2020
10.1
9.7
10.4
General Medicines
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GSK Annual Report 2022
Group financial review continued
Turnover by regions
US
In the US, sales were £14,542 million, up 22% at AER, 10% at
CER. Sales adjusted for COVID-19 solutions were up 24% AER,
12% CER. Sales of
Xevudy
were £828 million.
In Specialty, HIV sales of £3,756 million were up 30% at AER,
17% at CER. Growth benefited from strong patient demand for
all new HIV products, pricing favourability and year-end
inventory build. New HIV medicines (
Dovato
,
Cabenuva
,
Juluca
,
Rukobia
and
Apretude
) sales were £1,685 million up
88% at AER, 70% at CER.
Nucala
in respiratory and
Benlysta
in immunology both continued to grow double-digit and
reflected ongoing strong patient demand. Oncology sales
increased 14% at AER, 3% at CER with diagnosis and
treatment rates continuing to be impacted by the pandemic
for
Zejula
, and the withdrawal of
Blenrep
from the US market
in Q4 2022.
Vaccine sales were £4,243 million, up 22% at AER, 10% at CER,
excluding the impact of pandemic adjuvant sales in 2021, sales
increased 31% at AER, 18% at CER. The performance was
primarily driven by
Shingrix
sales of £1,964 million up 46% at
AER, 32% at CER, mostly due to higher non-retail and retail
demand and strong commercial execution. Demand recovery
in Established Vaccines and share gains in Meningitis vaccines
also contributed to growth.
General Medicines sales were £3,572 million up 10% at AER
down 1% at CER.
Trelegy
was up 47% at AER, 32% at CER
reflecting increased patient demand and growth of the single
inhaler triple therapy market, and
Flovent
grew on launch of
authorised generics in the year. Overall, there was a three-
percentage point reduction in growth of US General Medicines
due to prior period Returns and Rebates (RAR) adjustments in
the year.
Europe
In Europe, sales were £6,348 million, up 18% at AER, 19% at
CER, including COVID-19 solution sales of £513 million
contributing 8 percentage points of growth at AER and CER.
In Specialty Medicines, HIV sales were £1,310 million up 10% at
AER, 10% at CER primarily driven by strong patient demand for
Dovato
,
Cabenuva
and
Juluca
.
Dovato
delivered sales of £478
million,
Juluca
£127 million and
Cabenuva
£40 million.
Benlysta
in immunology,
Nucala
in respiratory, and Oncology medicines
Zejula
,
Blenrep
and
Jemperli
all continued to show strong
double-digit growth.
Vaccine sales were £1,884 million, up 31% at AER, 32% at CER.
The performance was driven by
Shingrix
sales of £688 million,
>100% at AER and CER, particularly in Germany. Pandemic
adjuvant sales of £57 million contributed four percentage
points of growth at AER and CER.
General Medicines sales of £2,079 million decreased 3% at
AER and CER, reflecting the ongoing impact of generic
competitive pressures on
Seretide
and the divestment in Q4
2021 of cephalosporin products which caused one percentage
point of drag on growth at AER and CER. This was partly
offset, however, by strong demand for
Trelegy
and the growth
of
Augmentin
following the post-pandemic rebound of the
antibiotic market since H2 2021.
International
International sales were £8,434 million, up 14% at AER and
CER, including
Xevudy
sales of £1,025 million. Sales grew 7%
AER and 6% CER excluding sales of COVID-19 solutions.
In Specialty, HIV sales were £683 million, stable at AER and
decreased 3% at CER, primarily driven by tender decline.
Excluding tenders, International grew driven by strong
Dovato
growth. Combined
Tivicay
and
Triumeq
sales were £506
million, down 12% at AER and 15% at CER.
Nucala
sales of
£242 million grew 24% at AER and 28% at CER reflecting
strong market growth and patient uptake.
Benlysta
sales of
£114 million grew 44% at AER, 43% at CER reflecting growth in
the biological market in Japan and inclusion on China’s
National Reimbursement Drug List.
Vaccine sales were £1,810 million, down 3% at AER, 5% at CER,
reflecting an 11 percentage points drag at AER and CER from
COVID-19 vaccine adjuvant sales in 2021. Growth excluding
COVID-19 solutions was driven by strong
Shingrix
take-up in
China, Canada and Japan more than offsetting the impact of
supply constraints in MMR/V vaccines and lower
Synflorix
tender demand across several markets.
General Medicines sales were £4,467 million up 5% at AER and
CER. Respiratory sales of £1,955 million increased 10% at AER,
9% at CER, with
Trelegy
sales up 47% at AER, 48% at CER
reflecting strong demand and inclusion on China’s National
Reimbursement Drug List. Sales of
Advair/Seretide
were up
3% at AER, 1% at CER with the adverse impact of generic
competition offset by growth in certain markets due to
targeted promotion. Other General Medicines sales of £2,512
million increased 1% at AER, 2% at CER, and reflected growth
of
Augmentin
following the post-pandemic rebound of the
antibiotic market since H2 2021, partially offset by generic
competition and price reductions in certain markets.
Financial performance
continued
Proof 6 (e) 08.03.2023 at 1 pm
77
Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Cost of sales
2022
£m
2021
(1)
£m
Growth
£%
Growth
CER%
Total cost of sales
(9,554)
(8,163)
17
16
Adjusted cost of sales
(8,741)
(7,346)
19
18
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
Total cost of sales as a percentage of turnover was 32.6%,
0.5 percentage points lower at AER and 0.9 percentage points
higher in CER terms than 2021.
Adjusted cost of sales as a percentage of turnover was 29.8%,
0.1 percentage points higher at AER and 1.3 percentage points
higher at CER compared with 2021. This primarily reflected
higher sales of lower margin
Xevudy
compared to 2021 which
included higher margin pandemic adjuvant sales, increasing
cost of sales margin by 2.5 percentage points at AER and CER,
as well as the impact of increased commodity prices and
freight costs. This was partially offset by a favourable mix
primarily from increased sales of
Shingrix
in the US and
Europe and increased sales of HIV medicines in the US,
lower inventory adjustments and write offs in Vaccines and
continued contribution from restructuring savings.
Selling, general and administration
2022
£m
2021
(1)
£m
Growth
£%
Growth
CER%
Total selling, general and
administration
(8,372)
(7,070)
18
13
Adjusted selling, general and
administration
(8,128)
(6,749)
20
15
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
Total SG&A costs as a percentage of turnover were 28.6%, 0.1
percentage points lower at AER and stable at CER compared
to 2021. This included a reduction in restructuring charges.
Adjusted SG&A costs as a percentage of turnover were 27.7%,
0.4 percentage points higher at AER and 0.5 percentage points
higher at CER than in 2021. Adjusted SG&A costs increased
20% at AER, 15% at CER which primarily reflected an increased
level of launch investment in Specialty Medicines particularly
HIV and Vaccines including
Shingrix
to drive post-pandemic
recovery demand and support market expansion. The growth
in Adjusted SG&A also reflected an unfavourable comparison
to a beneficial legal settlement in 2021 as well as impairment
provisions relating to Russia and Ukraine. This growth was
partly offset by the continuing benefit of restructuring and tight
control of ongoing costs.
Research and development
2022
£m
2021
(1)
£m
Growth
£%
Growth
CER%
Total research and development
(5,488)
(5,019)
9
4
Adjusted research and
development
(5,062)
(4,525)
12
6
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
Total R&D expenditure was £5,488 million up 9% at AER, 4% at
CER. This included amortisation and impairments.
Adjusted R&D expenditure in the full-year increased by 12% at
AER, and 6% at CER, to £5,062 million. This reflected continued
increased investment across Vaccines clinical development,
including investments into our mRNA technology platforms,
continued investment in the late-stage portfolio and several
early discovery programmes, as well as expenditure related to
our recent acquisition of Affinivax, Inc (Affinivax).
In addition, in Specialty Medicines, the level of R&D investment
increased to support the phase III respiratory programme for
depemokimab, a potential new medicine to treat severe
asthma, and bepirovirsen, our study in chronic hepatitis B, in
preparation for the start of the phase III trial. In Oncology,
investment increased in our early-stage immuno-oncology
assets and in momelotinib (MMB), our potential new treatment
of myelofibrosis patients with anaemia, acquired as part of
the recent Sierra Oncology acquisition. These increases in
investment were offset by decreases related to the completion
of several late-stage clinical development programmes and
reduced R&D investment in COVID-19 pandemic solutions
versus 2021.
Royalty income
Royalty income was £758 million (2021: £417 million), up 82%
at AER, 81% at CER, the increase primarily reflecting royalty
income from Gilead under the settlement and licensing
agreement with Gilead announced on 1 February 2022 and
Gardasil royalty income increasing to £446 million due to
higher sales.
Financial performance
continued
Proof 6 (e) 08.03.2023 at 1 pm
78
GSK Annual Report 2022
Group financial review continued
Other operating income/(expense)
Net other operating expense was £235 million (2021: £504
million) reflecting accounting charges of £1,726 million (2021:
£1,101 million) arising from the remeasurement of contingent
consideration liabilities and the liabilities for the Pfizer put
option and Pfizer and Shionogi preferential dividends in ViiV
Healthcare. This included a remeasurement charge of £1,431
million (2021: £1,026 million) for the contingent consideration
liability due to Shionogi, including the unwinding of the
discount of £410 million and a charge for £1,021 million
primarily from changes to exchange rates as well as
adjustments to sales forecasts. This was partly offset by £922
million upfront income received from the settlement with
Gilead, fair value gain on investments including £229 million
on the retained stake in Haleon plc (Haleon), reflecting an
increase in share price since listing and milestone income from
disposals.
Operating profit
Total operating profit from continuing operations was £6,433
million compared with £4,357 million in 2021.
This included the £922 million upfront income received from
the settlement with Gilead, increased profits on turnover
growth of 19% at AER, 13% at CER and fair value gains on
investments including £229 million on the retained stake in
Haleon, partly offset by higher remeasurement charges for
contingent consideration liabilities. Adjusted operating profit
was £8,151 million, 26% higher at AER and 14% at CER than
2021 on a turnover increase of 13% at CER. The Adjusted
operating margin of 27.8% was 1.5 percentage points higher at
AER and 0.3 percentage points higher at CER compared to
2021. This primarily reflected the impact from low margin
COVID-19 solutions sales (
Xevudy
), which reduced Adjusted
Operating profit growth by 3% AER and CER and reduced the
Adjusted operating margin by approximately 1.4 percentage
points at AER and approximately 1.3 percentage points at CER.
This was offset by operating leverage from strong sales growth,
mix benefit, lower inventory adjustments and write offs and
higher royalty income.
Contingent consideration cash payments 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 2022 amounted to
£1,137 million (2021: £856 million). These included cash
payments made to Shionogi of £1,100 million (2021: £826
million).
Adjusted operating profit by business
Commercial Operations operating profit was £13,590 million,
up 19% at AER and 10% at CER on a turnover increase of 13%
at CER. The operating margin of 46.3% was 0.1 percentage
points lower at AER, 1.2 percentage points lower at CER than in
2021. This primarily reflected strong sales of lower margin
Xevudy
, increased investment behind launches in Specialty
Medicines including HIV and Vaccines plus higher commodity,
freight and distribution costs as well as an adverse comparison
to a favourable legal settlement in 2021. This was partly offset
by leverage from strong sales growth, mix and lower inventory
adjustments and write-offs, continued tight control of ongoing
costs, benefits from continued restructuring and increased
royalty income from Biktarvy and Gardasil sales.
R&D segment operating expenses were £5,060 million, up 11%
at AER, 5% at CER, primarily reflecting increased investment in
Vaccines including priority investments for mRNA, late stage
portfolio and expenditure from the acquisition of Affinivax and
in Specialty Medicines in early stage HIV and depemokimab.
This was partly offset by decreases related to the completion
of several late-stage clinical development programmes and
reduced R&D investment in COVID-19 pandemic solutions
versus 2021.
Financial performance
continued
Proof 6 (e) 08.03.2023 at 1 pm
79
Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Net finance costs
Finance income
2022
£m
2021
(1)
£m
Interest and other income
62
13
Fair value movements
14
1
76
14
Finance expense
Interest expense
(789)
(735)
Unwinding of discounts on provisions
(7)
(2)
Remeasurements and fair value movements
(20)
(2)
Finance expense on lease liabilities
(30)
(27)
Other finance expense
(33)
(3)
(879)
(769)
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
Total net finance costs were £803 million compared with £755
million in 2021. Adjusted net finance costs were £791 million
compared with £752 million in 2021. The increase is mainly
driven by costs associated with the Sterling Notes repurchase
in Q4 2022 and higher interest on tax offset by increased
interest income due to higher interest rates and larger cash
balances as a result of the Consumer Healthcare demerger.
Share of after tax profits of associates and joint
ventures
The share of after tax loss of associates and joint ventures was
£2 million (2021: £33 million share of profit).
Loss on disposal of interest in associates
In 2021, the Group also reported a net loss on disposal of
interests in associates of £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 £5,628 million compared with £3,599
million in 2021.
Taxation
2022
£m
2021
(1)
£m
UK current year charge
200
119
Rest of world current year charge
1,351
593
Charge/(credit) in respect of prior periods
(60)
219
Total current taxation
1,491
931
Total deferred taxation
(784)
(848)
Taxation on total profits
707
83
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
The charge of £707 million represented an effective tax rate on
Total results of 12.6% (2021: 2.3%) and reflected the different
tax effects of the various Adjusting items. Included in 2021 was
a credit of £430 million resulting from the remeasurement of
deferred tax assets following enactment of the proposed
change of UK corporate income tax rates from 19% to 25%.
Tax on Adjusted profit amounted to £1,138 million and
represented an effective Adjusted tax rate of 15.5% (2021:
15.9%).
Issues related to taxation are described in Note 14 to the
financial statements ‘Taxation’. 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 profit from continuing operations to
non-controlling interests amounted to £460 million (2021: £200
million). The increase was primarily due to an increased allocation
of ViiV Healthcare profits of £416 million (2021: £197 million),
including the Gilead upfront settlement income, partly offset by
increased credits for remeasurement of contingent consideration
liabilities, as well as higher net profits in some of the Group’s other
entities with non-controlling interests.
The allocation of Adjusted earnings from continuing operations to
non-controlling interests amounted to £595 million (2021: £441
million). The increase in allocation primarily reflected an increased
allocation of ViiV Healthcare profits of £551 million (2021: £438
million), as well as higher net profits in some of the Group’s other
entities with non-controlling interests.
Earnings per share from continuing operations
Total EPS from continuing operations was 110.8p compared
with 82.9p in 2021. This primarily reflected the £922 million
upfront income received from the settlement with Gilead,
increased profits on turnover growth of 13% at CER and fair
value gains on investments including the retained stake in
Haleon, partly offset by higher remeasurement charges for
contingent consideration liabilities and an unfavourable
comparison due to a credit of £430 million to Taxation in
2021 resulting from the remeasurement of deferred tax assets.
Adjusted EPS was 139.7p compared with 110.3p in 2021, up 27%
at AER, 15% at CER on a 13% CER turnover increase. Operating
leverage from growth in sales of Specialty Medicines including
HIV and Vaccines, beneficial mix and lower inventory
adjustments and write-offs, higher royalty income and a lower
effective tax rate was partly offset by increased investment
behind launches in Specialty Medicines including HIV and
Vaccines plus higher supply chain costs, freight and
distribution costs and higher non-controlling interests. Growth
in lower margin COVID-19 solutions sales reduced Adjusted
EPS growth by 4% AER and 3% CER.
Financial performance
continued
Proof 6 (e) 08.03.2023 at 1 pm
80
GSK Annual Report 2022
Group financial review continued
Profit and earnings per share from discontinued
operations
Discontinued operations include the Consumer Healthcare
business and certain Corporate costs directly attributable to the
Consumer Healthcare business. Profit after taxation from
discontinued operations amounted to £10,700 million (2021: £1,580
million). This includes £10,084 million for the gain arising on the
demerger of Consumer Healthcare split between the amount
distributed to shareholders on demerger of £7,651 million and profit
after taxation on discontinued operations for the retained stake of
£2,433 million. In addition, the Profit after taxation from
discontinued operations for the Consumer Healthcare business
was £616 million (2021: £1,580 million).
EPS from discontinued operations was 260.6p, compared with
26.7p in 2021. The increase primarily reflected the gain arising on
the demerger of the Consumer Healthcare business. For further
details see page 238.
Total earnings per share
Total EPS was 371.4p compared with 109.6p in 2021. The increase
primarily reflected the profit after taxation for discontinued
operations recognised on the Consumer Healthcare business
demerger, upfront income received from the settlement with
Gilead, increased profits and fair value gains on investments,
partly offset by higher remeasurement charges for contingent
consideration liabilities and an unfavourable comparison due to a
credit of £397 million to Taxation in 2021.
Dividends
The Board has declared four interim dividends resulting in a total
dividend for the year of 61.25p per share retrospectively adjusted for
the share consolidation. The 2021 dividend per share was 100p
retrospectively adjusted for the share consolidation. 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
guided by a 40 to 60 percent pay-out ratio through the investment
cycle. The dividend policy, the total expected cash distribution,
and the respective dividend pay-out ratios for GSK remain
unchanged.
GSK has previously stated that it expected to declare a 27p per
share dividend for the first half of 2022, a 22p per share dividend
for the second half of 2022 and a 45p per share dividend for 2023
(before the Share Consolidation) but that these targeted dividends
per share would increase in step with the Share Consolidation to
maintain the same aggregate dividend pay-out in absolute
Sterling terms. Accordingly, using the consolidation ratio, GSK’s
expected dividend for the fourth quarter of 2022 converts to 13.75p
per new ordinary share. This results in an expected total dividend
for the second half of 2022 of 27.5p per new ordinary share. The
expected dividend for 2023 converts to 56.5p per new ordinary
share in line with the original expectation converted for the Share
Consolidation and rounded up.
Guidance and Outlook
GSK expects 2023 turnover to increase between 6 to 8 per cent,
Adjusted operating profit to increase between 10 to 12 per cent
and Adjusted earnings per share to increase between 12 to 15 per
cent. This guidance is provided at CER and excludes any
contributions from COVID-19 solutions.
In outlining the guidance for 2023, 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. Due to the phasing of quarterly results
in 2022 and the resulting comparators, GSK expects turnover and
Adjusted operating profit growth to be slightly lower in the first half
of 2023 including a challenging comparator in Q1 2022 and
somewhat higher in the second half, relative to full-year
expectations. Despite the ongoing recovery of healthcare systems
from the impact of the COVID-19 pandemic, uncertain economic
conditions prevail across many markets in which GSK operates
and we continue to expect to see variability in performance
between quarters.
We expect sales of Specialty Medicines to increase mid to high
single-digit per cent, sales of Vaccines to increase mid-teens per
cent and sales of General Medicines to decrease slightly.
COVID-19 solutions
Based on known binding agreements with governments, GSK does
not anticipate any significant COVID-19 pandemic-related sales or
operating profit in 2023. Sales of COVID-19 solutions were £2.4
billion in 2022 and therefore we expect a reduction in Turnover
growth by approximately 9% and a reduction in Adjusted
Operating profit growth by 6% to 7%. However, the Company
continues to discuss future opportunities to support governments,
healthcare systems, and patients whereby its COVID-19 solutions
can address the emergence of any new COVID-19 variant of
concern.
Financial performance
continued
Proof 6 (e) 08.03.2023 at 1 pm
81
Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Adjusted results reconciliation
31 December 2022
Total
results
£m
Profit from
discon-
tinued
operations
£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
29,324
29,324
Cost of sales
(9,554)
648
102
45
18
(8,741)
Gross profit
19,770
648
102
45
18
20,583
Selling, general and administration
(8,372)
180
13
51
(8,128)
Research and development
(5,488)
91
296
39
(5,062)
Royalty income
758
758
Other operating (expense)/income
(235)
1692
(1,457)
–
Operating profit
6,433
739
296
321
1,750
(1,388)
8,151
Net finance costs
(803)
2
10
(791)
Share of after-tax losses of associates and joint
ventures
(2)
(2)
Profit before taxation
5,628
739
296
323
1,750
(1,378)
7,358
Taxation
(707)
(150)
(64)
(87)
(242)
112
(1,138)
Tax rate
12.6%
15.5%
Profit after taxation from continuing operations
4,921
589
232
236
1,508
(1,266)
6,220
Profit after taxation from discontinued operations
and other gains/(losses) from the demerger
3,049
(3,049)
Remeasurement of discontinued operations
distributed to shareholders on demerger
7,651
(7,651)
Profit after taxation from discontinued operations
10,700
(10,700)
Total profit after taxation for the year
15,621
(10,700)
589
232
236
1,508
(1,266)
6,220
Profit attributable to non-controlling interests from
continuing operations
460
135
595
Profit attributable to shareholders from continuing
operations
4,461
589
232
236
1,373
(1,266)
5,625
Profit attributable to non-controlling interest from
discontinued operations
205
(205)
Profit attributable to shareholders from discontinued
operations
10,495
(10,495)
15,621
(10,700)
589
232
236
1,508
(1,266)
6,220
Total profit attributable to non-controlling interests
665
(205)
135
595
Total profit attributable to shareholders
14,956
(10,495)
589
232
236
1,373
(1,266)
5,625
15,621
(10,700)
589
232
236
1,508
(1,266)
6,220
Earnings per share from continuing operations
110.8p
14.6p
5.8p
5.9p
34.1p
(31.5)p
139.7p
Earnings per share from discontinued operations
260.6p
(260.6)p
Total earnings per share
371.4p
(260.6)p
14.6p
5.8p
5.9p
34.1p
(31.5)p
139.7p
Weighted average number of shares (millions)
4,026
4,026
Adjusting items
Proof 6 (e) 08.03.2023 at 1 pm
82
GSK Annual Report 2022
Group financial review continued
Adjusted results reconciliation
31 December 2021
(1)
Total
results
£m
Profit from
discon-
tinued
operations
£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
24,696
24,696
Cost of sales
(8,163)
660
102
28
27
(7,346)
Gross profit
16,533
660
102
28
27
17,350
Selling, general and administration
(7,070)
277
9
35
(6,749)
Research and development
(5,019)
101
347
45
1
(4,525)
Royalty income
417
417
Other operating (expense)/income
(504)
1,106
(602)
Operating profit
4,357
761
347
424
1,143
(539)
6,493
Net finance costs
(755)
2
1
(752)
Loss on disposal of interest in associates
(36)
36
–
Share of after-tax profits of associates and joint
ventures
33
33
Profit before taxation
3,599
761
347
426
1,143
(502)
5,774
Taxation
(83)
(153)
(81)
(79)
(179)
(343)
(918)
Tax rate
2.3%
15.9%
Profit after taxation from continuing operations
3,516
608
266
347
964
(845)
4,856
Profit after taxation from discontinued operations
and other gains/(losses) from the demerger
1,580
(1,580)
Profit after taxation from discontinued operations
1,580
(1,580)
Total profit after taxation for the year
5,096
(1,580)
608
266
347
964
(845)
4,856
Profit attributable to non-controlling interests from
continuing operations
200
241
441
Profit attributable to shareholders from continuing
operations
3,316
608
266
347
723
(845)
4,415
Profit attributable to non-controlling interest from
discontinued operations
511
(511)
Profit attributable to shareholders from discontinued
operations
1,069
(1,069)
5,096
(1,580)
608
266
347
964
(845)
4,856
Total profit attributable to non-controlling interests
711
(511)
241
441
Total profit attributable to shareholders
4,385
(1,069)
608
266
347
723
(845)
4,415
5,096
(1,580)
608
266
347
964
(845)
4,856
Earnings per share from continuing operations
82.9p
15.2p
6.6p
8.7p
18.1p
(21.2)p
110.3p
Earnings per share from discontinued operations
26.7p
(26.7)p
Total earnings per share
109.6p
(26.7)p
15.2p
6.6p
8.7p
18.1p
(21.2)p
110.3p
Weighted average number of shares (millions)
4,003
4,003
(1)
The 2021 comparative results have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare
business (see page 238) and the impact of Share Consolidation implemented on 18 July 2022 (see page 233).
Financial performance
continued
Proof 6 (e) 08.03.2023 at 1 pm
83
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Adjusted results reconciliation
31 December 2020
(1)
Total
results
£m
Profit from
discon-
tinued
operations
£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
24.354
24,354
Cost of sales
(7,929)
649
–
585
23
–
(6,672)
Gross profit
16,425
649
–
585
23
–
17,682
Selling, general and administration
(7,437)
2
395
(1)
16
(7,025)
Research and development
(4,793)
75
198
198
(4,322)
Royalty income
321
321
Other operating (expense)/income
1,463
1,215
(2,678)
–
Operating profit
5,979
724
200
1,178
1,237
(2,662)
6,656
Net finance costs
(842)
2
2
(838)
Share of after-tax profits of associates and joint
ventures
33
33
Profit before taxation
5,170
724
200
1,180
1,237
(2,660)
5,851
Taxation
(67)
(142)
(38)
(213)
(231)
(125)
(816)
Tax rate
1.3%
13.9%
Profit after taxation from continuing operations
5,103
582
162
967
1,006
(2,785)
5,035
Profit after taxation from discontinued operations
and other gains/(losses) from the demerger
1,285
(1,285)
Profit after taxation from discontinued operations
1,285
(1,285)
Total profit after taxation for the year
6,388
(1,285)
582
162
967
1,006
(2,785)
5,035
Profit attributable to non-controlling interests from
continuing operations
230
251
481
Profit attributable to shareholders from continuing
operations
4,873
582
162
967
755
(2,785)
4,554
Profit attributable to non-controlling interest from
discontinued operations
409
(409)
Profit attributable to shareholders from discontinued
operations
876
(876)
6,388
(1,285)
582
162
967
1,006
(2,785)
5,035
Total profit attributable to non-controlling interests
639
(409)
251
481
Total profit attributable to shareholders
5,749
(876)
582
162
967
755
(2,785)
4,554
6,388
(1,285)
582
162
967
1,066
(2,785)
5,035
Earnings per share from continuing operations
122.4p
14.6p
4.1p
24.3p
19.0p
(70.0)p
114.4p
Earnings per share from discontinued operations
22.0p
(22.0)p
Total earnings per share
144.4p
(22.0)p
14.6p
4.1p
24.3p
19.0p
(70.0)p
114.4p
Weighted average number of shares (millions)
3,981
3,981
(1)
The 2020 comparative results have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare
business (see page 238) and the impact of Share Consolidation implemented on 18 July 2022 (see page 233).
Financial performance
continued
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
Group financial review continued
Profit from discontinued operations
Discontinued operations include the Consumer Healthcare
business and certain Corporate costs directly attributable to
the Consumer Healthcare business. Profit after taxation from
discontinued operations amounted to £10,700 million (2021:
£1,580 million). This includes £10,084 million for the gain arising
on the demerger of Consumer Healthcare split between the
amount distributed to shareholders on demerger of £7,651
million and profit after taxation on discontinued operations for
the retained stake of £2,433 million. In addition, the Profit after
taxation from discontinued operations for the Consumer
Healthcare business was £616 million (2021: £1,580 million).
Intangible asset amortisation
See page 211 for description and information on Intangible
asset amortisation.
Intangible asset impairment
See page 211 for description and information on Intangible
asset impairment. No individual intangible asset accounted for
a material impairment.
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 2022 were
£321 million (2021
(1)
: £424 million), analysed as follows:
2022
2021
(1)
Cash
£m
Non-
cash
£m
Total
£m
Cash
£m
Non-
cash
£m
Total
£m
Separation
preparation
restructuring
programme
177
110
287
353
59
412
Significant
acquisitions
20
–
20
–
–
–
Legacy programmes
9
5
14
32
(20)
12
206
115
321
385
39
424
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
Cash charges of £177 million under the Separation Preparation
programme primarily arose from the restructuring of some
administrative functions as well as Global Supply Chain, R&D
functions and commercial. The non-cash charges of £110
million primarily reflected the write-down of assets in
administrative and manufacturing locations and impairment
of IT assets.
Total cash payments made in 2022 were £388 million (2021:
£551 million), £332 million (2021: £428 million) relating to the
Separation Preparation restructuring programme, £17 million
relating to significant acquisitions (2021: £nil) and £39 million
(2021: £123 million) relating to other legacy programmes
including the settlement of certain charges accrued in previous
quarters.
The analysis of Major restructuring charges by income
statement line was as follows:
2022
£m
2021
(1)
£m
Cost of sales
102
102
Selling, general and administration
180
277
Research and development
39
45
Total Major restructuring costs from continuing
operations
321
424
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
The benefit in 2022 from restructuring programmes was
£0.5 billion, primarily relating to the Separation Preparation
restructuring programme.
The Group initiated in Q1 2020 a Separation Preparation
programme to prepare for the separation of GSK into two
companies: The programme aims were:
–
Drive a common approach to R&D with improved capital
allocation
–
Align and improve the capabilities and efficiency of global
support functions to support GSK
–
Further optimise the supply chain and product portfolio,
including the divestment of non-core assets
–
Prepare Consumer Healthcare to operate as a standalone
company
The programme delivered £0.9 billion of annual savings by
2022 and targets to deliver £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.
Adjusting items
continued
Proof 6 (e) 08.03.2023 at 1 pm
85
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Transaction-related adjustments
Transaction-related adjustments from continuing operations
resulted in a net charge of £1,750 million (2021: £1,143 million).
This included a net £1,726 million accounting charge for the
re-measurement of the contingent consideration liabilities and
the liabilities for the Pfizer put option and Pfizer and Shionogi
preferential dividends in ViiV Healthcare.
Charge/(credit)
2022
£m
2021
(1)
£m
Contingent consideration on former Shionogi-ViiV
Healthcare Joint Venture (including Shionogi
preferential dividends)
1,431
1,026
ViiV Healthcare put options and Pfizer
preferential dividends
85
48
Contingent consideration on former Novartis
Vaccines business
193
27
Contingent consideration on acquisition of
Affinivax
17
–
Other adjustments
24
42
Total transaction-related charges
1,750
1,143
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
The £1,431 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 £410 million and a charge of £1,021
million primarily from adjustments to sales forecasts and the
settlement with Gilead as well as updated exchange rate
assumptions. The £85 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. An explanation of the accounting for the
non-controlling interests in ViiV Healthcare is set out on
page 71.
Divestments, significant legal charges and
other items
Divestments, significant legal charges and other items
primarily included the £922 million upfront settlement income
received from Gilead, a fair value gain on investments
including £229 million on the retained stake in Haleon as well
as milestone income and gains from a number of asset
disposals, partly offset by certain other Adjusting items.
Discontinued operations
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”). These
are presented as part of discontinued operations. Total
separation costs incurred in 2022 were £366 million (2021: £314
million). This includes £103 million relating to transaction costs
incurred in connection with the demerger and preparatory
admission costs related to the listing of Haleon.
Total separation costs to date are £748 million including £141
million relating to transaction costs.
Adjusting items
continued
Proof 6 (e) 08.03.2023 at 1 pm
86
GSK Annual Report 2022
Group financial review continued
A summary of the consolidated cash flow statement is set out
below.
2022
£m
2021
£m
Total net cash inflow from operating activities
7,403
7,952
Total net cash (outflow) from investing
activities
(8,772)
(1,777)
Total net cash inflow/(outflow) from financing
activities
823
(7,589)
Decrease in cash and bank overdrafts
(546)
(1,414)
Cash and bank overdrafts at beginning of year
3,819
5,262
Exchange adjustments
152
(29)
Decrease in cash and bank overdrafts
(546)
(1,414)
Cash and bank overdrafts at end of year
3,425
3,819
Cash and bank overdrafts at end of year
comprise:
Cash and cash equivalents
3,723
4,274
Overdrafts
(298)
(455)
3,425
3,819
Reconciliation of net cash inflow from continuing
operating activities to free cash inflow
A reconciliation of net cash inflow from operating activities,
which is the closest equivalent IFRS measure to free cash flow,
is shown below.
2022
£m
2021
(1)
£m
Net cash inflow from continuing operating activities
6,634
6,277
Purchase of property, plant and equipment
(1,143)
(950)
Purchase of intangible assets
(1,115)
(1,704)
Proceeds from sale of property, plant and
equipment
146
132
Proceeds from sale of intangible assets
196
641
Net finance costs
(784)
(758)
Dividends from joint ventures and associates
6
9
Contingent consideration paid (reported in
investing activities)
(79)
(114)
Contribution from non-controlling interests
8
7
Distributions to non-controlling interests
(521)
(239)
Free cash inflow
3,348
3,301
(1)
The 2021 comparative results have been restated on a consistent basis from those
previously published to reflect the demerger of the Consumer Healthcare business
(see page 238).
Capital expenditure and financial investment
Cash payments for tangible and intangible fixed assets
amounted to £2,258 million (2021: £2,654 million) and disposals
realised £342 million (2021: £773 million). Cash payments to
acquire equity investments amounted to £143 million (2021:
£162 million) and sales of equity investments realised £238
million (2021: £202 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.
2022
£m
2021
(1)
£m
Free cash inflow
3,348
3,301
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
Total cash payments to Shionogi in relation to the ViiV
Healthcare contingent consideration liability in the year were
£1,100 million (2021: £826 million), of which £1,031 million was
recognised in cash flows from operating activities and £69
million was recognised in contingent consideration paid within
investing cash flows. These payments are deductible for tax
purposes.
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 285 to
295. We may from time to time have additional demands for
finance, such as for acquisitions. 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
Proof 6 (e) 08.03.2023 at 1 pm
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
2022
£m
2021
£m
Assets
Non-current assets
Property, plant and equipment
8,933
9,932
Right of use assets
687
740
Goodwill
7,046
10,552
Other intangible assets
14,318
30,079
Investments in associates and joint ventures
74
88
Other investments
1,467
2,126
Deferred tax assets
5,658
5,218
Derivative financial instruments
–
18
Other non-current assets
1,194
1,676
Total non-current assets
39.377
60,429
Current assets
Inventories
5,146
5,783
Current tax recoverable
405
486
Trade and other receivables
7,053
7,860
Derivative financial instruments
190
188
Current equity investments
4,087
–
Liquid investments
67
61
Cash and cash equivalents
3,723
4,274
Assets held for sale
98
22
Total current assets
20,769
18,674
Total assets
60,146
79,103
Liabilities
Current liabilities
Short-term borrowings
(3,952)
(3,601)
Contingent consideration liabilities
(1,289)
(958)
Trade and other payables
(16,263)
(17,554)
Derivative financial instruments
(183)
(227)
Current tax payable
(471)
(489)
Short-term provisions
(652)
(841)
Total current liabilities
(22,810)
(23,670)
Non-current liabilities
Long-term borrowings
(17,035)
(20,572)
Corporation tax payable
(127)
(180)
Deferred tax liabilities
(289)
(3,556)
Pensions and other post-employment benefits
(2,579)
(3,113)
Other provisions
(532)
(630)
Derivative financial instruments
–
(1)
Contingent consideration liabilities
(5,779)
(5,118)
Other non-current liabilities
(899)
(921)
Total non-current liabilities
(27,240)
(34,091)
Total liabilities
(50,050)
(57,761)
Net assets
10,096
21,342
Total equity
10,096
21,342
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, equipment and vehicles 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 2022 was £19,451 million, with a net book value of
£8,933 million. Of this, land and buildings represented £3,113
million, plant, equipment and vehicles £4,012 million and assets
in construction £1,808 million. In 2022, we invested £1,245
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 2022, we had
contractual commitments for future capital expenditure of
£743 million. We believe that our property and plant facilities
are adequate for our current requirements.
Right of use assets
Right of use assets amounted to £687 million at 31 December
2022 compared with £740 million at 31 December 2021. The
decrease in the year reflected the impact of depreciation
and transfer to assets held for sale/distribution of £192 million
and £127 million respectively, disposals and impairments
amounting to £75 million, partly offset by additions through
business combinations of £53 million and other additions of
£233 million.
Goodwill
Goodwill decreased to £7,046 million at 31 December 2022,
from £10,552 million primarily as a result of transfer of assets
held for sale/distribution of £5,183 million for the Consumer
Healthcare demerger partially offset by an increase of £1,127
million for the acquisitions of Sierra Oncology and Affinivax.
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 2022
was £14,318 million (2021: £30,079 million). The decrease
primarily reflected transfer to assets held for sale/distribution
of £19,957 million, impairment losses, net of reversals and
amortisation of £1,519 million, offset by additions, net of
disposals, write-offs of £4,047 million and exchange rate gains
of £1,628 million.
Financial position and resources
Proof 6 (e) 08.03.2023 at 1 pm
88
GSK Annual Report 2022
Group financial review continued
Investments in associates and joint ventures
We held investments in associates and joint ventures with a
carrying value at 31 December 2022 of £74 million (2021: £88
million). See Note 21 to the financial statements, ‘Investments in
associates and joint ventures’ for more details.
Current equity investments
Current equity investments amounted to £4,087 million at 31
December 2022 (2021: £nil). Current equity investments comprise
equity investments which the Group holds with the intention to sell
and which it may sell in the short term. Where acquired with this
intention, they are measured at fair value through the profit and
loss (FVTPL). 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
the income statement. The investment of £4,087 million (2021: £nil)
represents the shares held in Haleon after the demerger.
Other investments
We held other investments with a carrying value at 31
December 2022 of £1,467 million (2021: £2,126 million). The most
significant of these investments held at 31 December 2022 were
in Vir Biotechnology and Nimbus Discovery. These investments
had a fair value at 31 December 2022 of £180 million (2021:
£266 million) and £139 million (2021: £32 million) respectively.
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 £190
million (2021: £188 million) and non-current derivative financial
assets held at fair value of £nil (2021: £18 million). The majority of
these financial instruments related to foreign exchange contracts
both designated and not designated as accounting hedges.
Inventories
Inventories amounted to £5,146 million (2021: £5,783) at 31
December 2022. The decrease was mainly driven by the
Consumer Healthcare demerger partially offset by vaccines
stock build.
Trade and other receivables
Trade and other receivables amounted to £7,053 million (2021:
£7,860 million) at 31 December 2022. The decrease was mainly
driven by the Consumer Healthcare demerger and lower
pandemic adjuvant sales compared to last year.
Deferred tax assets
Deferred tax assets amounted to £5,658 million (2021: £5,218
million) at 31 December 2022.
Derivative financial instruments: liabilities
We held current and non-current derivative financial liabilities
at fair value of £183 million (2021: £228 million). This primarily
related to foreign exchange contracts both designated and
not designated as accounting hedges.
Trade and other payables
At 31 December 2022, trade and other payables were £16,263
million compared with £17,554 million at 31 December 2021.
See Note 29 to the financial statements, ‘Trade and other
payables’. The decrease was mainly driven by the Consumer
Healthcare demerger and profit share collaborations offset by
an increase in promotional activity in the regions.
Provisions
We carried deferred tax provisions and other short-term and
non-current provisions of £1,473 million at 31 December 2022
(2021: £5,027 million). Other provisions at the year-end included
£218 million (2021: £196 million) related to legal and other
disputes and £351 million (2021: £652 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
£1,356 million (2021: £1,129 million) on pension arrangements
and £994 million (2021: £1,243 million) on unfunded post-
employment liabilities. See Note 31 to the financial statements,
‘Pensions and other post-employment benefits’.
Other non-current liabilities
Other non-current liabilities amounted to £899 million at 31
December 2022 (2021: £921 million).
Contingent consideration liabilities
Contingent consideration amounted to £7,068 million at 31
December 2022 (2021: £6,076 million), of which £5,890 million
(2021: £5,559 million) represented the estimated present value of
amounts payable to Shionogi relating to ViiV Healthcare, £501
million (2021: £nil) represented the estimated present value of
contingent consideration payable to the former shareholders of
Affinivax and £673 million (2021: £479 million) represented the
estimated present value of contingent consideration payable to
Novartis related to the Vaccines acquisition.
The liability due to Shionogi was £263 million in respect of
preferential dividends. An explanation of the accounting for
the non-controlling interests in ViiV Healthcare is set out on
page 71.
Of the total contingent consideration payable (on a post-tax
basis) at 31 December 2022, £940 million (2021: £937 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 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
Proof 6 (e) 08.03.2023 at 1 pm
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Net debt
2022
£m
2021
£m
Liquid investments
67
61
Cash and cash equivalents
3,723
4,274
Short term borrowings
(3,952)
(3,601)
Long term borrowings
(17,035)
(20,572)
Net debt the end of the year
(17,197)
(19,838)
At 31 December 2022, net debt was £17.2 billion, compared with
£19.8 billion at 31 December 2021, comprising gross debt of
£21.0 billion and cash and liquid investments of £3.8 billion. Net
debt reduced by £2.6 billion primarily due to £3.3 billion free cash
flow from continuing operations, £0.2 billion disposals of equity
investments and £7.2 billion decrease from discontinued
operations as result of demerger primarily reflecting £7.1 billion
of pre-separation dividends attributable to GSK funded by
Consumer Healthcare debt. This was partly offset by purchases of
businesses of £3.1 billion, net of cash acquired, reflecting the
acquisitions of Sierra Oncology and Affinivax, dividends paid to
shareholders of £3.5 billion, net adverse exchange impacts of
£1.4 billion from the translation of non-Sterling denominated debt
and exchange on other financing items and £0.1 billion purchases
of equity investments.
At 31 December 2022, GSK had short-term borrowings
(including overdrafts and lease liabilities) repayable within
12 months of £4.0 billion and £1.9 billion repayable in the
subsequent year.
At 31 December 2022, GSK’s cash and liquid investments were
held as follows:
2022
£m
2021
£m
Bank balances and deposits
1,324
2,825
US Treasury and Treasury repo only money
market funds
146
54
Liquidity funds
2,253
1,395
Cash and cash equivalents
3,723
4,274
Liquid investments – government securities
67
61
3,790
4,335
Cash and liquid investments of £3.1 billion (2021: £2.9 billion) were
held centrally at 31 December 2022.
The analysis of cash and gross debt after the effects of
hedging is as follows:
2022
£m
2021
£m
Liquid investments
67
61
Cash and cash equivalents
3,723
4,274
Gross debt – fixed
(19,214)
(23,167)
– floating
(1,773)
(1,006)
Net debt
(17,197)
(19,838)
Movements in net debt
2022
£m
2021
£m
Total net debt at beginning of year
(19,838)
(20,780)
Decrease in cash and bank overdrafts
(7,597)
(2,504)
Decrease in liquid investments
(1)
(18)
Net decrease in long-term loans
569
–
Net decrease of short-term loans
4,053
2,003
Repayment of lease liabilities
202
181
Debt of subsidiary undertaking acquired
(24)
–
Exchange adjustments
(1,531)
314
Other non-cash movements
(207)
(134)
Decrease/(increase) in net debt from
continuing operations
(4,536)
(158)
Decrease/(increase) in net debt from
discontinued operations
7,177
1,100
Total net debt at end of year
(17,197)
(19,838)
Financial position and resources
continued
3,500
2,500
2,000
1,500
1,000
500
3,000
Maturity profile of bond debt
£m equivalent
GBP bonds
EUR bonds
USD bonds
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
0
Proof 6 (e) 08.03.2023 at 1 pm
90
GSK Annual Report 2022
Group financial review continued
Financial position and resources
continued
Total equity
At 31 December 2022, total equity had decreased from
£21,342 million at 31 December 2021 to £10,096 million.
A summary of the movements in equity is set out below:
2022
£m
2021
£m
Total equity at beginning of year
21,342
20,808
Total comprehensive income for the year
14,790
4,759
Non-cash distribution to non-controlling interests
(2,960)
–
Deconsolidation of former subsidiaries
(3,045)
–
Dividends to shareholders
(3,467)
(3,999)
Ordinary shares issued
25
21
Changes in non-controlling interests
(20)
–
Non-cash dividends to shareholders
(15,526)
–
Hedging gain/loss transferred to non-financial
assets
9
–
Transaction with non-controlling interest
–
10
Share-based incentive plans
357
367
Tax on share-based incentive plans
(8)
11
Contributions from non-controlling interests
8
7
Distributions to non-controlling interests
(1,409)
(642)
Total equity at end of year
10,096
21,342
Share purchases
At 31 December 2022, GSK held 217.1 million shares as Treasury
shares (2021: 284.2 million shares), at a cost of £3,798 million
(2021: £4,969 million), which has been deducted from retained
earnings.
No ordinary shares were repurchased in the period 1 January
2023 to 9 March 2023 and the company does not expect to
make any ordinary share repurchases in the remainder of 2023.
In 2022, 77.1 million Treasury shares were transferred to the
Employee Share Ownership Plan (ESOP) Trusts, of which 50.3
million shares were transferred prior to share consolidation.
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 2022, the ESOP Trusts held 59.9 million (2021:
23.3 million) GSK shares against the future exercise of share
options and share awards. The carrying value of £353 million
(2021: £27 million) has been deducted from other reserves.
The market value of these shares was £861 million (2021:
£371 million).
Contractual obligations and commitments
Financial commitments are summarised in Note 36 to the
financial statements, ‘Commitments’.
The following table sets out our contractual obligations and
commitments at 31 December 2022 as they fall due for
payment.
Total
Under 1 yr
1-3 yrs
3-5 yrs
5 yrs+
£m
£m
£m
£m
£m
Loans
20,086
3,786
3,213
2,259
10,828
Interest on loans
6,322
594
1,101
961
3,666
Finance lease obligations
1,008
167
328
177
336
Future Finance Charges on
leases
146
25
41
28
52
Lease contracts that have
not yet commenced
396
18
42
68
268
Intangible assets
10,659
317
590
1,616
8,136
Property, plant &
equipment
743
612
131
–
–
Investments
138
51
71
13
3
Purchase commitments
161
96
61
4
–
Pensions and post-
retirement benefits
345
345
–
–
–
Total
40,004
6,011
5,578
5,126
23,289
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 2022 as a result of a reduction
in outstanding loan commitments.
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
In connection with the demerger of Consumer Healthcare, the
31 December 2020 pension scheme valuations identified cash
funding or technical provisions deficits in three GSK UK Pension
Schemes. Scottish limited partnerships (“SLPs”) were
established to provide a funding mechanism for each of GSK’s
UK defined benefit pension schemes. The SLPs together hold
shares representing 7.5% of the total issued share capital of
Haleon.
Each pension scheme, through its SLP interest, is entitled to
receive a distribution from that SLP in an amount equal to the
net proceeds of sales of Haleon shares, and to receive
dividend income on Haleon shares, until it has received an
aggregate amount equal to an agreed threshold (“Proceeds
Threshold”). The Proceeds Thresholds total £1,080 million (as
increased by notional interest on the remaining balance from
time to time), and payment of this amount would fully fund the
cash funding or technical provisions deficits in the three
schemes shown by the 31 December 2020 valuations. Once the
Proceeds Threshold has been reached the GSK-controlled
General Partner of each SLP is entitled to sell the remaining
Haleon shares held by the SLP and distribute the proceeds to
GSK. As at 31 December 2022, £345 million remains
outstanding to the UK Pension Trustees.
Contingent liabilities
Other contingent liabilities are set out in Note 35 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
8
3
–
1
Other contingent
liabilities
46
10
–
11
25
Total
58
18
3
11
26
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 32 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
2022, 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 285 to
295 and Note 47 to the financial statements, ‘Legal
proceedings’.
Financial position and resources
continued
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GSK Annual Report 2022
Group financial review continued
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 biopharmaceutical 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 2022, the Group corporate tax charge was £707 million
(2021
(1)
: £83 million) on profits before tax of £5,628 million
(2021
(1)
: £3,599 million) representing an effective tax rate of
12.6% (2021
(1)
: 2.3%). We made cash tax payments of £1,310
million in the year (2021
(1)
: £972 million). In addition to the taxes
we pay on our profits, we pay duties, levies, transactional and
employment taxes.
Our Adjusted tax rate for 2022 was 15.5% (2021
(1)
: 15.9%).
The rate has benefited from the closure of open issues with
tax authorities in various jurisdictions. 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 for 2023 is
expected to be around 15%.
The Group’s Total tax rate for 2022 of 12.6% (2021
(1)
: 2.3%) was
lower than the Adjusted tax rate reflecting the different tax
effects of various Adjusting items.
The UK Government has confirmed that the Spring Finance Bill
2023 will include legislation introducing a 15% global minimum
corporate income tax rate, to have effect from 2024. The detail
of the measures and how they are to be accounted for is still
being finalised and so it is not possible to accurately quantify
the impact for GSK at this stage.
Further details about our corporate tax charges for the year
are set out in Note 14.
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
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Financial statements
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GSK Annual Report 2022
Group financial review continued
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 12 October 2022. 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 to or from 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 Chief Financial Officer 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.
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GSK Annual Report 2022
Group financial review continued
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 47)
–
Contingent liabilities (Note 35)
–
Pensions and other post-employment benefits (Note 31)
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 Commercial Operations, 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 Commercial Operations:
–
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 US
Commercial Operations is as follows:
2022
2021
2020
£m
Margin
%
£m
Margin
%
£m
Margin
%
Gross turnover
29,814
100
24,432
100
24,570
100
Market-driven
segments
(8,275)
(28)
(6,875)
(28)
(7,004)
(29)
Government
mandated and
state programmes
(6,218)
(21)
(5,134)
(21)
(5,710)
(23)
Cash discounts
(536)
(2)
(438)
(2)
(453)
(2)
Customer returns
(255)
(1)
(253)
(1)
(235)
(1)
Prior year
adjustments
780
3
855
4
540
2
Other items
(768)
(2)
(673)
(3)
(560)
(2)
Total deductions
(15,272)
(51)
(12,518)
(51) (13,422)
(55)
Net turnover
14,542
49
11,914
49
11,148
45
The reconciliation has been revised to include Vaccines as part
of US Commercial Operations in all years.
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
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Group financial review continued
Overall sales deduction as a percentage of sales is consistent
year over year with sales growth coming primarily from
Trelegy
and Specialty Products including ViiV. Deductions within the
year were split approximately as follows: General Medicines
70%, Specialty Medicines 20% and Vaccines 10%.
At 31 December 2022, the total accrual for rebates, discounts,
allowances and returns for US Commercial Operations
amounted to £5,855 million (2021: £5,044 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 Commercial Operations inventory levels at
wholesalers and in other distribution channels at 31 December
2022 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 47 to the financial statements, ‘Legal
proceedings’.
Critical accounting policies
continued
Strategic report
The Strategic report was approved by the Board of Directors on
9 March 2023
Iain Mackay
Chief Financial Officer
9 March 2023
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
Corporate
governance
In this section
The Board and GSK Leadership Team
97
Chair’s governance statement
103
Corporate governance architecture
107
Ahead Together – Board oversight
110
Key decisions and engagements
112
Board committee reports
117
Directors’ report
130
96
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97
Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Key
Committee Chair
C
Corporate Responsibility
S
Science
N
Nominations & Corporate Governance
A
Audit & Risk
R
Remuneration
The Board
Sir Jonathan Symonds, CBE
Non-Executive Chair
Age:
64
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, Non-Executive Chair of Proteus Digital Health Inc and Non-Executive Director of
Rubius Therapeutics, Inc.
Jon is a Fellow of the Institute of Chartered Accountants in England and Wales.
External appointments
Non-Executive Director, Genomics England Limited having previously served as its Chairman;
Non-Executive Chair, Energy Aspects; Member, European Round Table for Industry; Senior
Advisor to Chatham House.
Dame Emma Walmsley
Chief Executive Officer
Age:
53
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:
61
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.
Iain will step down as CFO and Executive Director on 1 May 2023. He will continue as an
employee and leave the company on 31 December 2023.
External appointments
Non-Executive Director, Chair of Audit & Risk Committee and member of Remuneration
Committee, National Grid plc; 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.
Elizabeth (Liz) McKee Anderson
Independent Non-Executive Director
Age:
65
Nationality:
American
Appointed:
1 September 2022
A
R
Skills and experience
Liz brings significant experience in commercial biopharmaceuticals and is a seasoned
biotech board member. Her significant experience in commercial biopharmaceuticals, both
operationally and at Board level, as well as her deep understanding of the biotechnology sector
are invaluable to GSK as a pure biopharma company.
Prior to her current roles, Liz served as Worldwide Vice President and commercial leader in
infectious diseases and vaccines and also for immunology and oncology at Janssen
Pharmaceuticals, and as Vice President and General Manager at Wyeth Vaccines. Liz was also
previously a Board member of Bavarian Nordic A/S and of Huntsworth Plc.
External appointments
Board Member, BioMarin Pharmaceutical, Inc; Board Member, Revolution Medicines, Inc; Board
Member, Insmed, Inc; Trustee, The Wistar Institute; Director, Aro Biotherapeutics Company.
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
The Board continued
Charles Bancroft
Senior Independent Non-Executive
Director
Age:
63
Nationality:
American
Appointed:
1 May 2020
Senior Independent Non-Executive Director
from 18 July 2022
A
N
R
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 $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.
Dr Hal Barron
Non-Executive Director
Age:
60
Nationality:
American
Appointed:
1 January 2018
Chief Scientific Officer and
President, R&D from 1 April 2018
Transitioned to the role of Non-Executive
Director on 1 August 2022
S
Skills and experience
Hal joined GSK in 2018 as Chief Scientific Officer and President, R&D. On 1 August 2022, he
transitioned to the role of Non-Executive Director, with additional responsibilities to support R&D.
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.
External appointments
CEO and Board Co-Chair, Altos Labs Inc; Associate Adjunct Professor, Epidemiology &
Biostatistics, University of California, San Francisco.
Dr Anne Beal
Independent Non-Executive Director
Age:
60
Nationality:
American
Appointed:
6 May 2021
C
N
R
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 US 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.
Key
Committee Chair
C
Corporate Responsibility
S
Science
N
Nominations & Corporate Governance
A
Audit & Risk
R
Remuneration
Proof 6 (e) 08.03.2023 at 1 pm
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Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
The Board continued
Dr Harry (Hal) C Dietz
Independent Non-Executive Director
and Scientific & Medical Expert
Age:
64
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, in particular in relation to
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; Consultant and Chair of Scientific Advisory
Board, Aytu Biopharma; Independent Chair, GSK’s Human Genetics Scientific Advisory Board;
founded and previously Scientific Adviser to Blade Therapeutics.
Dr Jesse Goodman
Independent Non-Executive Director
and Scientific & Medical Expert
Age:
71
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.
Key
Committee Chair
C
Corporate Responsibility
S
Science
N
Nominations & Corporate Governance
A
Audit & Risk
R
Remuneration
Proof 6 (e) 08.03.2023 at 1 pm
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The Board continued
Urs Rohner
Independent Non-Executive Director
Age:
63
Nationality:
Swiss
Appointed:
1 January 2015
R
A
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.
Dr Vishal Sikka
Independent Non-Executive Director
Age:
55
Nationality:
American
Appointed:
18 July 2022
C
Skills and experience
Vishal has a distinguished background in technology and particularly in the field of Artificial
Intelligence (AI) and Machine Learning, which is central to GSK’s approach to R&D. He is the
founder and CEO of Vianai Systems, Inc, a Silicon Valley-based company that provides
advanced technological software and services in AI and Machine Learning to large
enterprises around the world.
Prior to founding Vianai Systems, Vishal served as CEO of Infosys Limited and as a member of
the Executive Board of SAP SE. Vishal has a PhD in Artificial Intelligence from Stanford
University and has co-authored several research abstracts related to AI, technology and
database management.
External appointments
Founder and CEO, Vianai Systems, Inc; Board Member, Oracle Corporation; Member,
Supervisory Board, BMW AG.
Key
Committee Chair
C
Corporate Responsibility
S
Science
N
Nominations & Corporate Governance
A
Audit & Risk
R
Remuneration
Directors departing during 2022
Manvinder Singh (Vindi) Banga
1 Sept 2016 to July 2022
Retired from the Board on appointment to the Haleon plc Board effective on demerger
Dame Vivienne Cox
1 July 2016 to 18 July 2022
Lynn Elsenhans
1 July 2012 to 18 July 2022
Retired from the Board after nine years of service
Dr Laurie Glimcher
1 Sept 2017 to 10 Oct 2022
Retired from the Board after over five years of service
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Financial statements
Investor information
GSK Annual Report 2022
GSK Leadership Team (GLT)
Skills and experience
Emma Walmsley
Chief Executive Officer
Emma joined GSK in 2010 and the GLT in 2011. See Board biographies on pages 97 to 100.
Iain Mackay
1
Chief Financial Officer
Iain joined GSK and the GLT in 2019. See Board biographies on pages 97 to 100.
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, later taking responsibility for Compliance, Corporate Security and
Investigations in 2021. 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 the 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 and has
practised law and lived in the US, Singapore and Hong Kong. James was co-chair of the
US-based Civil Justice Reform Group 2019-2022, and is a director of the European General
Counsel Association and the Association of Corporate Counsel.
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.
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 Tony Wood and is a member of the ViiV Healthcare Board. Outside of GSK, Luke is
a member of the Singapore Economic Development Board.
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 former member of the board of directors at
Remediant and is a member of the board of directors at SustainableIT.org.
Shobie holds a Bachelor’s degree in Electronics Engineering from Vellore Institute of
Technology, University of Madras, India.
1
Iain Mackay will step down from the Board and GLT from 2023. He will be succeeded as CFO by Julie Brown.
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GSK Leadership Team continued
Skills and experience
David Redfern
President, Corporate Development
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, Global 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 medicines and vaccines. In
addition, he 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. He joined Glaxo Wellcome as a commercial trainee in 1996.
Phil is also Chair of The Whitehall & Industry Group and holds a degree in English, History
and Russian Studies from Durham University.
Deborah Waterhouse
CEO, ViiV Healthcare and President,
GSK Global Health
Deborah was appointed to the GLT in January 2020. She became Chief Executive Officer of
ViiV Healthcare in April 2017. In addition to ViiV, Deborah also leads GSK’s Global Health
organisation.
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.
Tony Wood
Chief Scientific Officer
Tony was appointed Chief Scientific Officer (CSO) designate on 19 January 2022 and became
CSO, Head of R&D and a member of GLT on 1 August 2022. He joined GSK from Pfizer in 2017
as Senior Vice President, Medicinal Science and Technology, responsible for all science and
technology platforms driving the delivery of new innovation.
Tony has led large-scale global organisations in drug discovery and development in multiple
therapeutic areas, including immunology, oncology and infectious diseases. During his time at
Pfizer, Tony was responsible for the invention of a new antiretroviral medication used to treat
HIV infection. He is a Fellow of the Academy of Medical Sciences, an Honorary Fellow of the
Royal Society of Chemistry (RSC), the highest honour given by the RSC, and a Fellow of the
Royal Society of Biology.
Tony has a BSc in chemistry and PhD in organic synthesis from the University of Newcastle,
and was a postdoctoral fellow at Imperial College, London. He is also currently a visiting
professor at IMCM Oxford.
GLT members departing during 2022
Hal Barron was a member of the GLT and Chief Scientific Officer until 1 August 2022, when he transitioned to a Non-Executive Director.
Roger Connor was a member of the GLT and President, Global Vaccines until 1 December 2022, when he left the company.
Proof 6 (e) 08.03.2023 at 1 pm
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Financial statements
Investor information
GSK Annual Report 2022
Chair’s governance statement
2022 was one of the most important years in GSK’s recent history which saw the delivery of strong operational and
financial performance, the successful demerger of Consumer Healthcare and the establishment of new GSK as a fully
focused global biopharma company.
There was an intensity to the Board’s work in supporting and overseeing this, which required a number of additional meetings to
be scheduled, as illustrated below.
Executing the demerger and creating new GSK
The Board’s work in the first half of the year was primarily
occupied in overseeing the smooth execution of the demerger
of Consumer Healthcare from GSK, resulting in the creation of
two strong businesses. This culminated in the approval of the
GSK Circular and the Haleon Prospectus which were
overwhelmingly approved by shareholders at the General
Meeting in July, with over 99% of votes cast in favour. This work
included, at its heart, a robust focus on shareholder value
creation embodied in the ambitions for both companies. These
were communicated in the investor updates in February 2022
for Haleon and previously in June 2021 for GSK.
Pre-demerger (1 January to 17 July)
Routine
Additional*
Board
3
3
Nominations & Corporate Governance
3
1
Science
1
2
Corporate Responsibility
1
1
Audit & Risk
3
2
Remuneration
3
2
Chairs‘
0
5
*Additional activity:
–
Development and approval of demerger
documentation and forecast
–
Haleon plc (Haleon): Chair appointment and Board
development
–
GSK Remuneration policy development and investor
approval
–
GSK Board development and CSO succession
–
Business development
Post-demerger (18 July to 31 December)
Routine
Additional*
Board
3
2
Nominations & Corporate Governance
2
0
Science
2
1
Corporate Responsibility
3
0
Audit & Risk
3
2
Remuneration
3
1
Chairs‘
0
1
*Additional activity:
–
CFO succession
–
Zantac
litigation
–
Business development
2022 Board activity
–
Disciplined Board approach
to deliver demerger
–
Creation of world-leading consumer
healthcare business with competitive
long-term growth prospects and
compelling financial proposition
–
Newly focused GSK with
strengthened balance sheet for
investment in pipeline/R&D
–
Both companies with clear targets
for upper-quartile growth, set out
at Investor Updates
Q3
Q4
Q1
Q3
Q4
Q1
Q2
2022
Haleon Chair
and Board
appointments
Haleon Prospectus
and Circular
published
GSK Investor
Update
Haleon Investor
Update
Haleon
Demerger
2022 separation process
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GSK Annual Report 2022
Chair's governance statement continued
At our investor updates, we set out what we believed to be
competitive financial aspirations for new GSK. Namely:
cumulative top-line growth of 5% and operating profit growth
of 10% (excluding COVID-19 solutions), together with an
aspiration of £31 billion to £33 billion of sales by 2031. This was
not an ambition that the Board entered into lightly. It was a
very important demonstration of the confidence the Board has
in the business and our determination to be held accountable
for a step-change in improved performance. 2022’s strong
operational and financial performance is a good platform to
progress from.
Similarly, for Haleon, the focus was on a top-line growth
aspiration to signal that the business had upper quartile
growth potential. This view was robustly tested when an
unsolicited conditional and non-binding proposal to acquire
the Consumer Healthcare business was received. In exercising
its fiduciary duties all proposals were evaluated but rejected by
the Board as they were not in the best interests of shareholders.
This is because the proposals fundamentally undervalued the
Haleon business and its future prospects. The Board was
confident that Haleon could deliver sustained organic sales
growth in the range of 4-6% CER over the medium term. It has
been very pleasing to see that since separation, Haleon has
subsequently announced strong performance.
A key part of our aspiration for GSK was the restructuring of
the GSK balance sheet with an appropriate level of debt for
Haleon. This sought to ensure the competitiveness of both
companies on separation and GSK’s ability to continue to
invest in external as well as internal science was improved. The
refinancing of approximately £10 billion of indebtedness was
successfully completed in the first quarter of 2022. This timing
was opportune given the current environment. GSK received
£7.1 billion of pre-separation dividends attributable to GSK
funded by Consumer Healthcare debt and we continue to hold
13.5% of Haleon shares, which will be divested in due course.
R&D and business development
I have also previously described the succession process we
followed for the CSO transition from Dr Hal Barron to Dr Tony
Wood. We are very pleased with how smooth this process
has been and that we are making good progress in R&D.
The Board receives regular reports on R&D from Dr Wood
as well as from the Science Committee, following its reviews.
Progress is achieved by organic and inorganic business
development (BD).
We now have an efficient Board cadence for BD to support
R&D. The scientific screening of a target is undertaken first by
the Science Committee, well in advance of the Board’s
consideration. This is to ensure that we are confident with the
scientific rationale underpinning a deal before progressing to
the Board. If the proposal is for a late or later stage target or
asset, we then also undertake a commercial review of the
forecasts and the commercial assumptions underpinning it.
We consider deals in respect of their contribution to our
ambitions for the periods: to 2026, 2026 to 2031, and beyond.
The Board can then review the proposal knowing that these
important aspects have been established. We then focus on
the value associated with the transaction and how it
contributes to furthering our strategy and plan.
During 2022, this process included the appraisal and approval
of the acquisitions of:
–
Sierra Oncology
, a biopharmaceutical company focused on
targeted therapies for rare forms of cancer. The acquisition
included momelotinib, a new medicine with a unique dual
mechanism of action intended to address the critical unmet
medical needs of myelofibrosis patients with anaemia
–
Affinivax
, a clinical stage biopharmaceutical company
providing GSK with access to a next generation
pneumococcal vaccine candidate and a highly innovative
Multiple Antigen Presenting System, known as MAPS
Other transactions reviewed by the Board included:
–
a licensing agreement with Spero Therapeutics for
tebipenem HBr, a late-stage antibiotic targeted to treat
complicated urinary tract infections; a significant unmet
medical need
–
a collaboration with Wave Life Sciences, bringing together
Wave’s oligonucleotide platform and GSK’s expertise in
genetics and genomics
–
a collaboration with Tempus to provide GSK with access to
Tempus’ AI-enabled platform, including its library of
de-identified patient data – one of the world’s largest
sources of clinical and molecular data
Shareholder perspectives and engagement
The Board believes in the importance of maintaining a high
and continuous level of engagement with shareholders. During
2022 and up to the date of publication of this Report, I held 27
individual meetings with a range of investors, who make up
approximately 35% of the company’s share register. Charles
Bancroft, who was appointed our new SID after the demerger,
has held 14 introductory meetings with shareholders making up
over 25% of our register. We were also pleased to be able to
hold our Annual Governance Meeting in London in December
2022 as an ‘in person’ meeting once again. We extended an
invitation to shareholders representing holdings totalling
approximately 50% of our share register to this event and were
pleased that representatives of over 25% participated virtually
or in person. It is of prime importance for us to maintain a clear
understanding of investors’ views on the company’s
performance. These meetings help achieve that and provide a
key input to our Board planning.
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GSK Annual Report 2022
Chair's governance statement continued
New GSK Board priorities
When I joined the Board in September 2019, GSK was entering
a period of significant transition in the run up to the separation
of the Group. The Board engaged in a structured, externally
facilitated appraisal of our governance and the architecture of
the Board and its committees. The output of this was a Board
agenda that was focused and linked directly to the business
needs of innovation, pipeline, performance, culture and
separation, and a refined committee architecture that
reinforced these priorities.
Following separation, it was time to set new Board priorities.
Ms Hall of No 4, a business advisory company, was engaged to
facilitate this work following the success of her previous review.
This work comprised two key aspects:
–
a review of our current ways of working, with
recommendations for further improvement and establishing
priorities for the Board agenda for the next three to five years
–
an evaluation of the Board and its committees during 2022
The Board is now aligned with management to deliver our new
Ahead Together purpose, strategy and culture, with a strong
emphasis on value creation over three time periods: near-term
(2023-26) based around delivering our public commitments;
medium- to long-term (2026-31); and beyond. Our Board
programme for 2023 has been set accordingly.
The report of the formal independent external 2022 Board and
committee performance review is set out on page 111.
Board culture and decision-making
The Board fully supported our new purpose, strategy and the
performance culture for new GSK. We are now well-positioned
to deliver on our public commitments for growth and to create
sustainable long-term value. All Board discussions focus on the
powerful combination of Science, Technology and Talent and
realising GSK’s desired culture. These support our aim to be:
–
ambitious for patients
–
accountable for impact
–
doing the right thing
They also frame Board discussions when considering strategic
decisions and actions to be taken.
Connecting with the business and our people
Following the COVID-19 restrictions, the Board is now able to
meet together in person. Time is set aside to enable our
Non-Executive Directors to have more informal time, together
with the GLT members presenting to them and to meet with
other colleagues at each meeting location.
The Board and Board committees
The Board’s agenda seeks to be focused and not to duplicate
work. Each committee remit defines its agenda to support our
priorities. Our Committee Chairs continue to be responsible for
sharing with the Board the work their committees undertake
and the main issues they are overseeing. They also highlight
specific committee papers which they believe would benefit
the Board’s wider understanding. Non-Executive Directors
may attend any committee meeting and have full access to
agendas and papers. From time to time the Chairs’ Committee,
or a more specific Board committee, may be convened for a
specific topic. This creates flexibility and enables the Board to
be more agile, if required. Given the increased biopharma
expertise of the new Board, management has also been
sharing proposals and opportunities at an earlier stage to
facilitate more efficient decision-making.
The following is a snapshot of aspects of our Board
committees, work in 2022.
Audit & Risk Committee:
assisted in the establishment of a
robust internal control and risk management control
framework for Haleon as an independent listed company. It
also confirmed that GSK’s framework remained fit for our new
future. The Committee took a lead role in completing the
scrutiny of and then subsequently recommending to the Board
the demerger and listing documents for shareholder approval
at the General Meeting in July 2022.
2023 Board priorities
Externally facilitated Board review to agree priorities and ways of working
Focus on value creation, governance and oversight of Ahead Together strategy:
–
Delivery of performance targets
–
Execution of R&D pipeline and business development
–
Long-term R&D strategy and approach
–
People/Talent/Culture
–
ESG Leadership
–
Zantac
litigation – defence and mitigation
–
Focus on shareholder value creation
to 2026
2026-31
2031 and
beyond
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Chair's governance statement continued
Since the demerger, the Group’s share price performance in
the second half of the year was impacted by the uncertainties
associated with the
Zantac
product liability litigation in the
US. The Committee continues to have primary Board
accountability for the
Zantac
litigation, including accounting,
disclosure and communication assessments on behalf of the
Board. The Committee has a clear remit and recommends
decisions on the navigation of the litigation to the Board, as
appropriate. I would reiterate at this point that the company
remains very confident in its position on these matters and
will defend itself vigorously against any claims brought.
Nominations & Corporate Governance Committee:
supported the demerger of the Consumer Healthcare business
by assisting the Haleon Chair designate in completing the
composition of the Haleon Board. This included the transfer,
on demerger, of two of our serving Directors, Vindi Banga and
Dame Vivienne Cox. The Committee felt strongly that their
particular skills and experience would be valuable to Haleon
and that they would also importantly provide continuity for the
new Haleon Board.
The Committee’s other focus was on continuing to complete
the composition of the new GSK Board and changes to the
GLT. The key focus was in deepening the Board’s scientific
and biopharma skills. The Committee selected new Directors
with a strong emphasis on life sciences and technology to help
deepen our biopharma expertise and experience:
–
Dr Vishal Sikka
is a world-leading technologist in the field of
advanced enterprise technologies with extraordinary
credentials in AI and machine learning
–
Liz McKee Anderson
has deep commercial expertise across
both large and specialty biopharma and has specific
experience of global commercialisation and market access
in specialisms such as respiratory, immunology, vaccines and
HIV
–
Julie Brown
, will join GSK in April as our incoming CFO. She
has considerable listed pharmaceuticals and commercial
experience
The Board now has scientific credentials ideally suited to its
new purpose and which are among the strongest in the
industry. We have moved away from the broader experience
on the Board I originally joined in 2019. I am pleased at how
the debate and discussion in Board and committee meetings
has evolved to our new purpose and is deeper and more
enriched as a result. The Committee will continue to recruit
diverse Directors with scientific and biopharma expertise to
meet the evolving needs of the Board to oversee the
company’s strategy as a global biopharma business.
Science Committee:
Good progress has been made in R&D.
The Committee continues to support the ambitious and agile
development of our pipeline, both organically and through
smart business development, by overseeing and reviewing our
application of science. The Committee supported the seamless
transition of leadership of R&D to Dr Tony Wood from Dr Hal
Barron. Tony’s role as a key architect in rebuilding our pipeline
was key to this.
Corporate Responsibility Committee:
The new culture at GSK
is something that we all own. It powers our purpose, drives
delivery of our strategy and helps make GSK a place where
people can thrive. The Committee continues to focus its
oversight on evolving the company’s ESG performance. I am
pleased that we are able to report that we are
on track
against our new ESG rating and reassured by the further
enhancements to our ESG reporting and data oversight.
Remuneration Committee:
Our focused new Remuneration
policy is a fundamental part of the architecture of new
GSK post-separation. It is critical we now build a strong
performance culture to generate sustained delivery of
shareholder value. Our new policy seeks to achieve this
key linkage between executive remuneration rewarding
outperformance.
We engaged extensively with shareholders and shareholder
representative bodies as we developed the new policy to
recognise the importance of the new reward system to support
new GSK’s success. The final policy was modified to reflect the
feedback we received, whilst recognising the sizeable minority
of shareholders who voted against it. We will continue to
engage with shareholders to demonstrate the importance
we place on rewarding over-performance in the policy at this
crucial next stage of new GSK’s development. The strong
operational and financial performance of the company
in 2022 is an encouraging start. However, GSK has
underperformed in terms of TSR and share price performance
for many years. The new policy is firmly focused on addressing
and reversing this trend and the outturns of awards in 2022
recognise the significant improvement in performance.
Overall good progress was made in 2022. However, your Board
is clear that there is more to do to increase investor confidence
in the ability of the Group to sustain growth over the next
decade.
Thank you for your continued support and I look forward to
connecting with you during the year, whether at our Annual
General Meeting in May, or otherwise, to share our continued
progress.
Sir Jonathan Symonds
Chair
9 March 2023
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Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Corporate governance architecture
Our corporate governance architecture is a framework designed to improve the effectiveness of the Board and to support its
oversight of the GSK Leadership Team (GLT) in the delivery of our strategy. It continues to evolve to support our infrastructure and
priorities as a pure biopharma business.
GSK’s internal control and risk management arrangements are an integral part of our overall corporate governance framework
and are described on pages 51 to 64 and pages 125 and 126 .
To ensure the framework's optimal effectiveness it requires:
–
a clear division of responsibilities for individual and collective Board roles described on the next page
–
the appropriate distribution of workload to the Board committee with the requisite focus and skills
–
highly committed Board Directors motivated to discharge their roles and responsibilities for the success of the company
Committee roles
Board
CEO
GLT
Chairs’
Committee
Committee
Role and focus
Membership
Committee
report
on page
Chairs’
Acts on behalf of the Board between its scheduled meetings to take decisions on urgent
matters in accordance with matters and authority delegated to it by the Board from time to
time
Sir Jonathan Symonds
(Company Chair)
Senior Independent
Director
Chairs of the Board's
committees
–
Corporate
Responsibility
Considers GSK's Trust priority and has oversight of our responsible business approach and ESG
strategy, performance and reporting. This reflects 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
Dr Anne Beal (Chair)
Dr Jesse Goodman
Dr Vishal Sikka
117-118
Science
Supports the Board in its understanding of the key strategic themes, upon which the company’s
R&D strategy is based, and of 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 Hal Dietz (Chair
from 1 January 2023)
Dr Jesse Goodman
(Chair to 31
December 2022)
Dr Hal Barron
118-120
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. It makes recommendations to
the Board as appropriate. It also 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 Board and GLT conflicts of interest
Sir Jonathan Symonds
(Chair)
Charles Bancroft
Dr Anne Beal
Urs Rohner
120-124
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. It also oversees ESG data reporting and assurance
Initiates audit tenders, the selection and appointment of the external auditor, setting
its remuneration and exercising oversight of its work
Charles Bancroft
(Chair)
Elizabeth McKee
Anderson
Urs Rohner
124-129
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 arrangements and policy for the Non-Executive Directors)
Urs Rohner (Chair)
Charles Bancroft
Dr Anne Beal
Elizabeth McKee
Anderson
132-164
Each Board committee has written terms of reference which are 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. Board and committee meeting attendance for 2022 and
oversight of the company's policy on external appointments is set out on page 109.
Corporate
Responsibility
Committee
Science
Committee
Nominations
& Corporate
Governance
Committee
Audit & Risk
Committee
Remuneration
Committee
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GSK Annual Report 2022
Independent oversight and rigorous challenge
Non-Executive Directors
–
provide a strong independent element to the Board
–
constructively support and challenge management and
scrutinise its performance in achieving 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 97 to 100, with the exception of Dr
Hal Barron, to be independent after being assessed against
Provision 10 of the Financial Reporting Council's (FRC) UK
Corporate Governance Code (Code).
The independence and commitment of Dr Jesse Goodman
and Urs Rohner, who have each served on the Board for
over six years, has been subjected to a rigorous review.
GSK's Non-Executive Director role description is available on gsk.com
Senior Independent Director
Charles Bancroft
–
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 the 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 meetings with investors and
briefings from the Company Secretary and Investor
Relations
GSK's 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 a 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
–
is responsible for the management of the Group and its
business
–
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
–
is 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 Code
–
is a point of contact for shareholders on all corporate governance matters
Corporate governance architecture continued
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GSK Annual Report 2022
Corporate governance architecture continued
Board
Chairs’
Corporate
Responsibility
Science
Nominations &
Corporate
Governance
Audit & Risk
Remuneration
Total number of routine meetings
6
6
4
3
5
6
6
Current members
Attended
Attended
Attended
Attended
Attended
Attended
Sir Jonathan Symonds
6
6
5
Emma Walmsley
6
Iain Mackay
6
Elizabeth McKee Anderson
1 (2)
1 (2)
1 (2)
Dr Hal Barron
6
2 (2)
Charles Bancroft
6
5
5
6
3 (3)
Dr Anne Beal
6
1 (3)
4
2 (2)
5 (5)
3 (3)
Dr Harry C Dietz
6
3
Dr Jesse Goodman
6
5
4
3
Urs Rohner
6
6
5
3 (3)
6
Dr Vishal Sikka
3 (3)
2 (3)
Retired members
Vindi Banga
3 (3)
4 (5)
3 (3)
3 (3)
3 (3)
Dame Vivienne Cox
3 (3)
1 (1)
3 (3)
Lynn Elsenhans
3 (3)
2 (3)
1 (1)
3 (3)
3 (3)
Dr Laurie Glimcher
5 (5)
2 (2)
5 (5)
Number of additional meetings
5
–
1
3
1
4
3
The numbers in brackets denote the number of meetings which these individuals were eligible to attend. See Board and committee changes during
2022 on page 123. Details of committee members’ skills and experience are included in their biographies under ‘The Board’ on pages 97 to 100.
All our Non-Executive Directors are expected to devote such time as is necessary for the performance of their duties. Each
Director is required to attend a minimum of 75% of scheduled Board and committees meetings. However, it is recognised that
there may be rare occasions when this is not possible. Special allowance is given during the first year of Board membership
while calendars are aligned. There was a high attendance record at scheduled Board and committee meetings for all our
Directors who served during 2022, as set out above.
Our Board Directors’ external appointments are governed by a Board approved policy. External appointments can help Board
and GLT members widen their expertise and knowledge and hence perform their roles more effectively. When proposing new
Non-Executive Director appointments to the Board for approval, the Board takes into account other demands on the
individuals’ time. Prior to appointment to the Board, an individual is required to disclose significant commitments they may
have with an indication of the time involved.
All additional prospective external appointments for serving Board Directors are considered and approved by the Board,
noting the nature of the role and type of organisation, time commitment and any potential conflicts that are envisaged.
The Company Secretary maintains a register of commitments and potential conflicts. The Board is satisfied that given
Directors’ other interests, each has sufficient time to carry out their role. Our Executive or Non-Executive Directors may
undertake a maximum of one, or up to four listed company directorships, respectively.
FRC UK Corporate Governance Code
Financial experience
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.
Compliance
The Board is pleased to report that in 2022 it was in full
compliance with the provisions of the FRC's Code, with the
exception of Code provision 38.
Provision 38 requires alignment of pension rates for executive
directors with those available to the local workforce. Since
1 January 2023, current Executive Directors' pension rates
have been aligned to the wider workforce local to them. This
replicates the requirement for pension arrangements for any
new Executive Directors appointed to GSK.
In addition, provision 38 requires that only base salary should
be pensionable. US pension arrangements for employees
allow basic salary and bonus to be pensionable. Following
Dr Hal Barron's transition to a Non-Executive Director with
effect from 1 August 2022, this FRC Code requirement has
also been 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 report. A copy of the
Code is available on the FRC’s website, www.frc.org.uk.
2022 Board and committee attendance
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GSK Annual Report 2022
Areas of focus in 2022
Demerger and
listing of Haleon
The Board’s preparation for the demerger as a value-based process included:
–
discussing strategy and plans for Consumer Healthcare for the period up to and beyond its separation as Haleon
–
receiving regular performance reports
–
scrutinising and overseeing the Consumer Healthcare Capital Markets Day approach and materials
–
supporting appointments to the Haleon Board, including the transition of Vindi Banga and Dame Vivienne Cox to Haleon
–
scrutinising and responding to an unsolicited proposal for the Consumer Healthcare business in advance of the demerger
–
approving the GSK Shareholder Circular recommending the demerger and overseeing the Haleon Prospectus
–
approval of the demerger and subsequent GSK share consolidation
Build GSK as a
pure biopharma
business
The Board’s oversight of the creation of GSK as a pure biopharma business and delivery of a step-change in performance included:
–
regularly discussing and scrutinising transformation plans for GSK
–
scutinising updates on R&D strategy, progress and progression of the company's pipeline
–
requesting the Remuneration Committee renew the Remuneration policy's focus to incentivise overdelivery and reward a new
performance culture
–
Board and management succession planning, including approval of the appointment of a new Chief Scientific Officer, the transition
of Dr Hal Barron to Non-Executive Director, and the appointment of two new independent Non-Executive Directors and a new Chief
Financial Officer
–
approval of Charles Bancroft as successor to Vindi Banga in the role of Senior Independent Director
–
approval of a change in approach to workforce engagement
Ahead Together
– further
strengthening the
fundamentals of
value creation
The Board’s oversight of the fundamentals of commercial execution, cost base management, capital allocation, pipeline and
culture included:
–
setting and approving the Board’s 2022-24 priorities
–
receiving regular progress updates and providing input into the company’s Vaccines mRNA strategy and plan
–
receiving and discussing commercial strategy performance reports from Pharmaceuticals, Vaccines and ViiV Healthcare
–
receiving updates on R&D strategy and pipeline progress
–
approving business development transactions, acquisitions and strategic partnerships with third parties including: Sierra Oncology,
Affinivax, Mersana Therapeutics, Spero Therapeutics, Wave Life Sciences and Tempus
–
receiving quarterly reports from the CEO, CFO and CSO
–
scrutinising the Group’s financial performance
–
setting the company’s new name, purpose and simplified culture, through a new Code of Conduct
Enhancing
ESG leadership
The Board’s oversight of our new culture and embedding ESG at our core:
–
approving and supporting the new GSK culture
–
approving the Responsible Business section of the Annual Report
–
approving the Task Force on Climate-related Financial Disclosures section in the Annual Report
–
final approval of our Pricing and Access Policy principles
–
overseeing GSK’s overall response to the situation in Ukraine
Regular
corporate
governance
oversight
The Board’s programme of governance included:
–
reviewing the quarterly financial results, dividend proposals, earnings guidance, investor materials, results announcements and
receiving reports from the external auditor
–
approving the final 2021 Annual Report and Form 20-F
–
setting the annual budget, and the forward-looking three-year plan
–
conducting an annual review of the Board’s enterprise risk responsibility framework and enterprise-wide risks
–
undertaking an annual Board evaluation and implementing its agreed outcomes
–
reviewing and continuing to evolve the Board’s governance architecture
–
evaluating the CEO’s 2021 performance, and setting her 2022 objectives
–
reviewing the talent and succession plans annually
–
receiving reports on Board committee work
–
engaging with GSK's stakeholders and the wider workforce to gather and understand their views on the company’s activities and
operation
–
reviewing the employee PULSE survey results
–
receiving reports on wider 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.
In 2022, papers and presentations were provided to the Board (and its committees) which were focused on the strengthening of the
fundamental elements of the business to move Ahead Together in pursuit of the company's strategy to deliver GSK's growth-based
performance ambitions, oversee the demerger and listing of Haleon, establishing GSK as a pure biopharma business and drive our ESG
leadership priorities. In doing so, these papers and presentations also highlighted the relevant stakeholder impacts and perspectives.
These materials enable the Board's effective decision-making, input and oversight of business performance and governance.
The key items of business considered critical to GSK’s long-term success through the achievement of GSK's key priorities are highlighted
below:
Ahead Together – Board oversight
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Ahead Together – Board oversight continued
Board performance
The Board evaluates its performance, and that of its
committees, every year. The evaluation is normally carried out
externally every third year, with the last one being facilitated in
2020 by Jan Hall of No 4, a business advisory company which
does not have any other connection with GSK. The Board felt
it would be helpful for No 4 to conduct the 2022 evaluation
following the completion of the demerger of Haleon and the
formation of GSK as a new biopharma company.
Preparation
No 4 met with the Chair and CEO in advance of the evaluation,
for an update on how the Board is operating to understand
GSK’s future priorities, and to agree the review’s objectives,
scope and timetable. The Company Secretary also provided
No 4 with access to Board and committee materials, and other
information.
Interviews
During November and December 2022, No 4 conducted
confidential and detailed interviews with the Board, selected
GLT members, the Company Secretary, GSK’s external auditor
and our incoming and outgoing independent remuneration
adviser, to seek their views on the Board’s effectiveness. These
meetings reflected an agreed discussion guideline that was
sent to each participant beforehand. This included key topics
from the Financial Reporting Council’s 2018 Guidance on
Board Effectiveness and the relevant requirements of its 2018
UK Corporate Governance Code. However, this did not limit the
feedback each participant could give.
Review
The Review sought to determine the Board's priorities over the
next three to five years and how they should be built into the
Board's agenda. The evaluation results and suggested next
steps were included in a summary report, compiled by No 4
and discussed initially with the Chair, CEO and the Senior
Independent Director (SID). The Review was presented to the
Board in January 2023 which covered the following main areas
of the effectiveness review:
–
Overall review of the Board
–
Board organisation, agenda and information
–
Board dynamics, challenge and input
–
Future strategy development
–
Performance delivery
Action points
After due consideration and discussion the following action
points to further improve performance in 2023 were agreed:
–
The key area of focus for the Board should continue to be
R&D (organic and inorganic). Meeting the pipeline goals,
and therefore delivering shareholder value, is seen by all as
the top priority
–
The importance of the Science Committee in working with
the CSO to help optimise the pipeline
–
Supporting the onboarding of the new CFO, Julie Brown
–
Board succession planning would be progressed to ensure a
broad range of diverse candidates for consideration as
successor for the Remuneration Committee Chair
Board committees
The review of the Board committees focused on their progress.
It involved virtual interviews with committee members
conducted by No 4 on behalf of the respective Committee
Chairs. Each committee was considered to operate effectively
and the following further enhancements were agreed:
–
The importance of optimising concise feedback by
Committee Chairs to the full Board following each
committee meeting
–
Following agreement of the overall Board priorities and
the Board agenda, Committee Chairs agreed to review the
main areas of responsibility for their committees in line with
the Board priorities and incorporate them into their
committee programmes for 2023
–
In particular, the importance of the Science Committee in
supporting organic and inorganic R&D and evolving the
ways in which the committee works with the CSO and his
team
Chair
The SID and No 4 sought feedback on the Chair's performance
from the Directors individually and collectively. This concluded
that the Chair was operating effectively in leading the Board.
The results of the review were then noted by No 4 and
discussed by the Chair and the SID.
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Key decisions and engagements
Section 172 statement
Board members 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 meets this requirement, as set out
in Section 172 and Section 414CZA of the Companies Act 2006
(the Act). It states 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.
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
properly understand the potential impacts of the decisions it
makes on all stakeholders.
Engagement with our main stakeholder groups, including our
patients, shareholders, consumers, customers and employees
at all levels and across the organisation, are summarised
throughout the pages of our strategic report.
(a) Long-term results
The likely consequences of any decision in the long term
At the end of May 2022, the Board assessed the company’s
readiness to proceed with the Demerger and approved the
GSK Circular and agreed the Haleon Prospectus to be sent
to shareholders as the final stage of the Demerger.
The Board exercised its Section 172 duties by reviewing
the work of management and the Audit & Risk, Corporate
Responsibility, Remuneration and Transformation &
Separation committees in progressing the separation
since mid-2020. This included;
–
extensive consultations held with the key stakeholders, and
sharing the long-term growth ambitions at the investor
events for GSK in June 2021 and Haleon in February 2022
–
considering and rejecting the unsolicited, conditional and
non-binding proposals received to acquire the Consumer
Healthcare business
In recommending these proposals to create two
independent companies to most effectively serve their
patients and customers respectively, the Board firmly
believed that its decision would establish:
–
a newly independent global leader in consumer health
with a focused strategy to drive penetration growth across
its portfolio, capitalising on new and emerging growth
opportunities, underpinned by strong execution and
financial discipline. Haleon, as an independent company,
would be able to deliver sustainable above-market
growth, moderate sustainable adjusted operating margin
expansion in the medium term with attractive returns to
shareholders
–
new GSK, a pure biopharmaceuticals company with a
portfolio focused on Vaccines, Specialty Medicines and
General Medicines with clearly defined financial
ambitions, a clear ambition to deliver large-scale and
long-term positive human health impact and a strong
balance sheet enabling a growth-oriented capital
allocation policy and attractive shareholder returns
The Board believed that the Demerger would unlock the
potential of both businesses, strengthen the balance sheet of
new GSK and its ability to invest in growth and maximise
long-term return for shareholders.
Shareholders duly approved the two resolutions proposed at
the General Meeting held on 6 July 2022 and the Demerger
was then effected on 18 July 2022.
In particular, the Board's continuous engagement with our
investors and people is set out in this section on pages 114 to
116, and the company’s corporate governance architecture and
processes are summarised on pages 107 to 109.
This summary sets out how the Board considered all relevant
matters in making the principal decisions that contributed to
the formation of two attractive and viable businesses with
compelling investment propositions, through:
–
delivering the separation of Haleon from GSK with a strong
focus on shareholder value (the Demerger) and
–
building GSK as a pure biopharma company that is
ambitious for patients, accountable for impact and does the
right thing (new GSK)
The Demerger represented a key step in a multi-year
transformation of GSK to improve focus, performance and
competitiveness, and to maximise value for shareholders. The
Demerger also provided the right opportunity to implement the
legal change of name of the company from GlaxoSmithKline
plc to GSK plc. This was designed to mark the new GSK brand
and culture and protect and build it for the future. The change
was made in May 2022.
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(b) Our workforce
The interests of the Group’s employees
The Board had continual regard to the interests of our
people who were either remaining with new GSK or
departing to form Haleon. It achieved this by using various
employee voice mechanisms described on pages 10, 11
and 115 to help explain the future shape of these companies,
understand and assess the impact of these changes on the
organisation and how they were being experienced by our
people.
Significant focus was dedicated in bringing to life new GSK’s
Ahead Together purpose, strategy and culture for our people
across the Group. A strong emphasis has been given to
individual ownership of our new culture. This was formally
launched in June 2022 with events held around the
company’s locations globally.
These were attended by GLT members and Non-Executive
Board members including the Chair.
In 2022, in addition to our annual bonus and long-term
incentive structure, the Board also gave a special thank you
to all our people (excluding GLT), allowing us to recognise
what we had achieved together in preparation for the
Demerger and the transformation of the company into a
pure biopharma company. As a result, everyone received a
one-off payment equivalent to a week’s salary in March,
separate to our 2021 bonus pay-out.
We also ensured that the treatment of awards or options
held by GSK employees, and for departing Haleon
employees, delivered a fair outcome in accordance with the
rules of those share schemes as part of the Demerger and
the GSK share consolidation.
(c) Our business relationships
The importance of developing the Group’s business
relationships with suppliers, customers and others
A key imperative for the Board of GSK as a responsible
business is to ensure the company develops and monitors
these partnerships to ultimately serve patients. The benefits
of these relationships and how they can support the
achievement of our ambitions are described in the pages of
our strategic report, for example:
–
achieving our Ahead Together ambition to positively
impact the health of 2.5 billion people by the end of 2030,
requires the development of vaccines and medicines and
making them available through responsible pricing,
strategic access programmes and partnerships
–
ethical behaviour is promoted across our business by
supporting our people to do the right thing and working
with suppliers that share our standards and operate in a
responsible way. Our new Code of Conduct seeks to set
out expectations in this regard
–
our third parties are expected to meet our ABAC and
labour rights standards and to comply with our standards
on quality, health and safety, and the environment.
Approximately 29% of our total emissions footprint comes
from the goods and services that we buy. In September
2022, in support of our net zero carbon impact on climate
ambition, we launched our Sustainable Procurement
Programme. This will require our suppliers to, among other
things, disclose emissions, set carbon reduction targets,
and switch to renewable power and heat
(d) The community and the environment
The impact of the Group’s operations on the community
and our environment
Our approach to making a positive impact has been guided
by extensive stakeholder engagement on the key issues
relevant to new GSK and, prior to the demerger, Haleon’s
respective industries and the nature of the companies
themselves. The Board has sought to achieve this by:
–
in preparation for the Demerger, working with Haleon’s
management team in developing its own distinctive
responsible business approach and ESG framework
bespoke to the needs of its customers and the
communities it serves. This also involved scrutinising this
framework and the proposed targets, including
environmental sustainability targets. These were presented
at Haleon's investor update in February 2022
–
establishing the six areas of ESG focus for new GSK as a
global biopharma company that are fundamental to our
DNA and success. These six areas, detailed on pages 42
to 50, directly contribute to long-term shareholder value
by contributing to our health impact, supporting thriving
people and reducing risk. The environment is one of our
principal ESG focus areas. In 2022, an environmental
scorecard measure was introduced into our long-term
incentive plans to incentivise and reward progress on
delivering against our net zero impact on climate and net
positive impact on nature public ambitions by 2030
The Board has also been focused on new GSK’s Ahead
Together ambition to impact the lives of 2.5 billion patients
over the next ten years. Human capital is key to GSK and as
such we are seeking to strengthen early STEM education
investments to further support a long-term diverse talent
pool and increase the positive impact of volunteering
activities within the communities in which we serve.
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(e) Our reputation
Our desire to maintain our reputation for high standards of
business conduct
This duty guided the Board’s approach to the Demerger and
the creation of new GSK. This was achieved by:
–
the transformation of the company, initially launched in
early 2020. This included fundamentally reviewing our
structure, cost base, ways of working and the effectiveness
of both our biopharma and consumer healthcare
businesses and implementing targeted enhancements in
advance of the Demerger
–
choosing the optimal form of separation through a
Demerger with the same listing location and structure for
Haleon as GSK. As a result, Haleon should operate to the
same premium listed, legal and corporate governance
standards, in an environment with common business and
ethical values to GSK
–
extensive legal and financial due diligence and
engagement with key regulators, investors and other key
stakeholders, which was undertaken in preparing the GSK
Circular, the Haleon Prospectus and the Haleon 20-F
–
reaching an agreement with the trustees of the GSK UK
Pension Schemes on a package of measures (including
funding and protections) in relation to the Demerger and
the GSK UK Pension Schemes’ triennial actuarial valuations
–
ensuring that GSK remained as one company in how we
operated until the point of Demerger, with the overriding
emphasis on driving top-line growth and improving margin
–
implementing plans for the six areas of ESG focus for new
GSK, outlined to investors in June 2021 to help retain and
develop further GSK’s reputation for ESG leadership and
responsible business conduct
–
developing a distinctive and holistic responsible business
case and ESG framework for Haleon which was outlined to
investors in February 2022. This supported Haleon’s
purpose, strategy and culture as a premium UK listed
company, with a focus on the key responsible business issues
–
ensuring that the Board and our people in new GSK
commit annually to our new Code of Conduct introduced
in June 2022. This Code sets out our Board endorsed
Ahead Together purpose and culture, as well as the
performance commitments our people make so we can all
deliver on the company’s ambitions in the right way
(f) Fairness between our shareholders
Our aim to act fairly as between members of the Group
It was of fundamental importance that the Board was able
to ensure that shareholders were treated fairly up to, on and
after the Demerger. This was demonstrated by:
–
deciding on the most appropriate capital structures
required for the two companies to be competitive, on
which stock exchanges Haleon should list, and whether,
and to what extent, to distribute shares in Haleon to GSK’s
shareholders and retain any stake in Haleon
–
each shareholder having a right to vote on a one vote for
one share basis at the General Meeting for the Demerger
and the new GSK share consolidation, and related party
transactions resolutions. To ensure that as many
shareholders as possible could participate in the meeting,
shareholders were able to ask questions and vote either
electronically or in person. Voting majorities in excess of
99% were recorded for each resolution
–
each shareholder receiving a pro-rated shareholding in
Haleon after the Demerger, with the receipt of one Haleon
share for each GSK share held. Additionally, all Haleon
shares from the inception of the Demerger had equal
rights to participate in capital, dividend and profit
distributions by Haleon
–
the GSK Share Consolidation achieved consistency in the
GSK share price pre- and post-Demerger to enable
comparability between the new GSK earnings per share
and share price with previous periods. It also preserved, as
far as reasonably possible, the value of share options and
awards granted to our people after the Demerger
Approach to continuous engagement
Our stakeholders rightly have high expectations of us. The
dynamic operating environment presents many challenges
and opportunities. The Board aims to make sure that being
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 or is briefed on the views of our
stakeholders, to ensure it identifies and responds to their
expectations effectively and appropriately.
How we engage with our main stakeholder groups – including
patients, shareholders, consumers, customers and employees
– across the company is covered in the pages of our strategic
report.
The Board placed two of our main stakeholders at
the heart of our renewed culture, with our people all being
ambitious for patients, accountable for impact, and doing the
right thing. Our culture is described on pages 10 and 11 of the
strategic report.
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.
Continuous 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.
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Key decisions and engagements continued
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 then shared with the Board.
In particular, the Board receives briefings on stakeholders’
perspectives from the work of the Corporate Responsibility
Committee, which is discussed on pages 117 and 118.
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 all our external stakeholders
–
a regular Investor Relations Report which summarises
investor perceptions
–
regular corporate governance, 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, through the Board’s workforce engagement
activities, and from experts presenting at Board or committee
meetings. In addition to the Chair’s investor check-in meetings
which he holds on an ongoing basis, our new SID, Charles
Bancroft, joined him for some meetings. Charles also met
individually with investors to introduced himself and gain a
personal understanding of issues and any views they may
have.
Other opportunities:
Board members also gain wider
stakeholder views during the annual strategy meeting with the
GLT, as part of the annual review of strategy, budget and
planning process. This includes a review of 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 10 and 11 and are monitored regularly by the Board.
Three key governance channels help communicate what our
people are thinking to the Board:
–
regular Board updates from our Chief People Officer and
the CEO on culture and talent
–
feedback from a range of pulse surveys of varying sizes of
employee groups to help check sentiment and culture more
quickly and frequently and provide valuable insights on the
impact of major initiatives, events or communications
–
direct engagement by the Board. Prior to the demerger,
our designated Workforce Engagement Director, Dame
Vivienne Cox, had a specific mandate to connect with
our people
Workforce engagement:
Dame Vivienne concluded her
workforce engagement activities in the first half of the year.
This was prior to her transfer to the Haleon Board in July 2022
on the separation of the Consumer Healthcare business. Her
programme of visits was conducted on the same basis as she
described in previous Annual Reports.
Dame Vivienne provided a focus for employee engagement as
our designated Workforce Engagement Director from
December 2018. Her tenure coincided in its entirety with the
programme to transform GSK into a focused biopharma
company and the demerger of Consumer Healthcare to form
Haleon. She continued to take questions and gather feedback
for the Board from employees on the future strategy, shape
and culture of the two new independent companies in the
build up to separation. In doing so, during 2022 she held
listening events with a cross-section of:
–
Consumer Healthcare employees in April 2022 prior to their
transfer to Haleon and
–
Digital and Tech employees in June 2022 that were helping
to ensure a strong and secure technology platform for both
companies
Prior to separation, the Board reviewed its formal workforce
engagement arrangements. It was decided to move from a
specific Workforce Engagement Director model and apply an
‘alternative arrangement’ to the three methods set out in the
FRC’s Code. Given that the new GSK Board was recently
refreshed in terms of tenure, with over half of the independent
Non-Executive Directors (NEDs) having served for less than
three years, and with GSK's renewed purpose and focus as a
global biopharma company, it was considered important to
adopt a collective Board engagement model. This was agreed
to be the most effective approach to ensure newer Board
members meet our people and hear their views. This has been
implemented by:
–
a return to direct in-person receptions with local employees,
following COVID-19 restrictions during Board site visits.
During the second half of 2022 these included: Stevenage,
UK (as one of our two global R&D hubs), Boston, US, and our
Global HQ in Brentford
–
the Chair undertaking a range of site visits, including: Raleigh
Durham, US, to meet with our ViiV employees, King’s Cross,
London where he met with our Artificial Intelligence and
Machine Learning team, as well as our Respiratory supply
chain employees based in Ware, UK and Aranda, Spain
–
the Chair and Corporate Responsibility Committee Chair
meeting with leaders of our employee resource groups
(ERGs) to discuss how they experience GSK as well as
hearing their views on progress with our diversity, equity and
inclusion (DEI) agenda and ambitions
–
utilising a variety of bespoke engagements that have
enabled a broad and open dialogue and facilitated first
hand engagement discussions between the NEDs and
our people individually and as part of small groups,
encompassing perspectives on our strategy, purpose
and Ahead Together culture, and DEI
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Key decisions and engagements continued
Our shareholders
The Board seeks to directly engage with and be directly
accountable to institutional investors and private retail
shareholders. It seeks to discharge this direct and continuous
accountability in several ways. These include regular
communications, the Annual General Meeting, 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. They are also
regularly joined by the CSO, the Chief Commercial Officer, and
CEO, ViiV Healthcare and GSK Global Health. They are able to
provide investors with more detailed insights into their specific
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 2022 the CEO held a
total of 92 engagements with major shareholders, representing
approximately 40% of the company's share register. The CFO
held a total of 113 such engagements with investors making up
nearly 40% of the company's share register.
The Chair has always maintained a constant dialogue with
shareholders too – including fund and portfolio managers –
as well as engaging with governance and ESG professionals.
During 2022 and up to the date of publication of this Report,
the Chair held 27 meetings with a range of investors, who make
up approximately 35% of the company’s share register. This
enables him to gain a current understanding of investor views,
insights and perspectives of the company. He discusses the
many aspects of Board governance, oversight and succession.
Charles Bancroft was appointed our new SID in July 2022, after
the demerger of the Consumer Healthcare business. He has
been introducing himself to our shareholders to seek their views
on GSK and discuss any key matters of importance. From his
appointment as SID to the date of publication of this Report he
had 14 meetings with investors making up over 25% of our
share register.
The Chair, CEO and the rest of the Board had a particular focus
in 2022 on communicating the final process for demerging
Haleon, the ambitions for GSK as a global biopharma business
beyond the demerger and progression of our pipeline over three
key focus periods: to 2026, 2026 to 2031 and 2031 and beyond.
They also sought investors feedback on our new Remuneration
policy.
Annual Governance Meeting
This year’s event was a hybrid meeting in central London.
Institutional shareholders, key investment industry bodies and
proxy advisory firms were invited. Over 14 institutional
shareholders attended the event, representing approximately
25% of the company's issued share capital. The Chair was
joined by our new SID, Committee Chairs and GSK’s external
audit partner and his successor.
We shared with investors the priorities and focus of the Board
and its committees in 2022 and the progress made against
them. This included:
–
the execution of a clear plan for separation of Haleon from
GSK with strong focus on shareholder value creation
–
the creation of two attractive and viable businesses with
compelling investment propositions
–
building two highly-qualified Boards to complement the
world class management teams
–
re-architecting the GSK Board
–
supporting the Haleon Board build
–
the approval of a new binding Remuneration policy aligned
to delivery of GSK's public growth and ESG commitments
announced at the Investor Update in June 2021 and
–
continuous engagement with shareholders and other
stakeholders
The meeting was well-received and shareholder feedback was
shared subsequently with the full Board.
Annual General Meeting
We were pleased to be able to hold a hybrid meeting at the
Sofitel Heathrow in May 2022. This was the first meeting we
were able to hold for in person attendance since the onset of
the COVID-19 pandemic. We were pleased to see an increase
in attendance by our shareholders compared to the 2021
AGM that had been held virtually at our registered office in
Brentford. 94 shareholders joined the meeting in person and
68 shareholders joined virtually to watch or listen to updates
from our Chair and the CEO, to ask questions, and vote. With
the exception of our proposed Remuneration policy resolution
which received shareholder approval of 62%, all our proposed
resolutions were approved by shareholders, with majorities
ranging from 91% to 99%.
Our AGM this year will be held once again in a hybrid format
at the Sofitel Heathrow. Shareholders will also have the
flexibility to be able to watch and listen, vote and ask questions
at the meeting virtually via the Lumi platform and to ask
questions via a video connection. See further details on
page 299.
General Meeting
In addition, the Board convened a General Meeting at Sofitel
Heathrow on 6 July 2022 to seek shareholder approvals to
authorise the demerger of Haleon and the related share
consolidation for GSK. The Chair, CEO and CFO were present in
person with the Company Secretary while the rest of the Board
joined the meeting virtually. 46 shareholders joined the meeting
in person and 99 shareholders joined virtually. Both resolutions
were approved by shareholders with majorities in excess of 99%.
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Corporate Responsibility Committee report
Dr Anne Beal
Corporate Responsibility Committee
I am pleased to present this report, which is my first as Chair of
the Corporate Responsibility Committee (the Committee).
I joined the Committee in May 2021 and succeeded Lynn
Elsenhans as Chair in July 2022 after a comprehensive
transition and handover. During her time as Chair, Lynn made
an outstanding contribution in overseeing, shaping and
embedding our Trust priority and our approach as a
responsible business, and, more recently, establishing the six
areas of ESG focus for GSK as a pure biopharma company.
These six areas – detailed on pages 42 to 50 – directly
contribute to long-term shareholder value by contributing to
our health impact, supporting thriving people and reducing
risk.
I have been drawing on my extensive healthcare experience as
a physician and public health expert – including my time as
Chief Patient Officer of Sanofi combined with my passion for
patient advocacy, to continue building on the Committee’s
work. I have framed the work and scrutiny of the Committee on
the following questions:
–
how do we as a company and Committee know how we are
performing across our ESG focus areas?
–
can we challenge ourselves to further improve our
performance?
–
how we can best report to our key stakeholders on what we
have done and the level of impact we have made?
Driving the Board’s oversight for enhanced
ESG performance
A central element of the Committee’s work over the last 12
months has been devoted to accelerating improvements in
how ESG performance is understood and managed.
The Committee agreed the introduction and disclosure of a
new ESG Performance Rating – one of our company KPIs as a
key management tool to drive delivery of ESG across our six
ESG focus areas. This rating has been derived from assessing
the performance of a number of stretching, independently
assured metrics across the focus areas to arrive at a single
composite measure. The Committee has regularly monitored
the company’s progress against these metrics during the
course of the year. We recommended to the Board the
publication of a final
on track
ESG Rating for 2022 alongside
the other ESG disclosures in this Annual Report and our ESG
Performance Report. Further details can be found on page 42
of the strategic report and within the ESG performance report,
available on gsk.com.
ESG performance deep dives
Throughout the year the Committee has discussed with
management the following areas of our ESG focus.
Access and pricing principles:
The Committee reviewed and
recommended to the Board the adoption and publication of
GSK’s Pricing and Access Principles (Principles).
The principles are a high-level articulation of management’s
current approach to pricing and access. They have been
prepared with extensive internal and external consultation and
had been validated with key audiences including patient
advocacy groups drawn from the US and UK.
The Committee, as part of its detailed input on these Principles,
made sure that they captured:
–
the impact value of GSK’s innovation in terms of economic
benefit
–
health equity within and between countries
–
the importance of the supply network for access and
–
that the Principles are sufficiently flexible to evolve over time
and are subject to regular review
Diversity, Equity and Inclusion (DEI):
The Committee continues
to regularly assess the progress of GSK’s DEI approach and the
key metrics identified to drive performance. Metrics to support
some of these areas form part of the new ESG Performance
Rating, which can be explored further on page 47.
This work includes efforts to further increase our leadership
diversity, build a diverse talent pipeline and foster an inclusive
culture. The Committee was pleased to note the strong overall
progress that was being made towards the gender and
ethnicity aspirations for 2025. In particular, it was pleased that
the US ethnic diversity aspiration of at least 30% had already
been exceeded this year, while further work was being
undertaken to increase Black VP representation in the UK.
I firmly believe that GSK is doing some outstanding work in
this area and have been pleased with how the Committee’s
feedback is being utilised by management to further improve
performance for maximum impact.
The Committee also reviewed progress on efforts to broaden
diversity of our clinical trial participants, grow our supplier
diversity, improve health equity within countries and expand
equitable access to STEM education.
Environment:
The Committee has recently reviewed progress
on the company’s ambition for net zero impact on climate and
net positive impact on nature. The Committee is satisfied that
good progress is being made to date, with a dual focus on
maximising the success of the in-flight initiatives and
developing targeted actions to maintain momentum against
stretching ambitions.
Human rights:
The Committee has reviewed management’s
approach and progress on Human Rights including supply
chain and third party interactions. We have also considered the
complex and rapidly evolving legal and regulatory landscape
for Human Rights.
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ESG disclosures and reporting:
GSK’s capability in respect of
ESG reporting is continually evolving as we challenge ourselves
on how best to report clearly and concisely on our
performance. This is taking place against greater scrutiny on
ESG from all stakeholders, with ESG reporting increasingly
moving from voluntary to mandatory.
The Committee considers that GSK has a strong and mature
ESG reporting approach, but there is an opportunity to bring
the level of control of ESG data up to the same level as controls
for financial data. With this in mind, the Committee has
approved establishing an ESG data assurance hub to further
strengthen ESG data oversight.
Collaborating with other Board committees
There has been a careful division of responsibilities and
allocation of the workload between this Committee and the
Remuneration Committee, in respect of the introduction of
specific ESG targets into our short- and long-term incentive
plans from the beginning of 2022. We have been monitoring
and helping the Remuneration Committee determine vesting
outcomes.
The Audit & Risk Committee (ARC) supported the Committee
in its discussions over the introduction, measurement and
disclosure of the ESG Performance Rating. The Committee will
also work closely with the ARC from this year onwards over the
implementation and operation of enhanced ESG data
assurance oversight and determinations, which the ARC Chair
sets out further in his report on page 125.
Dr Anne Beal
Corporate Responsibility Committee Chair
9 March 2023
Science Committee report
Dr Jesse Goodman
Science Committee
I am pleased to present this report as Chair of the Science
Committee (the Committee) on our activities during 2022. It is
the first since the demerger of Consumer Healthcare as Haleon
in July 2022.
Key activities in 2022
As a result of the demerger, GSK is now a pure biopharma
business with a goal of uniting Science, Technology and Talent
to better prevent and treat disease. In R&D, we are combining
the power of genetic and genomic insights into what causes
disease, with the speed and scale of Artificial Intelligence and
Machine Learning to make better predictions about who a
treatment might work for, and why.
This renewed focus has been evident in the Committee’s
discussions for some time and I am excited for the future
opportunities it brings for GSK and its patients. The
Committee’s key activities in 2022 can be split into the following
key areas, which are covered in more detail below:
–
Pipeline reviews:
monitoring of GSK’s pipeline
–
Scientific deep-dives:
discussion and analysis of the key
scientific themes which drive the company’s R&D strategy
–
Business development:
undertaking technical reviews and
assurance of the underlying science of potential business
development transactions
Pipeline progress
Fundamental to GSK’s achievement of its growth ambitions is
the delivery of a successful pipeline, which the Committee has
continued to monitor throughout the year.
During 2021, the Committee participated in the Chief Scientific
Officer (CSO) succession planning process. This led to the
appointment of Dr Tony Wood in August 2022. Dr Wood has
since continued to build on the outstanding progress made by
Dr Hal Barron. Prior to his appointment as CSO, Dr Wood was
integrally involved in delivering R&D productivity improvement
and helped develop GSK’s current R&D approach focused on
the science of the immune system, human genetics and
advanced technologies. Consequently, he was well-placed to
implement a pipeline to deliver on GSK’s bold ambitions for
patients.
An exceptional milestone during this year was the very
positive results from our late-stage respiratory syncytial
virus vaccine
candidate. The vaccine demonstrated
unprecedented efficacy in older adults and has the potential
to help reduce disease and death from a major respiratory
infection which has not, until now, been vaccine preventable.
Our regulatory submission for the vaccine has been accepted
for review in Japan, accepted by the European Medicines
Agency under accelerated assessment and was submitted to
and granted Priority Review status by the US Food and Drug
Administration (FDA).
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The Committee was also delighted with the positive phase III
results for gepotidacin, a novel oral antibiotic, in the treatment
of uncomplicated urinary tract infections. This is an important
step in GSK’s continued scientific commitment and investment
to address antimicrobial resistance (AMR).
Our licensing agreement with Spero Therapeutics (see below)
provides further evidence of our continued leadership and
focus in tackling infectious diseases and AMR.
A number of key approvals were also obtained during the year:
–
FDA approval of
Boostrix
for immunisation during pregnancy
for the prevention of whooping cough in newborn infants
–
FDA approval of
Menveo
in a new single-vial presentation to
help prevent disease caused by meningococcal bacteria
serogroups A, C, Y and W
–
FDA approval of
Priorix
for the prevention of measles, mumps
and rubella in individuals 12 months of age and older
As well as having an exciting late-stage pipeline, we also now
have a robust early-stage portfolio with a number of innovative
programmes capable of transforming the lives of patients.
Business development transactions
GSK is viewing research and development holistically and
placing great importance on external as well as internal
innovation to source promising new medicines and vaccines.
During the year, the Committee continued to assess business
development transactions from a scientific perspective. The
acceleration of business development will be key to support
GSK’s organic pipeline growth. Transactions reviewed by the
Committee during the year include:
Sierra Oncology:
The acquisition of Sierra Oncology, a
biopharmaceutical company focused on targeted therapies
for rare forms of cancer. The acquisition included momelotinib,
a new medicine with a unique dual mechanism of action
intended to address the critical unmet medical needs of
myelofibrosis patients with anaemia. A new drug application
for momelotinib for the treatment of myelofibrosis was
accepted in August 2022 by the FDA and in December
2022 by the EMA.
Affinivax:
The acquisition of Affinivax, a clinical-stage
biopharmaceutical company, providing GSK with access to a
next generation pneumococcal vaccine candidate and highly
innovative Multiple Antigen Presenting System (
MAPS
)
technology.
Mersana Therapeutics:
The collaboration with Mersana
Therapeutics for the co-development and commercialisation
of XMT-2056, a first-in-class HER2 STING antibody drug
conjugate, initially for the treatment of advanced breast
cancer.
Spero Therapeutics:
The licensing agreement with Spero
Therapeutics for tebipenem HBr, a late-stage antibiotic that
may treat complicated urinary tract infections. There is a
significant unmet medical need for a novel oral antibiotic that
can potentially provide an alternative to intravenous therapy,
particularly for patients with multi-drug resistant organisms.
Wave Life Sciences:
This collaboration brings together
Wave's PRISM
TM
oligonucleotide platform and GSK's expertise
in genetics and genomics to drive the discovery and
development of oligonucleotide therapeutics focusing
on novel genetic targets.
Tempus:
The collaboration with Tempus provides GSK with
access to Tempus’ AI-enabled platform including its library of
de-identified patient data – one of the world’s largest sources
of clinical and molecular data. Through its own leading AI/ML
capability, GSK will work with Tempus both to identify new drug
targets and improve clinical trial design, speeding up
enrolment and completion, and accelerating the development
of personalised treatments for patients.
GSK’s dedicated AI/ML team is the largest in-house strategic
function in the biopharma industry. Collaborations between
R&D and Technology within GSK have become increasingly
important in drug discovery, enabling GSK to more rapidly
and effectively design new vaccines and medicines.
Scientific deep-dives
The Committee also dedicated a significant proportion of its
time to discussing some of the most exciting and innovative
areas of science which have been driving the company’s R&D
strategy. Deep-dives undertaken during the year include:
–
Phase 1 Pipeline review
–
RNA based therapeutics and vaccines
– Oncology
In particular, the Committee’s discussion of RNA, including
oligonucleotide therapeutics, provided important insights into
emerging science with the potential to transform the lives of
patients. In November 2022, the company published positive
results from a phase IIb trial evaluating the safety and efficacy
of bepirovirsen – a potentially transformative treatment for
people living with chronic hepatitis B.
The results offer an early indication that bepirovirsen might be
a potential treatment, either as monotherapy or in combination
with other drugs, that could result in a functional cure. GSK’s
expertise in human genetics, functional genomics and AI/ML
to identify novel, genetically validated targets, as well as
our recent collaboration with Wave Life Sciences referred to
above, demonstrate that we are well-positioned to become
a leader in oligo-based therapeutics.
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Board committee reports continued
Committee changes
As previously mentioned, in August 2022 Dr Tony Wood
succeeded Dr Hal Barron as CSO. Tony is an outstanding and
highly respected scientist and the Committee had engaged
with him regularly in advance of his appointment. Dr Barron
transitioned to a Non-Executive Director and member of the
Committee. The Committee, and GSK, will therefore continue to
benefit from his expert advice and support on scientific matters.
Dr Laurie Glimcher retired from the Board in October 2022.
I would like to thank Laurie for her valuable expertise and
scientific insights contributed to the Committee during her
tenure.
Finally, having chaired the Committee since its inception
over six years ago, my rotation as Chair concluded effective
1 January 2023. Dr Hal Dietz, who joined the Committee on
1 January 2022, has succeeded me as Committee Chair. His
experience in human genetics, which is central to GSK’s
approach in R&D, has already proven invaluable in the
Committee’s discussions. He is an excellent successor in the
role of Chair.
It has been a privilege to work with GSK's outstanding
scientists and leaders, as well as my fellow Committee
members, and to chair the Committee during what has been a
transformational period, both for the company and the
scientific fields in which we operate. I remain a member of the
Committee and look forward to continuing the progress
outlined today.
Dr Jesse Goodman
Science Committee Chair (2017-2022)
9 March 2023
Nominations & Corporate Governance
Committee report
Jonathan Symonds
Nominations & Corporate Governance Committee
I am pleased to present my fourth report as Chair of the
Nominations & Corporate Governance Committee (the
Committee).
Key activities in 2022
During the year, the Committee continued its important role in
the process of:
–
delivering the demerger of Haleon from the Group as a key
Board governance workstream and
–
creating two attractive and viable businesses with
compelling investment propositions, directed and overseen
by highly capable boards
This was achieved in an orderly and targeted manner by
building two highly-qualified boards to complement their world
class leadership teams through:
–
supporting the shaping and creation of the Haleon Board; and
–
restructuring the GSK Board with a new focus and expertise
for a pure biopharma business
Haleon Board appointments
In my report last year, I described the work of the Committee
in appointing the CEO, CFO and Chair designates of Haleon.
I also disclosed that two Non-Executive members of the GSK
Board were expected to transfer to the Haleon Board on
completion of the demerger.
The Committee subsequently supported the Haleon Chair,
Sir Dave Lewis, in finalising the search for and the appointment
of high calibre non-executive directors to complete the Haleon
Board and its committees. The Board subsequently endorsed
the Committee’s recommendation to transition Vindi Banga
and Dame Vivienne Cox to the Haleon Board on completion
of the demerger. The Committee considered that the
Haleon Board would benefit from both their knowledge
and experience. They would also provide important continuity
for Haleon post-demerger.
Separately, the company’s Consumer Healthcare joint venture
partner (Pfizer) exercised its right to appoint two non-executive
directors to the Haleon Board.
Shaping our new biopharma Board
I previously described the process to transition the GSK Board as
a pure focused global biopharma company and the work
undertaken by the Committee in designing and planning the
optimal structure and composition of the new biopharma Board.
New Non-Executive Directors
The Committee wanted to ensure that new Non-Executive
Director appointments would further deepen the biopharma
skills, expertise and experience on the Board. A global search
process was activated to appoint directors with deep life sciences
commercial expertise and Artificial Intelligence and Machine
Learning (AI/ML) expertise. A diverse list of such candidates
was identified, shortlisted and then interviewed by Committee
members, the CEO, CSO and our Chief People Officer.
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GSK Annual Report 2022
Following careful review, the Committee was pleased to
recommend the appointment of two high calibre individuals,
Dr Vishal Sikka and Elizabeth McKee Anderson, as independent
Non-Executive Directors with effect from 18 July and
1 September 2022, respectively.
Vishal has a very distinguished background as a world-leading
technologist and most particularly in the field of AI/ML, which
is not only central to GSK’s approach to R&D, but is also
embraced across the Group. Meanwhile, Liz brings significant
commercial understanding and experience in commercial
biopharmaceuticals and is a seasoned biotech board member.
Their contributions are already proving invaluable to the Board
as a fully focused biopharma company.
Further details of Vishal and Liz’s experience and biographies
can be found on pages 100 and 97. The rationale for their
appointments was included in the company’s announcements
on 4 May and 24 August 2022 respectively. They are available
on gsk.com.
Dr Hal Dietz was appointed to the Board at the end of 2021, he
joined the Board as a designated Scientific and Medical Expert
on 1 January 2022. He has extensive experience in the field of
human genetics, which is also central to GSK’s approach to
R&D. The recruitment process for his appointment by the
Committee was described in my report last year. After
a year on the Board, Dr Dietz began his rotation as Science
Committee Chair from 1 January 2023 in succession to Dr Jesse
Goodman.
Senior Independent Director (SID) succession
Vindi Banga performed the role of SID for over six years. Vindi's
transition to the Haleon Board on completion of the demerger
created the opportunity to appoint a successor. The
Committee determined that Charles Bancroft, having served
two years on the Board, with experience of working with
investors from his role as CFO at Bristol Myers Squibb, a deep
understanding of the pharma industry, his experience as a
non-executive director of listed companies and having
sufficient time to dedicate to the role, made him the ideal
successor. He succeeded Vindi with effect from 18 July 2022.
The Board fully endorsed his appointment.
Continuing to shape the GSK Board for the
future
Management succession planning
I previously described the work of the Committee in the
appointment of Dr Tony Wood as successor to Dr Hal Barron
as CSO and a member of GLT. The transition of Drs Wood and
Barron into the roles of CSO and Non-Independent Non-
Executive Director took effect as planned on 1 August 2022.
CFO succession
When our CFO, Iain Mackay, advised the Board of his intention
to step down from the Board and leave the company, the
Committee activated its CFO succession plan. A targeted
search of high-quality executives for CFO succession had
already been undertaken against a role profile for the next
CFO for GSK as a pure biotech.
The Committee proposed, and the Board approved, the
appointment of Ms Julie Brown as successor to Iain Mackay as
CFO. Julie, currently Chief Operating and Financial Officer at
Burberry Group plc, will join GSK in April 2023 and will work with
Iain to transition his responsibilities. She will take on responsibilities
as CFO and as an Executive Director on 1 May 2023. Our CFO
succession process is described in more detail below.
In the Committee’s view, the ideal successor to Iain was a
proven CFO of a global public company with deep
biopharmaceutical experience. He or she would need to be an
effective business partner to the CEO in the successful delivery
of GSK’s growth ambitions. It was also important to the
Committee that the successor be a good fit with our new
culture and have a high energy and a positive mindset.
A thorough global search was initiated against this agreed
profile. A shortlist of viable candidates was identified for the
role. The CEO, other members of the Committee, the Chief
People Officer and I met with Julie and there was unanimous
support that she be recommended as Iain’s successor.
The Board is looking forward to welcoming Julie to GSK. She is
a highly respected CFO with extensive experience in the
biopharma and medtech sectors. Further details of Julie’s
experience and the rationale for her appointment are included
in the company’s announcement on 24 September 2022, which
is available on gsk.com.
GLT changes
In addition to the new CSO and CFO, the Committee has also
reviewed the following internal senior executive changes to the
GLT to help bring further simplification and alignment of the
GLT in these areas:
–
Luke Miels, Chief Commercial Officer, assumed full
accountability for strategic commercial product
development of vaccines, alongside his current
accountabilities for strategic product development in
Specialty and General Medicines and the commercial
performance of the GSK portfolio in markets
–
Regis Simard, President Global Supply Chain, assumed
accountability for both Vaccines and Medicines supply
–
Deborah Waterhouse, Chief Executive Officer ViiV
Healthcare, assumed overall accountability for GSK Global
Health
–
Roger Connor, President of Vaccines and Global Health, left
GSK to progress a new role in healthcare, outside biopharma
The Committee continues to review our talent and succession
pipelines and development plans for key management roles
and their successors.
Non-Executive Director succession planning
The Committee regularly reviews the Board's composition and
skills. It will be working with the Science Committee for the
potential to add a further Scientific and Medical Expert, as the
Board seeks to further contribute to our biopharma skills and
expertise to support our growth ambitions. The Committee
is also looking to identify a successor to Urs Rohner, our
Remuneration Committee Chair, who is due to retire from
the Board in 2024.
I look forward to providing further updates on these roles
next year.
Board committee reports continued
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Board and GLT gender diversity
Diversity objective
Status
Performance
At least 40% of Board positions held by women
Below objective
27.2%
At least one woman either in the Chair, SID role on the Board and/or one
woman in the Chief Executive Officer or Finance Director role by the end of 2025
Met objective
One Director (CEO)
At least 40% of GLT positions held by women
Met objective
41.7%
At least one Board Director is ethnically diverse
Exceed objective
Two Directors
Non-Executive tenure
Up to 3 years
56%
3-6 years
22%
6-9 years
22%
Industry experience
0
2
4
6
Life sciences
8
2019 (pre-demerger)
2022 (post-demerger)
10
Number of Board members
Tech
Finance
Consumer
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 as well as the fresh perspectives and insights
from newer appointees. Our Non-Executive Directors are now
drawn from industries and backgrounds most relevant to a
pure biopharma company, including life sciences, the
pharmaceuticals industry, R&D and Tech, vaccines and
healthcare, medical research and academia and financial
services. Collectively they have a wealth of experience of
complex businesses with global reach.
Board committee reports continued
Ethnicity
Gender
1
0
10
20
30
2019
40
2020
2021
2022
2023
(post-CFO
succession)
2024
50
Demerger
refocus
% female composition
Historic
Expected
Ethnically diverse
18%
White
82%
We are committed to the diversity of our Board, 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 collaboratively. This mix
needs to be complemented by a diversity of personal Board
attributes, including character, intellect, judgement, honesty
and courage.
The Committee is responsible for developing measurable
objectives and monitoring progress towards their achievement
to assist the implementation of the Board’s diversity policy
(Policy), including gender and ethnic diversity. As a minimum,
we seek to align our Policy objectives with the Financial
Conduct Authority, FTSE Women Leaders Review and Parker
Review diversity targets and ensure that they are consistent
with our public diversity, equity and inclusion (DEI) aspirations.
Composition and tenure
Diversity, equity and inclusion
1
Target female representation on Board is 40%. Data from GSK Annual Report published in the first quarter of each year. Current female representation is 27.2% at the
date of publication. This is expected to rise to 36% in May 2023 post-CFO succession
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Board committee reports continued
Board committee and GLT membership and role changes in 2022
Director/GLT member
Membership/Role
Appointment date
Retirement date
Elizabeth McKee Anderson
Audit & Risk and Remuneration committees
1 September
Dr Hal Barron
Science Committee (following transition to role of
Non-Executive Director)
1 August
Charles Bancroft
Science Committee
8 February
(stepped down after
Dr Hal Dietz joined the
Committee)
Senior Independent Director
18 July
Remuneration Committee
18 July
Vindi Banga
Audit & Risk, Nominations & Corporate Governance
and Remuneration committees
Senior Independent Director
18 July
Dr Anne Beal
Corporate Responsibility Committee Chair
4 May
Nominations & Corporate Governance and
Remuneration committees
18 July
Audit & Risk Committee
25 October
Dame Vivienne Cox
Corporate Responsibility and Remuneration committees
18 July
Dr Hal Dietz
Science Committee
Science Committee Chair
1 January
1 January 2023
Lynn Elsenhans
Corporate Responsibility Committee Chair
Audit & Risk, Corporate Responsibility and Nominations
& Corporate Governance committees
4 May
18 July
Dr Jesse Goodman
Science Committee Chair
31 December
Dr Laurie Glimcher
Audit & Risk and Science committees
10 October
Urs Rohner
Audit & Risk Committee
18 July
Dr Vishal Sikka
Corporate Responsibility Committee
18 July
Roger Connor
President, Global Vaccines
1 December
Dr Tony Wood
Chief Scientific Officer and GLT member
1 August
In May 2023, when Julie Brown becomes our new CFO, female
Board representation will stand at 36%. GSK will then have one
of the very few all-female Executive Boards running a FTSE 100
company. We also expect to fully restore our Board gender
diversity to meet or exceed 40% by 2024.
The Board has been pleased that for many years its gender
representation objective has been in excess of the target of over
40% of Board positions being held by women. This is illustrated
on the previous page of my Committee report. The composition
and diversity of the Board is currently in a transitional period
following the demerger and the reshaping of the Board for the
new biopharma company, the transfer of Board members to
Haleon and the retirement of two female Board Directors.
We also continue to oversee the developing pipeline of direct
reports to the GLT by gender and from ethnically diverse
backgrounds.
Details of GSK’s representation of women and ethnically
diverse leaders is covered on page 47, as part of the diversity
of our global workforce. Progress against our DEI
commitments, including gender and ethnicity, is illustrated
in our ESG Performance Report on gsk.com. This good
progress has also been incentivised by the introduction of
an ESG: DEI measure in the annual bonus arrangements
for our Executive Directors and other GLT members.
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Ways 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 are
signatories to the Voluntary Code of Conduct of Executive
Search Firms on gender diversity and best practice will be
engaged.
The Committee worked with a number of executive search
firms in 2022, 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
The Committee reviewed the potential for conflicts of
interest and judged that there were appropriate
safeguards against such conflicts.
Audit & Risk Committee report
Charles Bancroft
Audit & Risk Committee
I am pleased to present this report, which is my second as
Chair of the Audit & Risk Committee (the Committee).
In my report last year, I spoke about my initial, very favourable,
impressions of the people, processes, systems and culture at
GSK that underpin the successful management of financial
reporting, audit, litigation and compliance risks. I am pleased
to report that GSK continues to exhibit a strong compliance
culture with a consistent tone and engagement from the top
that runs throughout the organisation, and the financial
reporting and controls framework remains robust and did not
require any fundamental changes during the year.
Key activities in 2022
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, in summary:
–
recommended to the Board approval of the planned
separation of our Consumer Healthcare business in July
2022, based on the Committee’s awareness and review of
the transaction and Haleon’s operational readiness, and the
approval of final issuance of public documents and entry
into associated legal agreements
–
exercised oversight for the
Zantac
product liability litigation
by which I provided regular reports to the Board on progress
–
conducted a robust review process, together with the CFO,
to select and appoint a replacement to the current lead
audit partner, who under the five-year audit partner rotation
rules, rotates off after the publication of this Annual Report.
Further details are set out on page 128
Completion of the demerger
I highlighted, in my report last year, details of the technical
work of the Committee as a key demerger governance
workstream. This included overseeing the evolution of financial
reporting matters, risk and controls and the public documents
associated with delivering the demerger and listing to form
Haleon. This work continued and intensified through the first
half of 2022 to the point at which the Committee was able to
complete its review processes and recommend the approval
of the GSK Circular, Haleon Prospectus and Form 20-F and
associated documents and matters to the Board. Separately,
the Committee reviewed the processes to establish financial
reporting systems and development of a robust internal control
and risk management framework for Haleon. This was a
significant and critical demerger workstream that was
successfully delivered months prior to the demerger on a
business-as-usual basis.
Board committee reports continued
I look forward to reporting further progress in next year's report.
Sir Jonathan Symonds
Nominations & Corporate Governance Committee Chair
9 March 2023
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Information and cyber security
This is one of our principal risks which is regularly on the
Committee’s agenda. During 2022 the Committee oversaw the
merging of programme deliverables into an updated Cyber
Maturity Plan (CMP) with additional capabilities to continue to
get ahead of a dynamic threat environment. The Committee
has also reviewed the benchmarking of our target cyber
maturity against an industry best-practice framework, known
as the National Institute of Standards and Technology Cyber
Security Framework (NIST-CSF) and these learnings have been
incorporated into the CMP. The Committee will continue to
perform regular assessments of delivery against the Plan to
further enhance the capabilities and maturity of our cyber
security framework. I am pleased that the Committee’s
oversight in this area has been further strengthened this year
with the expertise of my fellow Board Director colleague,
Dr Vishal Sikka, who advises the Committee on this enterprise
risk. Vishal has a distinguished career in the Tech industry and
served as CEO of Infosys Limited and provides the Committee
and management with valuable insights.
Key risk indicators
For several years now, our Compliance function has worked
with risk owners and management to develop and report to the
Committee on key risk indicators (KRIs) at an enterprise level
and across our markets. As a core part of this process, we
have been using enhancements in our technology and data
analytics capabilities to employ a more data-driven approach
to risk management across a constantly evolving risk
landscape to further strengthen our compliance oversight
and culture.
Earlier this year, the Committee examined a review of our
principal risks resulting in a simplified process with fewer KRIs,
new KRIs, some revised definitions, and prioritisation of the
most meaningful indicators for the company. The Committee
was pleased to note that this simpler approach would result
in more focus on fewer KRIs reported to Risk Oversight &
Compliance Council (ROCC) which then reports to the
Committee, with a greater focus being brought to bear on
escalation of issues or concerns that are material to GSK.
Meanwhile, operational data, monitoring findings and other
established risks would continue to be analysed by risk owners
to ensure appropriate risk mitigation continues and escalation,
if necessary.
Zantac
litigation oversight
During the year, primary oversight for
Zantac
litigation,
the related accounting, disclosure and communication
assessments has continued to be undertaken by the
Committee. I then report the Committee’s conclusions on these
matters to the Board. The Committee continues to receive
regular legally privileged updates. In December 2022, we
welcomed the ruling by the United States District Court
(Southern District of Florida) which dismissed all federal cases
alleging the five remaining cancers in the Multi-District
Litigation. We will continue to defend all claims brought at
State level vigorously based on the science.
Audit quality indicators
Audit Quality Indicators (AQIs) are quantitative and qualitative
measures of external audit quality at an audit firm-level, an
engagement level and from a management or company
perspective. Together with our lead audit partner, I was
pleased to participate in a project carried out by the FRC to
identify the most useful engagement level AQIs relevant for the
audit to help improve transparency and drive audit quality
improvements. Our engagement with the FRC focused on our
most recent Annual Report and considered the interactions
between the auditor and the Committee during the audit
process. We had a constructive dialogue and one which I hope
was helpful to the FRC in progressing its work in promoting key
drivers of audit quality.
Committee aims in 2023
The Committee’s remit has expanded from 2023 onwards as
the Board has requested that it exercise oversight and review
of GSK’s ESG data assurance work. In doing so, the Committee
is currently overseeing the build and implementation of a new
dedicated ESG data assurance hub in our Finance
organisation to support this.
The hub will ensure minimum standards of controls,
governance and data quality to assure the accuracy of ESG
data in support of the company’s performance against ESG
metrics and compliance with new ESG reporting requirements.
Meanwhile, our Corporate Responsibility Committee, on behalf
of the Board, continues to exercise oversight of ESG strategy,
performance assessment and reporting.
Internal control framework
The 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 and emerging risks, as required by the FRC’s Code.
The framework is designed to manage the risk of GSK not
achieving its business objectives.
A fit-for-purpose framework – complemented by our corporate
culture 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.
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The Board mandates the Group’s 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 the
principal risk with oversight from a GLT member, which includes
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 culture 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 the CFO and the Committee.
The Committee receives regular reports from 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 2022, 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 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 51 to 64.
The management of each principal risk is explained in
‘Principal risks and uncertainties’ on pages 285 to 295. The
Group’s viability is discussed in the Group risk management
section of the strategic report on page
64.
Significant issues relating to the financial
statements
In considering GSK’s quarterly financial results announcements
and the financial results in the 2022 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 2022 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 168
to 181.
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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 impacts of the current economic environment and climate change
impacts. 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 RAR accrual for US
Commercial Operations was £5.9 billion at 31 December 2022 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 US Commercial Operations in determining the level of accrual
necessary is set out in ‘Critical accounting policies’ on pages 94 and 95.
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 including the
Zantac
litigation, 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 2022, the provision for legal matters was £0.2 billion,
see Note 32 to the financial statements, ‘Other provisions’ for more details.
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 2022, a tax payable liability of £0.6 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 charge of £402 million in 2022. 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 primarily as a result of updated
exchange rate assumptions as well as increases in sales forecasts and the unwind of
the discount. After cash payments of nearly £1.1 billion in the year, at 31 December
2022, the Groups’ balance sheet included a contingent consideration liability of
£5.9 billion in relation to ViiV Healthcare. See Note 33 to the financial statements,
‘Contingent consideration liabilities’ for more details.
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 £1.1 billion at 31 December 2022.
Consumer Healthcare demerger
The Committee reviewed management’s process for presenting Consumer
Healthcare as a discontinued operation and the subsequent demerger accounting.
The gain on the demerger of £10.1 billion included significant values relating to the
fair value of assets distributed and ownership in Haleon retained, the net assets
and non-controlling interest distributed/de-recognised and the cumulative foreign
exchange recycled. See Note 41 ‘Acquisitions and Disposals’ to the financial
statements for more details.
Board committee reports continued
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GSK Annual Report 2022
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 2021, prior to making a
recommendation on its reappointment in early 2022, the
Committee reviewed the effectiveness of its performance
against the criteria which it agreed with management at the
beginning of 2021. The detailed criteria used for judging the
effectiveness of Deloitte as external auditor are available on
gsk.com. These are based on the audit approach and strategy,
ensuring a high-quality independent audit, effective
partnership and value for money.
The Committee monitors engagements with external
stakeholders relevant to the Committee’s areas of oversight,
including the FRC and Securities and Exchange Commission.
During the year the FRC’s Audit Quality Review (AQR) team
reviewed Deloitte’s audit of the Group’s 2021 financial
statements as part of its annual inspection of audit firms.
The Committee received and reviewed the final report from
the AQR team which identified no key findings, assessed the
audit as requiring limited improvement and noted several
areas of good practice.
The Committee sought to ensure that Deloitte would deliver
a smooth, thorough and efficiently-executed audit for 2022.
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, given it only
commenced its role as auditor in 2018. However, the
Committee did consider how effectively it had assumed its role
as auditor. The Committee also considered feedback on the
2022 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 communications 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 and
–
skills and experience of the audit team
The Committee Chair regularly meets independently with the
audit partners. The Committee also meets with the auditor
privately 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 2023, 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.
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
New lead audit engagement partner
2023
Next audit tender required by regulations
2026 (to take effect from 2028)
There were no contractual or similar obligations restricting the
Group’s choice of external auditor.
Audit partner rotation
The external auditor is required to rotate the audit
engagement partner for GSK every five years.
Our current audit partner is due to step down from their
position after the audit of GSK’s financial statements for 2022
has been concluded.
After a robust review process by the Committee, together with
the involvement of the CFO, to select their replacement, the
Committee approved the appointment of the next audit
engagement partner with effect from the financial year
commencing on 1 January 2023.
The Committee is satisfied that Deloitte has been managing
an orderly handover to the new audit engagement partner to
ensure there is a seamless transition and maintenance of high
levels of audit quality and effectiveness.
Audit tender
The Committee considers that during 2022 the company
complied with the mandatory audit processes and audit
committee responsibility provisions of the Competition and
Markets Authority Statutory Audit Services Order 2014.
As Deloitte continues to maintain its independence and
objectivity, and the Committee remains satisfied with its
performance, GSK does not intend to tender the external
auditor contract before the end of the current required period
of 10 years identified above and considers that this is in the
best interests of shareholders. The Committee is mindful that
the 2023 financial year will see a new CFO for GSK and audit
partner for Deloitte, which will help further mitigate the risks of
any over-familiarity between the company and the auditor.
Board committee reports continued
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GSK Annual Report 2022
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 199.
During the year, fees for audit-related and other assurance
services of £6.3 million included £4.4 million related to the
continued work in the year 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 31.6% of the annual audit
service fee (2021: 15.2%). Excluding the demerger work and
quarterly review work, fees for audit-related and other
assurance services would have represented 4.4% of the
annual audit fee.
The Committee's rationale for originally hiring Deloitte to
undertake the reporting accountant role is set out on page 115
of GSK's 2021 Annual Report.
The Committee considered the level of non-audit services
incurred as part of its annual review of Deloitte’s independence
set out on the previous page and was satisfied that the auditor
continued to be independent and exercised objectivity
throughout 2022.
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 2022 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 2022 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
new 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
9 March 2023
Non-audit services
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 ensures that auditor
objectivity and independence are 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
Board committee reports continued
0
10
20
30
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)
2020
28.3
1.8
2022
30.3
20.6
2021
27.7
6.5
4.2
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GSK Annual Report 2022
Directors' powers
Our 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 40 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 2022 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
2022 Remuneration policy which is available on gsk.com
in the Investors section.
Directors’ report
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GSK Annual Report 2022
Directors’ report continued
Content of the Directors’ report
For the purposes of the UK Companies Act 2006, the
Directors’ report of GSK plc for the year ended 31 December
2022 comprises:
Directors’ report
Section
Pages
Corporate governance report
96 to 131
Employee engagement
115
Directors’ statements of responsibilities
166 and 167
Investor information
273 to 314
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
51 to 64 and
285 to 295
Likely future developments of the company
1 to 95
Research and development activities
15 to 28
Business relationships
49 and 50
Diversity
47
Provision of information to and consultations with
employees
10, 11 and 47
Carbon emissions
45 and 46
Section 172 statement
112 to 114
and
throughout
10 to 63
The following information is also incorporated into the
Directors’ report:
Location in Annual Report
Interest capitalised
Financial statements,
Notes 17 and 20
Publication of unaudited financial
information
Group financial review,
page 65
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 45
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 9 March 2023
and signed on its behalf by:
Sir Jonathan Symonds
Chair
9 March 2023
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Remuneration
In this section
Committee Chair’s annual statement
133
Annual report on remuneration
136
2022 Remuneration policy summary
158
132
GSK Annual Report 2022
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Financial statements
Investor information
GSK Annual Report 2022
Remuneration report
Committee Chair’s annual statement
Dear Shareholder,
On behalf of the Remuneration Committee, I am pleased to
present our Remuneration report for 2022. This includes my
annual statement, explaining the Committee’s work this year,
our annual report on remuneration for 2022, a summary of our
Remuneration policy which was approved by shareholders at
the 2022 AGM, and details of how we propose to operate the
Policy this year.
GSK’s Remuneration policy 2022
As detailed last year, we introduced a new Remuneration
policy in 2022 to better link executive remuneration to delivery
of outperformance.
The new arrangements were designed to reward the delivery
of the bold new performance ambitions set out at our Investor
Update in 2021 – to deliver sales growth of more than 5%
CAGR and adjusted operating profit growth of more than 10%
CAGR from 2021 to 2026. These ambitions represent a step-
change in performance for the Group and achievement of
them should deliver top quartile performance for our sector.
The Committee concluded that the design of its existing
Remuneration policy framework remained fit for purpose.
However, given that driving long-term performance through
consistent year-on-year improvement was the main aim
behind these targets, changing the short-term Annual Bonus
plan was determined to be the key imperative.
The main change to the plan was to significantly reduce the
Annual Bonus opportunity for below-target performance while
increasing the Annual Bonus opportunity for ‘exceptional
performance’ to 300% of salary. The increase in overall Annual
Bonus opportunity does not increase the cash reward
opportunity, as any incremental reward is delivered in the form
of shares deferred for three years.
The Committee is very aware of the sensitivity amongst
stakeholders to levels of executive pay.
We engaged extensively with shareholders to gain their views
and feedback on these changes. Please see the table below
which sets out the full details of this process.
As a result, we made adjustments to quantum, clarity on
disclosure of outcomes, and transparency in relation to the
targets set, that all feature in the final policy.
At the 2022 AGM, the new policy was approved with 62% of
shareholders voting in favour, but the Committee recognises
that a significant minority of shareholders voted against.
Following the AGM, the Committee ensured continued
consultation with shareholders to understand the full range
of views, including those who voted against the proposals.
The Committee thanks shareholders for their feedback and
remains committed to engaging on remuneration. It continues
to believe that incentivising outperformance against stretching
targets will create long-term value for shareholders. Noting
that no new issues were raised, the Committee is comfortable
that no further change is required to the Annual Bonus plan.
The Committee will review with shareholders the evolving
needs of the business in advance of the renewal of our
Remuneration policy in 2025.
Two administrative amendments to the 2022 Remuneration
policy are being proposed for shareholder approval at the
2023 AGM. Further details are set out on page 163.
2022 remuneration outcomes
The very strong operating performance for GSK in the first year
of the new remuneration arrangements has highlighted the
importance of incentivising exceptional performance.
As set out earlier in the Annual Report, in 2022 the Group
delivered strong sales growth of Vaccines and Specialty
Medicines and double-digit growth in operating profit and
earnings per share.
2022 Remuneration policy engagement
Details of the extensive consultation by the Committee and company Chairs regarding the 2022 Remuneration policy prior to
the 2022 AGM vote and continuing engagement with shareholders afterwards, are set out below.
Engagement events
Dates
Investor
participation
Share capital
represented
Initial individual consultation meetings
October to
November 2021
5 of the largest
15 shareholders
12%
2021 Annual Governance Meeting:
invitations
attendance
November 2021
December 2021
60 investors
13 investors
50%
15%
Follow-up letter after Annual Governance Meeting to non-attendees, setting out
proposed Remuneration policy asking for input via meeting with the Remuneration
Committee and company Chairs
January to February
2022
30 investors
35%
Letter circulated advising how feedback was incorporated into the final Remuneration
policy to be submitted to the 2022 Annual General Meeting for binding approval
March 2022
40 investors
45%
Meetings held with shareholders prior to AGM
January to April 2022
11 investors
16%
2022 Annual Governance Meeting:
invitations
attendance
November 2022
December 2022
60 investors
14 investors
50%
25%
Meetings held after the AGM to the publication of this Annual Report
May 2022 to
February 2023
20 meetings
35%
The principal proxy advisory firms were also consulted throughout the Remuneration policy process. This included invitations
to the Annual Governance Meeting, receipt of engagement letters and meetings with the company and Remuneration
Committee Chairs.
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Committee Chair’s annual statement continued
2022 Pay for performance outcome
Vested
Lapsed
2020 LTI vesting outcome:
performance period ended 31 December 2022
Innovation
sales
Relative
TSR
Adjusted
free cash flow
30%
of 30%
8.2% of
20%
0% of
30%
13.8% of
20%
Pipeline
progress
Overall vesting
52%
The nature of the strategic and operational objectives for each
Executive Director will be in line with those agreed for the 2022
Annual Bonus. These focus particularly on individual areas of
accountability to deliver the company’s strategy. For example,
the CEO has clear pipeline delivery objectives. Each Executive’s
objectives also require demonstration of their contribution to
leading and living our culture of performance with integrity
which the Board believes is a critical lever of long-term value
creation for GSK.
The Committee has reflected at length on investor input
regarding the most appropriate ESG measures to focus on.
One theme which arose during consultation was the possibility
of introducing a metric on access to medicines. However, as
GSK is already an industry leader in this area, and as it is
deeply engrained in the company’s culture and values, the
Committee felt that it was not necessary to include this as a
specific metric in incentives. Instead, the Committee has
selected measures aimed at specific GSK challenges and
opportunities in environmental sustainability and DEI.
Performance targets have been calibrated to consider a
number of internal and external reference points, in particular
analyst consensus has been considered for financial metrics
where available. The Committee is therefore satisfied that the
targets set for 2023 are sufficiently stretching.
Salary
The Committee agreed that the CEO should receive a 4%
salary increase for 2023 which is lower than the average
increase to the wider workforce in the UK of 5%. In addition to
the 5% average salary increase, the company has
implemented a number of monetary and non-monetary
initiatives for our colleagues in reaction to the cost of living
crisis as explained in my statement.
Workforce fairness
In setting executive pay it is important that the Committee does
so with a good understanding of the Group’s wider workforce
pay approach, with an emphasis on fairness and equity.
To that end, on an annual basis, I meet with senior Human
Resources Leaders from across the company to understand
perspectives on pay and GSK’s remuneration arrangements for
the wider workforce. This year was the fourth such annual
meeting held.
Remuneration awards for the year reflect this excellent
operating performance, alongside successful delivery of the
demerger of Consumer Healthcare to form Haleon, the largest
demerger in Europe for over 20 years.
2022 Annual Bonus
The Bonus outcomes for the CEO and CFO were each
determined by reference to performance against stretching
total sales, adjusted operating profit and diversity, equity and
inclusion (DEI) targets as well as the Committee’s assessment
of their individual performance against specific strategic and
operational measures.
The total sales growth rate was 3.4% above the target growth
rate of 6.5% and the adjusted operating profit growth rate
was 3.9% above the target growth rate of 12.8%. This led to an
overall payout under the financial elements of 149.5% of salary.
The targets were set with consideration given to analyst
consensus, hence the Committee is comfortable that the payout
represents exceptional performance. The full target range is set
out on page 139. When combined with the assessment of the
non-financial elements, the overall payout was 249.5% of salary
for the CEO (149.5% of salary delivered in deferred shares) and
227.5% of salary for the CFO (127.5% of salary delivered in
deferred shares).
The Committee believes the Bonus outcomes appropriately
reflect the overall performance achieved in 2022. Full details
are provided on page 139.
Long-term incentive (LTI) awards
52% of the 2020 Performance Share Plan (PSP) award vested.
Targets were set against pipeline progress (20%), innovation sales
(20%), adjusted free cash flow (30%) and relative TSR (30%).
Disappointingly there was nil-vesting under relative TSR. However,
strong performance against other metrics was evidenced with full
vesting under the cash flow element and partial vesting under
pipeline progress and innovation sales. This reflects progress in
R&D, including positive data for the company’s potential new RSV
vaccine, and strong sales from products launched over the last
five years, including shingles vaccine
Shingrix
which generated
sales of £3 billion during the year.
Following a review of contextual factors including previous
payouts, the Committee believes that the formulaic outcomes
appropriately reflect performance in the round having
considered the experience of all stakeholders including
shareholders and our employees. The Committee did not
deem it necessary to exercise discretion. Incentive awards in
relation to 2022 were made in accordance with the 2022
Remuneration policy.
Remuneration policy implementation for 2023
Annual Bonus and LTI performance measures
Following changes to the bonus in 2022, for 2023 we are
maintaining the performance measures in our incentive plans
as they continue to align with our strategic goals.
Annual Bonus measures will be: annual total sales growth
(30%); annual adjusted operating profit growth (30%); personal
performance against strategic and operational measures
(30%); ESG: diversity, equity and inclusion (DEI) (10%).
LTI measures will be: relative TSR (30%), total sales growth over
three years (20%); adjusted operating profit growth over three
years (20%); pipeline progress (20%); and ESG: environment
composite scorecard (10%).
Proof 6 (e) 08.03.2023 at 1 pm
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Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Committee Chair’s annual statement continued
At the meeting, we discussed how GSK continues to support its
diversity aspiration through fair pay processes and proactive
reviews and enhancements to its employee benefits. These
included:
–
new global minimum standards for parental leave and for
care of a family member
–
review of medical and insured benefits with a focus on equity
for same sex couples wherever legally possible and
–
new financial education support
Given the very challenging economic environment and cost of
living pressures in many countries, management has taken
action to support current employees and to attract talent,
through competitive salary increases, one-off support
payments to staff at lower grades, and enhancements to
workforce wellbeing programmes.
At the start of 2022, changes were also made to the Annual
Bonus plan below the GLT level to reflect a greater focus on
performance. The new plan has been generally well received
and first payments will be made in Q1 2023.
Director changes
In August 2022, Dr Hal Barron transitioned, as planned, from
his role as CSO to a non-independent Non-Executive Director.
Dr Barron was contractually entitled to receive a pro-rated
target bonus in respect of 2022. He did not receive an LTI grant
in 2022.
We also announced the appointment of Julie Brown as CFO
from May 2023, when Iain Mackay will step down from the
Board. As previously communicated, Mr Mackay will continue
to receive his base salary until he leaves GSK at the end of the
year and will be eligible to receive an Annual Bonus in respect
of 2023. He will not be eligible to receive any further LTI awards
and will receive no salary increase in 2023. Full details of his
retirement arrangements including the treatment of in-flight LTI
awards can be found on page 149.
Our new CFO, Julie Brown’s salary of £915,335 was preliminarily
set in line with that of her predecessor in September 2022. Her
salary upon joining has been increased by 4% to £951,948. This
is in line with the increase agreed for the CEO and is below that
which has been awarded to the UK wider workforce.
AGM
Finally, I would like to again thank shareholders for their valued
input and engagement. I welcome all further feedback and
look forward to receiving your support for this report at our
Annual General Meeting on 3 May 2023.
Urs Rohner
Remuneration Committee Chair
9 March 2023
How our performance measures align to our strategy
Performance measures
Alignment to strategy
Weighting
AB
LTI
Total sales growth
Ambition of 5% sales growth
30%
20%
Adjusted operating profit growth
Ambition of 10% profit growth
30%
20%
Pipeline
Emphasis on Innovation – rewards acceleration and
strengthening of pipeline
–
20%
Relative total shareholder return
Alignment with shareholders
–
30%
ESG ambitions
Nature and Climate ambitions
2022 – DEI Priorities
–
10%
10%
–
Strategic and operational
Individual accountability for delivery of our strategy and public ambitions
30%
–
Key
AB
Annual Bonus
LTI
Long-term incentives
Consideration of potential windfall gains
The Committee is aware of the guidance from investor
bodies around considering a potential executive benefit
arising from share award grants around the time of the
stock market fall at the onset of the COVID-19 pandemic in
March 2020.
Our Remuneration Policy contains sufficient flexibility to
reduce the vesting of awards if required.
However, the Committee determined that no reduction is
required in respect of the awards granted in March 2020.
In making this determination, the Committee considered
the share price at the following points:
–
The share price at the time of the February 2020 award
of £16.81
–
The share price over the final quarter of 2022 of £13.99
–
The share price at the time of the March 2019 award
(grant previous to the 2020 award) of £15.09
Whilst there have been upward and downward
movements in GSK’s share price over the period, taking
these above points into consideration the Committee was
satisfied that there was no risk of windfall gains.
Proof 6 (e) 08.03.2023 at 1 pm
136
GSK Annual Report 2022
2022 Total remuneration (audited)
Emma Walmsley, CEO
Iain Mackay, CFO
Dr Hal Barron, former CSO
(to 31 July 2022)
(2)
2022
£000
2021
£000
2022
£000
2021
£000
2022
$000
2021
$000
Fixed pay
Salary
1,260
1,223
915
889
1,332
1,883
Benefits
131
134
291
242
107
145
Pension
253
245
183
178
190
651
Total fixed pay
1,644
1,602
1,389
1,309
1,629
2,679
Pay for performance
Annual bonus
(1)
3,143
2,275
2,082
1,573
1,177
3,483
Vesting of PSP LTI awards
(3) (4)
3,666
4,326
1,854
2,408
4,381
6,371
Total pay for performance
(5)
6,809
6,601
3,936
3,981
5,558
9,854
Total remuneration
£8,453
£8,203
£5,325
£5,290
$7,187
$12,533
Notes:
(1)
The mandatory Deferred Annual Bonus Plan (DABP) bonus deferrals for 2022 and 2023 are set out on page 154. The payment shown for Dr Barron represents a
pro-rated on-target payment in respect of 1 January 2022 to 31 July 2022, in lieu of an Annual Bonus opportunity.
(2)
Dr Barron transitioned from his role as CSO to Non-Executive Director on 1 August 2022. Salary above includes the basic salary earned for his time as CSO from 1
January to 31 July 2022 plus payment in lieu of accrued holiday not taken, in accordance with GSK’s standard all employee US holiday pay policy. His Non-Executive
Director fees earned from 1 August to 31 December 2022 were $177,107. Please see page 153 for further details.
(3)
The PSP vesting figure for the CEO is inclusive of a top-up award (25% of salary) made in May 2020 following the vote in favour of the Remuneration policy at the
company’s 2020 AGM. This award will not vest until May 2023 and the final actual value received for the 2020-22 PSP will be restated in the 2023 Annual Report.
(4)
The 2020 PSP was valued based on the vesting prices on 10 February 2023 of £14.78 and the ADS price of $35.727. The share and ADS prices on 14 February 2020, the
main date of grant were £16.686 and $43.74. In respect of the top-up award for the CEO, the share price was £16.814. Of the vested amounts for the Executive Directors,
nothing was attributable to share price appreciation over the performance period. The Committee did not exercise any discretion in relation to the vesting of the awards
or share price changes. The value for Dr Hal Barron is illustrative as the award will not vest until August 2023 in accordance with the terms of the Executive and Senior
Management Recoupment Policy. The actual value received will be restated in the 2023 Annual Report.
(5)
The Committee may in specific circumstances, and in line with stated principles, apply malus/clawback, as it determines appropriate. Following due consideration by the
Committee, there has been no recovery of sums paid (clawback) or reduction of outstanding awards or vesting levels (malus) applied during 2022 in respect of any of
the CEO, CFO or the former CSO.
2022 Total remuneration (audited)
Fixed pay
Salary
Benefits
Pension
on pages 137 and 138
Pay for performance
Total
remuneration
could b
below
2022 Annual Bonus
on pages 139 and 140
2020 Vested LTI Awards
on pages 141 and 142
Annual report on remuneration
2022 measures
%
Total sales growth
30
Adjusted operating
profit growth
30
Individual strategic and
operational objectives
30
ESG: DEI
10
Overall vesting
52%
Shares subject to two-year holding
period upon vesting
2020-22 vested measures
%
Relative TSR
30
Adjusted free cash flow
30
Innovation sales
20
Pipeline progress
(Pivotal trial starts & Major
regulatory approvals)
20
+
Read more
CEO
CFO
Overall bonus
(% of salary)
249.5%
227.5%
Delivered as:
(% of bonus)
Cash
40.1%
44.0%
Deferred shares
59.9%
56.0%
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Financial statements
Investor information
GSK Annual Report 2022
Annual report on remuneration continued
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.
2022
effective
date
2022
% change
Salary
2022
2021
UK & US employees
1 April
3%
–
–
Emma Walmsley
£1,259,855
£1,223,160
Iain Mackay
1 January
3%
£915,335
£888,675
Dr Hal Barron
(1)
$2,026,549
$1,967,523
(1)
With effect from 1 August 2022, Dr Barron transitioned to a Non-Executive
Director role and has not received a salary since that date. He receives
Non-Executive Director fees as described on page 153. Dr Barron’s 2021
base salary was increased by 8% from $1,821,781 to $1,967,523 with effect
from 1 August 2021. See page 126 of the 2021 Annual Report for further
details.
Details of salary levels for 2023 are provided on page 147.
Benefits
The UK remuneration reporting regulations require the
company to add into each Executive Director’s total benefits
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
–
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 include business travel and other
related business costs
The table below provides an analysis of Total benefits (grossed
up for tax) received by the Executive Directors in 2022 and
2021.
The following sections provide details of each element of 2022 ‘Total remuneration’, and how the Committee implemented
the company’s shareholder-approved Remuneration policy during the year in terms of fixed and performance pay:
Fixed pay (audited)
2022 Total remuneration (audited)
continued
2022 Benefits
£000
2021 Benefits
£000
Emma Walmsley
Benefits available to employees
66
71
Business-related services
65
63
Total benefits
131
134
Iain Mackay
Benefits available to employees
156
131
Business-related services
135
111
Total benefits
291
242
Dr Hal Barron
$000
$000
Benefits available to employees
71
83
Business-related services
36
64
Accommodation whilst on business travel
(1)
–
(2)
Total benefits
107
145
Notes:
(1)
2021 represents one-off refund of accommodation costs relating to 2020.
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GSK Annual Report 2022
Annual report on remuneration continued
Pensions
From 1 January 2023, pension arrangements for Executive Directors were aligned to the wider workforce. Further details are given
on page 147.
Executive Director
Member since
Pension arrangements in 2022
Emma Walmsley
Iain Mackay
2010
2019
Pension contributions of 20% of base salary and matching contributions of up to 5% on the first
£13,333 of salary, with a cash payment of 20% of base salary in lieu of pension on salary in excess
of £13,333 in line with plan rates.
Dr Hal Barron
2018-July 2022
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 received 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).
The following table shows the breakdown of the pension values included in Total remuneration on page 136. They are calculated
in accordance with the methodology set out in the UK Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended) (Remuneration regulations).
Pension remuneration values
Emma Walmsley
Iain Mackay
Dr Hal Barron
2022
£000
2021
£000
2022
£000
2021
£000
Jan-Jul 2022
$000
2021
$000
UK defined contribution
3
3
3
3
–
–
US defined benefit
–
–
–
–
(134)
350
Employer cash contributions
250
242
180
175
324
301
Total pension remuneration value
253
245
183
178
190
651
Dr Hal Barron is now a deferred member of the US style defined benefit plan. Further details regarding the 2022 pension values
for Dr Barron are set out in the table below. His accrued benefit (ie the annual pension accrued to date) for 2022 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 over a number of years. The normal retirement age under the Cash Balance Pension Plan is age 65. Dr Barron has not
received any additional benefit for retiring early.
Dr Hal Barron pension values
Accrued pension
Pension remuneration
value for 2022
$000
31 July 2022
$000
31 December 2021
$000
US – Funded
2
2
(6)
US – Unfunded
194
187
(128)
Total
196
189
(134)
Fixed pay (audited)
continued
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GSK Annual Report 2022
Annual report on remuneration continued
2022 Annual Bonus performance against measures
The following table shows the Annual Bonuses earned compared to the bonus opportunity for 2022:
2022 Bonus opportunity
2022 Bonus outcome
Bonus
Target
(% of salary)
Maximum
(% of salary)
2022
salary
Total sales
growth
(% of salary)
Adjusted
operating
profit growth
(% of salary)
Strategic and
operational
measures
(% of salary)
ESG
(% of salary)
Total 2022
bonus
(% of salary)
Total 2022
bonus
Emma Walmsley
100
300
£1,259,855
71
79
90
10
249.5
£3,143,340
Iain Mackay
£915,335
78
0
227.5
£2,082,390
Details of the mandatory deferral by Executive Directors into the DABP for the 2022 bonus are set out on page 147.
Dr Barron received a pro-rated ‘on-target’ payment for 2022 of $1,177,064 in lieu of a bonus opportunity. This is because he
transitioned to a Non-Executive Director role on 1 August 2022. This contractual payment, in accordance with the company’s
Remuneration policy, is included in his remuneration for 2022 under Annual Bonus in the table on page 136.
2022 financial performance measures
2022 Performance
Target
weighting
Target
growth rate
Outcome
growth rate
Positioning
achieved
Total sales growth
30%
6.5%
9.9%
+3.4%
Adjusted operating profit growth
30%
12.8%
16.8%
+3.9%
These targets were set following consideration of analyst consensus as well as internal budgets. The annual targets for 2022
exceeded the long-term sales and profit targets stated in our Investor Update of 5% and 10% respectively. The Committee is
therefore comfortable that over achievement of these represents exceptional performance. Threshold and maximum performance
targets were set at 1% below and 5% above target growth respectively. The total sales and adjusted operating profit targets and
outcomes for the purposes of the Annual Bonus calculation are based on CER and exclude the commercial benefit from COVID-19
solutions.
Total sales
growth
30%
Adjusted operating
profit growth
30%
Strategic and
operational
measures
30%
ESG: diversity,
equity and inclusion
10%
Annual Bonus
Annual Bonus
Pay for performance (audited)
Overview of performance against financial performance measures
–
2022 saw a step-change in commercial execution; earnings guidance was updated during the year as momentum grew. This
was driven by strong sales growth across Specialty Medicines and Vaccines, exceeding guidance for sales and operating profit
–
Delivered full-year reported Group sales of £29.3 billion (+19% AER, +13% CER) with Specialty growth of 37% AER, 29% CER
with double-digit growth across all Specialty therapy areas and Vaccines growth of 17% AER, 11% with a record year for
Shingrix
.
The outcome was adjusted to exclude the benefit from COVID-19 solutions
–
Adjusted Group operating profit of £8,151 million above target, driven by higher sales supported by prioritised investment and
effective cost control. The outcome was adjusted to exclude the commercial benefit from COVID-19 solutions
–
Adjusted EPS of 139.7p (+27% AER, +15% CER) was ahead of guidance excluding COVID-19 solutions
Proof 6 (e) 08.03.2023 at 1 pm
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Annual report on remuneration continued
2022 strategic and operational measures performance
The Committee received and considered a performance assessment report for each Executive Director showing the extent of their
achievement against the individual personal strategic and operational measures agreed by the Committee for them to support
the delivery of our strategic commitments during 2022. The Committee also reviewed Dr Hal Barron’s performance in July 2022
before the release of his contractual ‘on-target’ bonus payment.
As with the financial elements of the Annual Bonus, the Committee was satisfied that the scale of Executive Directors’
achievements this year was of an exceptional nature. In particular, these achievements relate to the pipeline, commercial
execution and Haleon demerger.
Strategic and operational measures
Performance achieved
Emma Walmsley
The Committee determined that the CEO clearly exceeded or met her individual objectives
Strengthen pipeline and
build GSK’s reputation for
Innovation
–
47 potential new medicines and 22 vaccine candidates in development, with 18 now in phase 3/registration.
Two-thirds of pipeline now focused on infectious diseases
–
Significant progress to strengthen pipeline and advance key assets (including RSV OA vaccine, bepirovirsen,
gepotidican, daprodustat and depemokimab) more than offset termination decisions on otilimab and RSV maternal
–
Continued progress in development of long-acting HIV treatments including launch of
Apretude
, for HIV
prevention and positive data for new broadly neutralising antibody N6LS
–
Successful business development to support future growth and focus in Vaccines and Specialty Medicines
including Affinivax, Sierra Oncology and Spero Therapeutics
Demonstrate continued
commercial execution
excellence
–
Step-change in commercial execution, with double-digit sales growth across Specialty Medicines and Vaccines
–
10 products now exceeding £1 billion in annual sales, including
Trelegy
,
Nucala
,
Benlysta
and
Dovato
–
Strong momentum for
Shingrix
(sales +60% to £3 billion), reflecting post pandemic rebound, new geographic
launches and excellent commercial execution
Complete separation and
unlocked value
–
Haleon successfully demerged on schedule from GSK on 18 July 2022. Largest demerger in Europe for 20 years
–
Meaningful progress in value recognition prior to impact of market uncertainty following
Zantac
litigation
Demonstrate strong
Environmental, Social and
Governance (ESG) credentials
and build trust in future delivery
–
Sustained leading ESG performance, with delivery against Global Health, Environment and Inclusion and Diversity
commitments
–
Maintained sector-leading rankings in key ESG indices. Ranked number 1 in Access to Medicines Index for the 8th
consecutive time and 2nd in S&P Corporate Sustainability Assessment for the pharmaceutical industry
Demonstrate strong culture
and leadership
–
Drove rapid ownership of new culture; launch and roll out of new internal GSK Code, Talent Management and
Performance with Choice programmes
–
Employee engagement up to 81% (versus 78% in 2021)
–
Continued development and succession planning for leadership team, with Tony Wood appointed CSO and new
Chief Financial Officer Designate appointed
Iain Mackay
The Committee determined that the CFO successfully met his individual objectives
Demonstrate financial
leadership
–
Group financial targets exceeded: total sales £29.3 billion (+19% AER, +13% CER, +10% excl COVID); adjusted
operating margin 27.8%; adjusted operating profit growth +26% AER, +14% CER, +17% excl COVID
–
Adjusted EPS 139.7p (+15% CER)
Cost discipline and cash
flow management
–
Prioritised investment and cost discipline supported strong growth in operating profit and EPS.
–
Transformation programme delivering £0.9 billion annual savings by end 2022, on track to deliver £1 billion by end 2023
–
Cash generated from operations £7.9 billion and free cash flow of £3.3 billion
Complete separation and
unlocked value
–
Haleon successfully demerged on schedule from GSK on 18 July 2022. Largest demerger in Europe for 20 years
–
Meaningful progress in value recognition prior to impact of market uncertainty following
Zantac
litigation
Demonstrate strong
culture and leadership
–
Finance and Tech engagement, confidence, culture and inclusivity employee survey scores all increased
versus 2021
Pay for performance (audited)
continued
2022 ESG: diversity, equity and inclusion (DEI) performance
Our first Annual Bonus ESG measure reinforces achievement of our DEI ambitions, as set out on page 47. DEI is an important
business imperative and aspirational targets could be set to warrant additional reward. To stay on track for the 2025 Aspirational
Targets for diversity of senior leadership, the Committee agreed interim, annual aspirational targets including global gender
representation and US and UK race and ethnicity representation. These interim, annual aspirations were agreed by the
Committee for the CEO. An internal governance team comprising members of Reward and Legal audited their performance
against these interim aspirations for consideration by the Committee. These interim aspirations were achieved in 2022 and at year
end we had 42% gender representation and 31.3% US ethnicity and 14.3% UK ethnicity in our VP and above employee population
which are above or on track to meet the 2025 Aspirations.
In addition, most directorates also performed strongly against their respective contributions to our Aspirations. However, not all
directorates achieved their expected contributions to the aspirational targets including Finance.
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GSK Annual Report 2022
Annual report on remuneration continued
Performance measures
and relative weighting
Outcome and vesting level
Performance targets
Outcome
% of
maximum
% of
award
Pipeline progress
(20%)
The pipeline progress measure targets rewarding strengthening of our pipeline
through progression of high quality assets into pivotal trials and the achievement
of regulatory approvals in major markets. Points based on achievement are
allocated to these two equally weighted elements.
Measure
LTI award
%
Threshold
25%
50%
75%
Maximum
100%
Pivotal Trial starts
10
13 points
14 points
15 points
18 points
Major regulatory
approval milestones
10
18 points
19 points
20 points
22 points
16.5 points
19 points
88%
50%
13.8%
Innovation sales
(20%)
The innovation sales measure recognises the importance of launching new products
successfully and that driving their performance is key to our commercial success.
This measure aggregates three-year sales for new innovative products launched in
the three-year performance period and the preceding two years, ie 2018-22.
Innovation sales (billion)
% vesting
Maximum
£18.132
100%
£16.484
75%
£15.660
50%
Threshold
£14.836
25%
<£14.836
0%
£15.368 billion
41%
8.2%0
Adjusted free
cash flow (AFCF)
performance
(30%)
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 (billion)
Revised
target (billion)
(1)
% vesting
Maximum
£11.84
£10.47
100%
£11.33
£10.01
75%
£10.30
£9.10
50%
Threshold
£9.99
£8.83
25%
<£9.99
<£8.83
0%
(1)
The revised target has been further adjusted since the 2021 Annual Report as noted overleaf.
£13.08 billion
100%
30%
Relative TSR
performance
(30%)
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)
TSR comparator group: AstraZeneca, Bristol-Myers Squibb, Eli Lilly, GSK,
Johnson & Johnson, Merck & Co, Novartis, Pfizer, Roche Holdings and Sanofi.
(3)
The vesting schedule is based on delivering 25% vesting for median performance.
In a comparator group of ten companies, median falls between two companies.
Ranked 9th
0%
0%
Total vesting in respect of 2020 awards
52%
Vesting of PSP LTI awards
The following sets out the performance achieved for the company’s PSP and includes an update on performance of outstanding
awards. In line with the Committee’s agreed principles, actual performance against each measure is carefully reviewed and
adjustments are made, as appropriate, to ensure that the vesting outcome reflects genuine underlying business performance
and has been delivered in line with our culture and responsible business priorities.
Overall, 52% of the 2020 PSP award vested. Targets were set against pipeline progress (20%), innovation sales (20%), adjusted
free cash flow (30%) and relative TSR (30%). Disappointingly there was nil-vesting under relative TSR. However, strong
performance against other metrics was evidenced with full vesting under the cash flow element and partial vesting under
pipeline progress and innovation sales.
During the 2020-22 period, significant progress was achieved in accelerating the delivery of our pipeline, notably the company’s RSV
vaccine, depemokimab and niraparib. Robust oversight resulted in a number of assets being discontinued as resources were
reprioritised to focus on those with the greatest potential. Major approvals in the period included: niraparib, for ovarian cancer;
sotrovimab (emergency use authorization) for COVID-19;
Cabenuva
for HIV treatment and
Apretude
for HIV pre-exposure prevention.
Innovation sales, in the period, reflected particularly strong performance of HIV medicines and our shingles vaccine,
Shingrix
.
Pay for performance (audited)
continued
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GSK Annual Report 2022
Annual report on remuneration continued
Pay for performance (audited)
continued
The Adjusted free cash flow (AFCF) target was revised in line with the disclosure on page 131 of the 2021 Annual Report. It has
been further restated to take account of the demerger by removing the share of target cash flows related to Consumer Healthcare
following the demerger in 2022, revised phasing of the Future Ready programme restructuring cash payments based on detailed
programme planning undertaken in 2022, and revised timing of divestments. As a result, the target was decreased by £0.99 billion
to £9.10 billion.
The Committee did not exercise any discretion in relation to the vesting of the awards or share price changes.
2020 PSP vesting
Granted
Vested
(1)
Value of
vested shares
(1)
Emma Walmsley
(2)
410,090
248,018
£3,666,163
Iain Mackay
207,267
125,432
£1,854,116
Dr Hal Barron – Pro-rated
(3)
203,981
122,634
$4,381,400
(1)
The vested number of shares and the value it represented at vesting includes dividend reinvestments during the performance period. These are based on the
vesting price of £14.78 and the closing ADS price of $35.727 on 10 February 2023.
(2)
The shares granted for Emma Walmsley include the additional ‘top-up’ award made in May 2020 which will not vest until May 2023. The final actual value received
and any amount attributable to share price appreciation over the performance period will be restated in the 2023 Annual Report.
(3)
The PSP award for Dr Hal Barron will not vest until August 2023 under the terms of the Executive & Senior Manager Financial Recoupment Policy.
Performance of ongoing LTI awards
The Committee also reviewed the performance of the PSP awards granted to Executive Directors in 2021 and 2022.
The following charts provide an estimate of the vesting levels of the 2021 and 2022 awards, taking into account performance to
31 December 2022.
–
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 measure target, threshold and associated vesting scales for the 2021 awards have been adjusted. The net overall
impact is a decrease in the target of £3.02 billion to £5.64 billion for the 2021 award
–
The adjustments took into account of the following items: the removal of the share of target cash flows relating to Consumer
Healthcare in 2022 and 2023 following the demerger in 2022, revised phasing of the Future Ready programme restructuring
cash payments, and revised timing of divestments
–
There were no changes to other measures
Maximum
Threshold
2021 PSP award
Commercially sensitive target published on vesting
Estimated vesting level
2022 PSP award
30%
Relative TSR
Pivotal trial starts
Median
£5.47bn
20%
Innovation
sales
30%
Adjusted free
cash flow
20%
Pipeline
progress
£6.49bn
Major regulatory approval milestones
P
M
P
M
Maximum
Threshold
30%
Relative TSR
Median
20%
Total sales
growth
20%
Adjusted
operating
profit growth
20%
Pipeline
progress
P
M
10%
ESG
122% of
threshold
Ranked 3rd
or above
105% of
target
105% of
target
Ranked 3rd
or above
For threshold performance 25% of each award will vest in respect of each performance measure. Individual 2021 LTI award levels
appear on page 131 of the 2021 Annual Report. They are set out below for the 2022 LTI awards.
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GSK Annual Report 2022
2022 LTI awards
The 2022 DABP awards, in respect of the deferral of 2021 bonus, and the 2022 PSP awards are both shown in the table below.
2022 DABP awards
2022 PSP awards
2021
% 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
72,399 shares
£1.138m
575%
461,059 shares
£7.2m
Iain Mackay
50%
50,056 shares
£0.786m
400%
233,028 shares
£3.7m
Dr Hal Barron
(4)
40,617 ADS
$1.741m
–
–
–
(1)
The face values of the DABP awards have been calculated based on a share price of £15.712 and an ADS price of $42.87, being the closing prices on 14 February 2022 (the day
before 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 three-year deferrals in respect of the Annual Bonus for 2021.
(2)
The face values of the PSP awards have been calculated based on a share price of £15.712, being the closing price on 14 February 2022 (the day before grant). These are
conditional shares, based on the performance measures outlined above. Dr Barron did not receive a 2022 PSP award given his transition to a Non-Executive Director role on
1 August 2022.
(3)
The performance period for the 2022 PSP awards is from 1 January 2022 to 31 December 2024. Awards vest at 25% of maximum for threshold performance.
(4)
Dr Barron’s DABP award will vest as normal three years after the date it was granted.
Historical vesting for LTI plans
The following table summarises LTI vesting by performance measure for GSK over the last ten years.
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Relative TSR
0
0
0
0
15
0
0
0
0
0
Adjusted free cash flow
13
0
0
0
21
26
33
33
33
30
Innovation sales (previously R&D new product)
16
7
21
33
33
33
33
33
25
8.2
Pipeline progress
13.8
Business diversification
11
7
17
Total vested %
40
14
38
33
69
59
67
67
58
52
Pay for performance (audited)
continued
Annual report on remuneration continued
Malus and clawback policy
For details of our existing policy on malus and clawback, please refer to the company’s 2022 Remuneration policy report on page
147 of the 2021 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, neither the Committee (nor the Recoupment Committee) exercised malus or clawback
during 2022.
An administrative amendment is proposed to the malus and clawback section of the 2022 Remuneration policy for shareholder
approval at the 2023 AGM, as described on page 163.
Other policies
For details of our existing policies on recruitment remuneration, loss of office and termination payments, please refer to the
2022 Remuneration policy report on pages 144 to 152 of the 2021 Annual Report, available on gsk.com.
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Annual report on remuneration continued
Directors’ pay in a wider setting
Internal context
Remuneration structure for employees compared to Executive Directors and GLT during 2022
Element
Wider workforce pay
Comparison with Executive Director and GLT pay
Salary
–
The market competitiveness of base 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
–
Increases may also be made to reflect a change in
scope of an individual’s role, responsibilities or
experience
–
For our Executive Directors and the GLT, following a
performance review, increases in base salaries are
considered in line with market practice, the average
increase for the wider employee population and other
comparotor tools.
–
Increases may also be made to reflect a change in scope
of an individual’s role, responsibilities or experience
–
In agreeing increases for Executive Directors and the GLT,
the Committee is mindful of the multiplier effect on the
individual’s total remuneration
Pensions
and
benefits
–
The company seeks to provide an appropriate
pension and benefits package that is aligned to
competitive market practices in those countries in
which the company operates and where our
employees are based
–
Our Executive Directors and the GLT are eligible to receive
benefits broadly in line with the policy for other
employees, which may vary by location
–
Pension arrangements are structured in accordance with
where the Executive Director or GLT member is expected
to retire. Current and future Executive Directors’ pension
arrangements have been aligned to the wider workforce
in their location since 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. These are
structured to reflect the priorities of each 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, ESG: DEI and personal objectives
–
For Executive Directors, any bonus up to 200% of salary is
paid 50% in cash and 50% in shares deferred for three
years. Any bonus earned in excess of this (up to a
maximum of 300% of salary) would be delivered fully in
shares deferred for three years
–
For GLT members, any bonus up to 170% of salary is paid
75% in cash and 25% in shares deferred for three years.
Any bonus earned in excess of this (up to a maximum of
255% of salary) would be delivered fully in shares deferred
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 as employees
–
Executive Directors are required to hold vested awards for
an additional two-year period
–
Clawback and/or malus provisions apply
–
Executive Directors and the GLT do not receive Share
Value Plan awards following appointment
All-employee share plans
UK Executive Directors may participate in His Majesty’s
Revenue & Customs approved all-employee share plans along
with the wider UK workforce, namely the company’s Share Save
and Share Reward plans.
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 discount of up to 20%
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 on a one for one basis.
For further details see page 154.
Dilution limits
All awards are made under plans which incorporate dilution
limits consistent with the guidelines published by the
Investment Association (IA). 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 2022 is as follows:
All GSK employee share plans
04
02
0
08
06
10
0.78%
Executive share plans
Actual
Limit
5%
0.42%
10%
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CEO pay ratios – Option A methodology
Financial year
Lower quartile
P25
Median
P50
Upper quartile
P75
2022
144:1
106:1
67:1
2021
154:1
108:1
67:1
2020
130:1
96:1
62:1
2019
160:1
119:1
73:1
GSK continues to use the Option A methodology because it is
the most robust and statistically accurate way to calculate the
three ratios from the options available in the Remuneration
regulations. The pay ratio is broadly similar to 2021 with the
reduction at P25 influenced by the change in workforce
composition following the Consumer Healthcare demerger.
The pay ratios above are calculated using actual earnings for
the CEO and UK employees. The CEO’s total single figure
remuneration of £8,453,253 for 2022 and £8,203,422 for 2021
are detailed on page 136.
Total remuneration for all UK full-time equivalent employees on
31 December 2022 has been calculated in line with the single
figure methodology. This reflects their actual earnings received
in 2022 (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 are not
sufficiently substantial in value to significantly impact the ratios.
Directors’ pay in a wider setting
continued
Annual report on remuneration continued
Supplemental and additional ratios
The 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 linked directly 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’s 2022 total remuneration excluding LTI compensation is
£4,787,090.
CEO pay ratios (less LTI awards)
Option A Methodology
Financial year
P25
P50
P75
2022
81:1
60:1
40:1
2021
73:1
51:1
34:1
2020
51:1
38:1
26:1
2019
65:1
48:1
32:1
Relative importance of spend on pay
The table shows total employee pay and the Group’s dividends
paid to shareholders.
Change
%
2022
£m
2021
£m
Total employee pay
0.2
7,693
7,680
Dividends paid in the year
(13.3)
3,467
3,999
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 200 and 207. However, cash
dividends declared in respect of 2022 were £2,468 million
(2021: £4,011 million) a decrease of 38.5%. Please see Note 16
to the financial statements for further details.
Total employee pay is based on 69,130 employees, the average
number of people employed during 2022 (2021: 71,345). Please
see Note 9 to the financial statements for further details.
There were no share repurchases made by the company
during 2022 and 2021.
The table below shows the salary, and total pay and benefits for each of the percentiles.
2022
2021
2020
2019
2022
2021
2020
2019
2022
2021
2020
2019
£
P25
P50
P75
Salary
37,776
37,251
36,924
34,510
52,107
51,492
50,000
47,029
74,905
72,997
70,203
66,561
Total pay and benefits
58,883
53,151
54,133
50,467
79,428
76,234
73,340
68,200
126,594
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.
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Annual report on remuneration continued
Directors’ pay in a wider setting
continued
6
8
10
12
14
16
Global
pharmaceutical
group
European
cross-industry
group
4
Lower quartile
to median
Median to upper
quartile
Emma Walmsley’s
current position
(£m)
Remuneration includes salary and the expected value of incentives based on the
Committee’s agreed benchmarking methodology.
External context
Comparator groups
The Committee used two pay comparator groups when
considering executive pay for 2022. The European cross-
industry comparator group is the primary comparator group
used for the CEO and CFO. The Global pharmaceutical
comparator group is the secondary group for the CEO and is
also used to measure relative TSR performance.
European cross-industry comparator group
Roche Holding AG
Novartis
LVMH
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
2022 target CEO total remuneration positioning
When reviewing the CEO’s remuneration, the Committee’s
primary comparator group is the European cross-industry
comparator group. It also references pay for the Global
pharmaceutical comparator group.
TSR Performance graph
The following graph sets out the performance of the company
relative to the FTSE 100 Index and to the Global pharmaceutical
performance comparator group for the ten-year period to
31 December 2022. 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.
Historic CEO remuneration
Emma Walmsley
£000
2022
2021
2020
2019
2018
2017
Total remuneration
8,453
8,203
7,031
8,094
5,887
4,883
(1)
% of maximum
Annual Bonus award
(2)
83%
93%
49%
79%
93%
77%
Vesting of LTI awards
52%
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
% of maximum
Annual Bonus award
(2)
0%
(2)
97%
100%
42%
88%
Vesting of LTI awards
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.
Global pharmaceutical comparator group
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.
Annual report on remuneration continued
* This index comprises AstraZeneca, Bristol-Myers Squibb, Eli Lilly, Johnson &
Johnson, Merck & Co, Novartis, Pfizer, Roche Holdings and Sanofi.
15
0
100
20
0
250
GSK Total Return
FTSE 100
Total Return Index
GSK Pharma Peers
Total Return Index*
30
0
35
0
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
31.12.22
40
0
50
45
0
50
0
550
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Annual report on remuneration continued
Fixed Pay
Salary
The Committee is very aware of the sensitivity amongst
stakeholders to levels of Executive pay. Before reviewing
Executive Directors’ salary, it considered the average increases
being awarded to employees below the level of Executive
Directors and was mindful of the multiplier effect of increases
in base pay. After due consideration of the wider economic
context, individual performance and market positioning it was
agreed that it was appropriate to award increases below that
of the wider workforce to the CEO.
During the year, in addition to the 5% average salary increase,
the company has implemented a number of monetary
initiatives for our colleagues in the wider workforce, in reaction
to the cost of living crisis, which can be found on pages 134
and 135.
Base salary
2023
% change
Wider workforce
(1)
–
5%
Emma Walmsley
£1,310,249
4%
Iain Mackay
(2)
£915,335
0%
(1)
Based on the average increase budget for employees below the level of GLT in
the UK.
(2)
As a known leaver on 31 December 2023, Mr Mackay is not eligible to receive a
salary increase.
Benefits
No significant changes to the provision of benefits are
proposed for 2023.
For full details of the policy in relation to benefits, please refer
to the 2022 Remuneration policy report on page 144 of the
2021 Annual Report.
Pension
The table below provides an overview of the pension
arrangements for each Executive Director in 2023.
Executive Directors’ pensions were reduced to align with the
wider UK workforce effective 1 January 2023.
Any new Executive Director’s pension will be aligned to the
appropriate wider workforce on appointment.
2023 Pension contribution
Emma Walmsley
Iain Mackay
–
7% of base salary contribution to defined
contribution plan and a further 3% in matched
contributions on the first £26,666 of salary in
accordance with the terms of the plan and
–
7% of base salary as a cash payment in lieu
of pension contribution on salary in excess of
£26,666, or
–
7% of base salary as a cash payment in lieu of
pension contribution
Pay for performance
Annual Bonus
There are no changes to the operation of the Annual Bonus plan.
For full details of the policy please refer to pages 145 and 146 of the
2021 Annual Report.
Bonus opportunity % of salary
Target
Maximum
(1)
Emma Walmsley
100
300
Iain Mackay
(1)
50% of the equivalent of the first 200% of salary is deferred, and any portion in
excess of 200% is deferred in full.
Weighting of performance measures %
Total sales
growth
Adjusted
operating
profit growth
Strategic and
operational
measures
ESG: diversity,
equity and
inclusion
Emma Walmsley
30
30
30
10
Iain Mackay
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 2023 Annual Report.
Deferred Annual Bonus Plan (DABP) 2023
awards
The table below provides details of the mandatory deferral into
the DABP of the 2022 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
Emma Walmsley
59.9
125,482
Iain Mackay
56.0
77,751
Performance Share Plan (PSP) 2023 awards
The table below provides details of awards granted under
the PSP.
% of salary
Shares
Emma Walmsley
575
501,927
LTI performance measures
The measures and weightings for the 2023 awards remain
unchanged from those used for the 2022 awards. The
weightings for the five LTI measures 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
10%
Implementation of Remuneration policy for 2023
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Annual report on remuneration continued
Implementation of Remuneration policy for 2023
continued
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 2023 award will vest as follows:
Pivotal trial starts
Focuses mainly on phase III registrational trial starts, but
may also include phase II starts.
Performance level
Points
Payout
Below Threshold
<12
Nil
Threshold
12
25%
14
50%
16
75%
Maximum
20
100%
Major regulatory approvals
Performance level
Points
Payout
Below Threshold
<17
Nil
Threshold
17
25%
19
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 disclosure of what has been achieved.
Performance
Relative TSR will continue to be measured against GSK’s
Global pharmaceutical comparator group (see page 146).
The total sales growth and adjusted operating profit growth
measures recognise the importance of our commercial
ambitions and the Committee has set targets that align with
those ambitions. The targets for total sales growth and
adjusted operating profit growth are commercially sensitive
at the time of grant.
ESG: environment
The ESG: environment measure is based on the goal of
having a Nature Net Positive and Climate Net Zero impact
by 2030 (see pages 45 and 46). The targets for the ESG:
environment measure for the 2023 grant are based on 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
.
The ESG: environment measure includes six key performance
measures:
–
3x Climate ambitions
–
3x Nature ambitions
To achieve:
–
75% vesting, all six measures must have met their
2025 targets
–
100% vesting, two of the six measures, at least one in
Climate and one in Nature, must have exceeded their
2025 targets
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
3 March 2023
31 December 2022
Emma Walmsley
650
1,292
1,031
Iain Mackay
300
406
228
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.
Emma Walmsley and Iain Mackay, at the date of publication
of this Report, exceed their SOR. Dr Hal Barron exceeded his
SOR prior to his transition to a Non-Executive Director role on
1 August 2022.
The company has processes in place to ensure that each
Executive Director maintains their SOR after leaving GSK. Each
Executive Director agrees to the terms of the SOR as part of
their service contract.
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GSK Annual Report 2022
Annual report on remuneration continued
Termination arrangements for Executive Directors
As announced during 2022, Iain Mackay will step down as CFO and Executive Director on 1 May 2023, continue as an employee
and leave the company on 31 December 2023.
Remuneration element
Summary of treatment
Annual Bonus
Eligible to receive bonuses which will be determined by the Committee based on a combination of business
and individual performance for his service during 2022 and 2023.
PSP
Not eligible to receive any further PSP awards.
Outstanding PSP and DABP awards
All existing LTI awards will be retained and PSP awards will be pro-rated for time.
DABP deferred bonus awards
Awards in respect of bonuses deferred in 2022 and prior years will vest at their normal vesting dates.
In addition to the above, Iain Mackay will be required to maintain his SOR in accordance with the company’s Remuneration policy.
Implementation of Remuneration policy for 2023
continued
Remuneration arrangements for Julie Brown
The Committee considered the remuneration arrangements
that would be appropriate to enable the company to recruit
and retain an experienced CFO within the criteria for the role
in the company’s 2022 Remuneration policy.
Given Julie Brown’s wealth of experience as a CFO and of the
industry, it was agreed that her remuneration should be set in
line with Iain Mackay’s remuneration, as follows:
Remuneration element
Notes
Salary
£951,948
Ms Brown’s salary was preliminarily
set in line with that of her
predecessor in September 2022
(£915,335) and her salary upon
joining will be 4% higher than this
figure, in line with the increase
agreed for the CEO. The
comparator group for pay for
the CFO remains the European
cross-industry comparator group
as set out on page 146.
Annual Bonus
£951,948
The on-target bonus would be
100%, with a maximum of 300%
for incremental exceptional
performance as for Mr Mackay.
Award of Long Term
Incentives (LTIs)
£1,903,896
This assumes an expected value
of 50% of an award of
performance shares under the PSP
at a 4x multiple of base salary as
for Mr Mackay.
Share Ownership
Requirement (SOR)
300% of
salary
This is in line with the 2022
Remuneration policy.
Pension
Pension arrangements will be in
line with those of the wider UK
workforce in accordance with
GSK’s commitment from 1 January
2023.
Benefits
Benefits will be in line with GSK’s
policy and arrangements for other
executives to support them in
undertaking their role.
The Committee sought to ensure Ms Brown was compensated
on a like-for-like basis as far as possible when concluding her
buyout payments, which are set out below:
–
a sum (the Bonus Buyout) equivalent to Ms Brown’s on-
target Burberry bonus for the period from 1 April 2022 to
31 March 2023, which she will forego on leaving Burberry
–
a sum (the LTI Buyout) equivalent to the aggregate value of
(i) her outstanding Burberry LTIs and SIP shares, which will
be lost on leaving Burberry, at a price equivalent to the
average price of such shares for the one-month period
ended on 7 September 2022, and (ii) the value of any
dividend equivalents accruing on those shares between their
date of award and her departure from Burberry. Given that
the Burberry LTIs are not subject to a performance measure,
and only to a performance underpin, no discount will be
applied to the value of the shares so calculated
The Committee agreed that these payments would be made in
stages over a two year period as follows, as cash amounts
equivalent to:
–
the Bonus Buyout and one-third of 85% of the LTI Buyout will
be paid to her in the first payroll following the
commencement of her employment with GSK
–
one-third of 85% of the LTI Buyout will be paid to her in the
first payroll following the first anniversary of the
commencement of her employment and
–
one-third of 85% of the LTI Buyout will be paid to her in the
first payroll following the second anniversary of the
commencement of her employment
In addition, she will be paid an amount equivalent to 15% of
the LTI Buyout in the first payroll following the commencement
of her employment. Ms Brown has agreed that she will invest
the net of tax proceeds of this 15% tranche in GSK shares at the
first reasonably available opportunity, subject to dealing
clearance, and that she will then hold those shares for a period
of at least two years. Ms Brown’s SOR as CFO will be three
times her base salary which she will be required to build over
time.
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
Annual report on remuneration continued
Remuneration governance
Committee role and membership
These details are available on page 107 and are incorporated
by reference into 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
The company undertook a full commercial tender process
during 2022 and appointed Willis Towers Watson LLP (WTW)
as independent adviser to the Committee with effect from
1 December 2022. WTW replaced PricewaterhouseCoopers LLP
(PwC) who served as independent adviser up to 1 December
2022 and for over four years in total.
Both WTW and PwC are members of the Remuneration
Consultants’ Group and, as such, voluntarily operate 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.
WTW provided additional market data to the Committee and
other HR consulting services to the company prior to and after
their appointment as independent Committee advisers. During
the year, in addition to providing consultancy services to the
Committee, PwC also provided other consulting and assurance
services to the company prior to WTW’s appointment.
In line with the protocols agreed and set by the Committee
Chair under which WTW and PwC provided their advice, the
Committee is satisfied that such advice has been objective
and independent. During their respective tenures in 2022,
PwC and WTW have provided independent commentary on
matters under consideration by the Committee and updates
on market practice and legislative requirements.
The Committee also reviewed the potential for conflicts of
interest and judged that there were appropriate safeguards
against such conflicts. WTW’s and PwC’s fees for advice
during that period, which were charged on a time and
materials basis, were £4,000 and £162,945 respectively.
The Committee is satisfied that these fees did not
compromise either firm’s independence.
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.
2022 AGM voting
Details of voting levels in respect of our Remuneration
arrangements are set out below.
Total votes
cast (billion)
Total votes
for (%)
Total votes
against (%)
Votes
withheld
(million)
2022 AGM
Remuneration report
3.6
91.05
8.95
12.3
Remuneration policy
3.6
61.76
38.24
13.3
Service 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, with the exception
of Julie Brown, whose contract will be available on gsk.com
following her appointment. 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
Julie Brown
25.09.22
01.05.23
n/a
The Non-Executive Directors have letters of appointment,
which are available to view at the company’s registered office.
Each Non-Executive Director is expected to serve on the Board
until the end of the AGM following the third anniversary of their
appointment. 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 FRC’s
UK Corporate Governance Code, subject to annual re-election.
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GSK Annual Report 2022
Annual report on remuneration continued
Committee focus during 2022
Items discussed
Remuneration policy
The Committee sets the Remuneration policy for
shareholder approval and then determines the
remuneration of the Executive Directors, the Chair and
other corporate officers in line with that policy.
–
Prepared and agreed the proposed 2022 Remuneration policy
–
Remuneration impact of Consumer Healthcare demerger
–
Shareholder and advisory body engagement on new Remuneration
policy. See page 133 for further details
–
Review and consideration of shareholder and proxy adviser
feedback
–
Amendments to the proposed Remuneration policy following
careful consideration of shareholder feedback
–
Continued engagement with shareholders
Salary review
The Committee periodically reviews and considers the
remuneration environment for Executive Directors and GLT
and approves, when appropriate, annual adjustments as
necessary having regard to performance, market
positioning and the remuneration of the wider workforce.
–
Executive Director and GLT benchmarking, competitiveness and
GSK comparator groups
–
GLT and Company Secretary salary review and recommendations
for 2022
–
Executive Director salary review and recommendations for 2023
–
Setting remuneration for Julie Brown, the new CFO
–
Review of company Chair’s fee
Annual Bonus
The Committee is responsible for setting specific
performance measures for the Annual Bonus and for
assessments of performance against these measures.
–
CEO, Executive Directors and GLT 2021 bonus recommendations
and 2022 CEO and Executive Directors’ bonus objectives
–
Proposed new Annual Bonus performance measures aligned with
June 2021 Investor Update commitments
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).
–
LTI performance outcomes and award vesting for the CEO,
Executive Directors, GLT and below
–
Confirmation of LTI grants for the CEO, Executive Directors, GLT
and below
–
Proposed new performance conditions aligned with June 2021
Investor Update commitments
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.
–
Remuneration considerations and Committee programme for 2022
–
Review of Terms of Reference
–
Committee evaluation annual review
–
2021 Remuneration report
–
Confirmation of 2022 Group Budget for remuneration purposes
–
AGM and Remuneration report feedback, the external
remuneration environment and performance target disclosure for
incentive plans
–
2022 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
–
Remuneration adviser tender process
Remuneration governance
continued
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Annual report on remuneration continued
Chair 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’s fee was set at £700,000 per annum, nearly four years ago in September 2019 when he was first appointed to the
Board. It has remained unchanged since that time. After a review of independently sourced data by the Committee in January
2023 it was agreed that it was appropriate to increase his fees by £35,000 to £735,000 from 1 January 2023 – a 5% increase from
the rate originally set in 2019.
During 2022 the Chair invested approximately 25% of his pre-tax fees in notional shares under the GSK NED share allocation plan
(NED plan). Since September 2022 he invests approximately 25% of his net fees in the purchase of GSK shares.
2022 Non-Executive Directors’ fees
The Non-Executive Directors’ fees that applied during 2022 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 and Workforce Engagement Director
£40,000
Science Committee members undertaking significant additional responsibilities on behalf of GSK to support R&D
Up to £200,000
Non-Executive Director undertaking intercontinental travel to meetings
£7,500 per meeting
Standard annual fee for Non-Executive Directors
The standard Non-Executive Director annual fee was last increased in 2020. Following a review of independently sourced data
and recognising the ever-increasing workload for Non-Executive Directors it was agreed that it was appropriate to increase the
standard annual fee by £3,800 (4%) from £95,000 to £98,800 per annum from 1 January 2023.
With a view to further simplicity, creating greater transparency of the overall standard Non-Executive Director fee and based on
review of independent data, going forward the intercontinental travel allowance of £7,500 per meeting will be added to the
standard fee. Ordinarily, Non-Executive Directors are expected to travel overseas to attend two meetings per year and so can
expect to receive two travel allowance payments totalling £15,000. The Chair does not receive this allowance. This amount will
now be added to the Non-Executive Director standard fee from 1 January 2023 bringing the total standard fee to £113,800.
Non-Executive Director Share Ownership Requirement
Following approval of the new Remuneration policy at the last AGM, in July 2022 it was agreed to implement a minimum Non-
Executive Director share ownership requirement (SOR) of at least one times the annual standard fee (or the Chair’s fee) to be
maintained until after retirement from the Board. The Chair, non-US based Non-Executive Directors and newly appointed
Non-Executive Directors commenced purchasing shares or ADS in the market towards their new Non-Executive Director SOR
from September 2022. US Non-Executive Directors began purchasing ADS towards their SOR from 1 January 2023.
Shareholder approval will be sought at the AGM for an administrative amendment to the Non-Executive Director section of the
Remuneration policy to allow the notional shares or ADS previously allocated under the Non-Executive Director plan to be
delivered to the Chair and Non-Executive Directors at such time as the Committee and Board considers appropriate after any
applicable tax withholding. This would be subject to the Chair and Non-Executive Directors undertaking to hold these shares or
ADS until they retire from the Board. This change will not only give the company greater operational flexibility, it will also reduce
the administrative burden of operating the Non-Executive Director plan, and will ensure that the Chair and Non-Executive
Directors directly maintain a meaningful and prudent level of investment which closer aligns their interests with shareholders.
The company does not expect to make any significant changes to the fee structure for Non-Executive Directors during the
remainder of the 2022 Remuneration policy period.
Non-Executive Directors’ fees
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GSK Annual Report 2022
Annual report on remuneration continued
2022 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 NED plan are set out on page 155. Non-Executive Directors fees 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 2022. Non-Executive Directors fees were converted to US Dollars using an exchange rate of $1.3481 in 2022. 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 and in fulfilling their role as Non-Executive Directors.
Non-Executive Directors’
emoluments (000) (audited)
2022
2021
Fixed fees
Fixed fees
Cash
Shares/ADS
Benefits
Total pay
Cash
Shares/ADS
Benefits
Total pay
Sir Jonathan Symonds
£525
£175
£10
£710
£525
£175
£3
£703
Elizabeth McKee Anderson
$35
$8
–
$43
–
–
–
–
Charles Bancroft
–
$287
$10
$297
–
$210
$5
$215
Dr Hal Barron
$150
$16
$11
$177
–
–
–
–
Dr Anne Beal
$138
$46
$15
$199
$62
$21
–
$83
Dr Hal Dietz
$174
$58
$2
$234
–
–
–
–
Dr Jesse Goodman
$182
$61
$31
$274
$164
$55
$23
$242
Urs Rohner
£112
£31
£23
£166
£101
£34
£11
£146
Dr Vishal Sikka
–
$58
–
$58
–
–
–
–
Retired Directors
Vindi Banga
(1)
£65
£22
£4
£91
£109
£36
£1
£146
Dame Vivienne Cox
(1)
£55
£18
£1
£74
£101
£34
£1
£136
Lynn Elsenhans
(1)
$74
$25
$23
$122
$134
$45
$5
$184
Dr Laurie Glimcher
(2)
–
$136
$20
$156
–
$165
$13
$178
(1)
Retired from the Board on 18 July 2022.
(2)
Retired from the Board on 13 October 2022.
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Annual report on remuneration continued
Executive Directors’ interests in shares
The interests of the Executive Directors of the company in office during 2022 and their persons closely associated (PCA) are
shown in the table below:
As at 31 December 2022
Unvested share plan interests
Total directors’ interests
Beneficial
interests
Not subject to performance
Subject to
performance
3 March 2023
(1)
31 December 2022
(1)
Shares/ADS
(2)
Shares/ADS
(3,7)
Options
(4,7)
Shares/ADS
(5)
Shares
Emma Walmsley
1,503,484
1,334,155
493,081
656,084
184,990
1,550,844
Iain Mackay
471,595
284,967
–
157,965
127,002
783,978
ADS
Dr Hal Barron
552,499
547,374
306,004
241,370
–
348,459
1)
Total directors’ interests
includes beneficial interests and unvested share plan interests not subject to performance. For Emma Walmsley and Iain
Mackay, the balance as at 3 March 2023 includes shares/ADS awarded in 2020 under the PSP and the DABP which vested in February 2023 less
those sold to satisfy tax liabilities on the vested amounts where relevant. ADS awarded in 2020 under the PSP and the DABP to Dr Hal Barron will
not vest until August 2023 in accordance with the terms of the Executive and Senior Management Recoupment Policy. Executive Directors’
shareholdings against their SOR are outlined on page 148.
2)
Beneficial interests
includes shares/ADS held by the Executive Directors and their PCAs. For Emma Walmsley, this includes 2,166 shares purchased
through the GSK Share Reward plan. Iain Mackay does not currently participate in the Share Reward plan. As a US employee, Dr Hal Barron was
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 these plans can be found on page 138.
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. 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). This figure excludes 790 options held by Emma Walmsley under the GSK Share Save plan.
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. As UK employees, bonus deferrals under the DABP are
granted as nil-cost options to Emma Walmsley and Iain Mackay.
DABP (Bonus deferrals)
3 March 2023
31 December 2022
1 January 2022
Shares
Emma Walmsley
251,541
184,990
176,801
Iain Mackay
164,988
127,002
71,972
ADS
Dr Hal Barron
104,563
103,600
101,801
8)
Options exercised in 2022:
The following table sets out details of options (including nil-cost options under the DABP) exercised during 2022 by
Executive Directors. Iain Mackay did not exercise any options during the year.
Type of award
Date of grant
Number of shares
under option
Date of
exercise
Grant price
Market price
at exercise
Gain on exercise
Emma Walmsley
Deferral award – DABP
13.02.2019
72,296
14.02.22
£0.00
£16.10
£1,164,000
Share Save
29.11.2018
744
25.02.22
£12.09
£15.82
£2,775
In respect of the nil-cost options awarded in 2019 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 2018. The number of shares under option includes the initial
award amount together with reinvested dividends accrued to the date of exercise.
In respect of options under the GSK Share Save plan, the remuneration receivable by an Executive Director is calculated on the date that the
options first vest. The remuneration is the difference between the amount the Executive Director is required to pay to buy the shares and the total
value of the shares on the vesting date. If the Executive Director chooses not to exercise the options on the vesting date, any subsequent increase
or decrease in the amount realised will be due to movements in the share price between the vesting date and the date of exercise. This increase or
decrease in value is the result of an investment decision by the Executive Director and, as such, is not recorded as remuneration.
Directors’ interests in shares (audited)
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GSK Annual Report 2022
Annual report on remuneration continued
Non-Executive Directors’ interests in shares
The interests of the Non-Executive Directors of the company in office during 2022 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
3 March
2023
31 December
2022
or date of
retirement
Beneficial
interests at
31 December
2022
or date of
retirement
(2)
Dividends
reinvested
after
year end
31 December
2022 or
date of
retirement
Adjustments
for share
consolidation
(4)
Elected &
allocated
during
the year
(3)
1 January
2022
Shares
Sir Jonathan Symonds
69,045
68,316
33,925
728
34,391
(8,598)
15,273
27,716
Vindi Banga
(5)
–
93,391
57,440
–
35,951
(8,987)
12,266
32,672
Dame Vivienne Cox
(5)
–
12,252
–
–
12,252
(3,062)
4,767
10,547
Urs Rohner
19,710
19,317
798
392
18,519
(4,630)
6,722
16,427
ADS
Elizabeth McKee Anderson
–
–
–
–
–
–
–
–
Charles Bancroft
15,804
15,564
–
240
15,564
(2,617)
10,715
7,466
Dr Anne Beal
1,800
1,777
–
23
1,777
(233)
1,507
503
Dr Hal Barron
552,499
547,374
306,004
–
–
–
–
–
Dr Hal Dietz
1,593
1,575
–
18
1,575
(164)
1,739
–
Lynn Elsenhans
(5)
–
47,692
800
–
46,892
(11,722)
14,631
43,983
Dr Laurie Glimcher
(6)
–
27,408
–
–
27,408
(6,430)
11,186
22,652
Dr Jesse Goodman
12,614
12,375
–
238
12,375
(2,846)
4,999
10,222
Dr Vishal Sikka
1,147
1,147
1,147
–
–
–
–
–
1)
Total directors’ interests
include beneficial interests and any notional shares/ADS received as all or part of their fees under the NED plan.
Dividends received on notional shares/ADS under the NED Plan during the year and in January 2023 were converted into notional shares/ADS
as at 12 January 2023.
2)
Beneficial interests
includes shares/ADS held by the Non-Executive Directors and their PCAs.
3)
Notional shares/ADS allocated during the year
under the NED plan includes (i) dividends reinvested during the year; and (ii) the reinvestment, on
demerger, of an amount equivalent to the value of the Haleon plc shares/ADS attributable to the Non-Executive Directors’ notional allocation of
GSK plc shares/ADS (see note 4 below).
4)
To align as closely as possible the treatment of Non-Executive Directors in respect of their NED plan allocations with those of shareholders on the
demerger and share consolidation, NED plan allocations were adjusted as follows: (a) an amount equivalent to the value of the Haleon plc shares/
ADS attributable to the Non-Executive Directors’ notional holding of GSK plc shares/ADSs was reinvested so as to increase those notional
allocations of GSK plc shares/ADS on 18 July 2022; and (b) all notional GSK share/ADS allocations in the NED plan, including allocations arising
under (a), were consolidated at a ratio of four new notional GSK shares/ADS for every five notional GSK shares/ADS held as at 18 July 2022.
5) Vindi Banga, Dame Vivienne Cox and Lynn Elsenhans all retired from the Board on 18 July 2022.
6) Dr Laurie Glimcher retired from the Board on 13 October 2022.
Directors’ interests in shares (audited)
continued
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Annual report on remuneration continued
2022 percentage change
2021 percentage change
2020 percentage change
Salary/fee
%
Benefits
%
Bonus
%
Salary/fee
%
Benefits
%
Bonus
%
Salary/fee
%
Benefits
%
Bonus
%
UK employees
(1)
3.0
2.26
44.81
2.0
0.0
4.85
2.5
0.0
1.1
Executive Directors
(2,3)
Emma Walmsley
3.0
(2.2)
38.2
2.0
(5.0)
94.6
8.0
(26.6)
(33.4)
Iain Mackay
3.0
20.2
32.4
2.0
56.1
94.2
5.6
11.5
(31.6)
Dr Hal Barron
(4)
(29.2)
(26.2)
(66.2)
5.4
150.0
100.1
2.5
(91.2)
(34.9)
Non-Executive Directors
(2,5,6)
Sir Jonathan Symonds
0.0
233.3
–
0.0
50.0
–
201.7
0.0
–
Elizabeth McKee Anderson
–
–
–
–
–
–
–
–
–
Charles Bancroft
36.7
100.0
–
156.1
–
–
–
–
–
Dr Hal Barron
(4)
–
–
–
–
–
–
–
–
–
Dr Anne Beal
121.7
–
–
–
–
–
–
–
–
Dr Hal Dietz
–
–
–
–
–
–
–
–
–
Dr Jesse Goodman
11.0
34.8
–
(5.6)
0.0
–
(12.5)
(65.2)
–
Urs Rohner
5.9
109.1
–
(5.6)
175.0
–
16.3
(69.2)
–
Dr Vishal Sikka
–
–
–
–
–
–
–
–
–
Retired Non-Executive Directors
(2,5,6)
Vindi Banga
(40.0)
300.0
–
(4.6)
(50.0)
–
23.6
(50.0)
–
Dame Vivienne Cox
(45.9)
0.0
–
(5.6)
(50.0)
–
55.4
(75.0)
–
Lynn Elsenhans
(44.7)
360.0
–
(7.3)
(75.0)
–
(12.3)
(73.3)
–
Dr Laurie Glimcher
(17.6)
53.8
–
(8.3)
(61.8)
–
(18.2)
(55.3)
–
(1)
This table is provided in accordance with Schedule 8 of The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019. The UK
employee population was considered to be the most relevant comparison as it most closely reflects the economic environment encountered by the majority of the
Executive Directors.
(2)
Percentage changes have been calculated based on the 2022 Total remuneration table on page 136 for Executive Directors and the 2022 Total fees table on page 153 for
Non-Executive Directors. Increases in benefits for Non-Executive Directors are due to increased travel costs following the return to in-person meetings post-COVID-19.
(3)
Further information on Executive Directors’ salary and benefits can be found on page 137.
(4)
Dr Hal Barron transitioned to a Non-Executive Director role on 1 August 2022.
(5)
Fees of Non-Executive Directors include fees received as cash and in the form of shares or ADS under the terms of the NED plan.
(6)
See page 123 for details of Non-Executive Director changes during the year.
Directors and Senior Management
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 2022, the following table sets out aggregate remuneration for the group for the periods during
which they served in that capacity.
Remuneration for 2022
£
Total compensation paid
31,807,039
Aggregate decrease in accrued pension benefits (net of inflation)
(19,550)
Aggregate payments to defined contribution schemes
1,739,677
During 2022, 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 2022
Shares
ADS
Shares
ADS
Performance Share Plan
1,973,531
52,484
317,026
32,823
Deferred Investment Awards
(1,2)
–
–
17,352
419
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.
Percentage change in remuneration of Directors
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Annual report on remuneration continued
At 3 March 2023, 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 pages 262 to 263.
Interests at 3 March 2023
Shares
ADS
Owned
2,533,721
409,464
Unexercised options
3,160
–
Deferred Annual Bonus Plan
842,660
118,293
Performance Share Plan
7,084,743
617,307
Deferred Investment Awards
(1,2)
280,056
8,968
Share Value Plan
(2)
68,345
5,740
1)
Notional shares.
2)
Executive Directors are not eligible to receive Deferred Investment Awards or participate in the Share Value Plan.
Directors and Senior Management
continued
Fees in respect of Executive Directors’ external appointments
CEO
Emma Walmsley is an independent non-executive director of Microsoft Corporation. During 2022, she received $360,208, of
which $125,208 was delivered as cash and $235,000 as stock options under the Microsoft Corporation’s Deferred
Compensation Plan for its non-employee directors.
CFO
On 11 July 2022, Iain Mackay became an independent non-executive director of National Grid plc. During 2022, he received
£33,330 in fees which was delivered as cash.
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.
Whilst compiling and before finalising the Remuneration policy, the Committee consulted extensively with 40 shareholders
representing 45% of our issued share capital, to ensure its full understanding of their views on the policy and transparency and
clarity of the proposals and how they would be implemented. 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 arrangements, in addition to operating malus and
clawback provisions. The Committee retains discretion to adjust award outcomes (to zero if appropriate) should it consider 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, strategy and culture continue to be directly reflected in the performance conditions set under the Annual Bonus
and Long-term incentive. In particular, we have introduced an ESG measure in both our short- and long-term plans. These
currently reinforce our diversity, equity and inclusion aspirations for 2025, 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 Committee believes the Remuneration policy has been operated as intended in terms of company performance and
quantum during 2022.
Payments to past Directors (audited)
No payments were made to past Directors in 2022 with the exception of the value of the deferred bonus and accrued dividends made to
Simon Dingemans, as described on page 142 of the 2021 Annual Report.
Payments for loss of office (audited)
No loss of office payments were made during 2022.
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The company’s Remuneration policy was approved on 4 May 2022 at GSK’s Annual General Meeting and has operated as intended
since its approval. The full policy is available at gsk.com in the Investors section. Two administrative amendments to the company’s
Remuneration policy are being proposed for binding shareholder approval at GSK’s 2023 Annual General Meeting, as described on
page 163.
2022 Remuneration policy summary
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 plans), 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
Executive Director Remuneration policy
Salary
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
Levels are set to recruit and retain high calibre individuals to execute the business strategy.
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2022 Remuneration policy summary continued
Executive Director Remuneration policy
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 of the 2021 Annual Report.
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
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.
Pension
Pension arrangements provide a competitive level of retirement income.
(1)
In the event of any change to the plans operated in the US, a similar treatment
would be provided under any successor arrangements introduced within the market
(2)
Less bonus deferred under the DABP
(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
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2022 Remuneration policy summary continued
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 of the 2021 Annual Report.
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)
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.
Executive Director Remuneration policy
continued
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 2021
Annual report on remuneration.
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2022 Remuneration policy summary continued
Executive Director Remuneration policy
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.
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.
Since approval of the Policy in May 2022, the Board has
evolved its approach to workforce engagement. Further details
are provided on page 115.
In the wider organisation, we have aligned our performance
and reward systems with our Innovation, Performance and
responsible business priorities and with 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.
Differences between Remuneration policy for Executive Directors and other employees
For details of our policy on clawback and malus, approach to recruitment remuneration, loss of office and termination payments,
please refer to the full 2022 Remuneration policy report on pages 144 to 152 of the 2021 Annual Report, available on gsk.com in
the Investors section
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Element
Purpose and link to strategy
Operation
Chair’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) were required to invest at
least 25% of their total net fees in shares or ADS of the company. The company has since
replaced the 25% minimum investment requirement with a minimum share or ADS ownership
requirement of at least one times the Non-Executive Director’s (or Chair’s) gross annual standard
fees to be retained until their retirement from the Board. An administrative amendment to this
section of the Remuneration policy is proposed for binding shareholder approval at the 2023
AGM as described on page 163.
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, Scientific 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
Approach to recruitment remuneration
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
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.
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Proposed amendments
Two administrative amendments to the company’s 2022
Remuneration policy (Policy), which was approved at last year’s
AGM, are being proposed as ordinary resolutions for binding
shareholder approval at the AGM on 3 May 2023. The Policy
is subject to renewal in respect of remuneration for 2025. Given
that these changes are purely administrative, a full consultation
with employees was not undertaken on these amendments.
Non-Executive Directors’ minimum share
ownership requirement
The Non-Executive Directors section of the 2022 Policy
includes a requirement for Non-Executive Directors (including
the Chair) to invest a minimum of 25% of their net basic fees in
shares or ADS of the company. The Policy also states that,
should the company replace this requirement, any shares or
ADS previously acquired in accordance with this 25% minimum
investment requirement would: (i) continue to be held under
those previous arrangements, (ii) count towards any expected
minimum ownership requirement; and (iii) be delivered or
released following the Non-Executive Director’s (or Chair’s)
retirement from the Board.
The company has since replaced the 25% minimum investment
requirement, as set out in the 2021 Annual Report, with a
minimum share or ADS ownership requirement of at least one
times the Non-Executive Director’s (or Chair’s) gross Annual
Standard Fees to be retained until their retirement from the
Board.
Shareholder approval will be sought to amend the Non-
Executive Directors section of the Policy to allow the shares or
ADS acquired under the previous 25% minimum investment
requirement to be delivered or released to the Non-Executive
Director (or Chair) at such time as the Board (excluding that
Non-Executive Director or the Chair) considers appropriate
(subject to any applicable tax withholding), rather than
continue to be held under the previous arrangements.
This is subject to the Non-Executive Directors (or the Chair)
undertaking to the company to hold such shares or ADS in
the company until they retire from the Board. This will give
the company greater operational flexibility, and reduce the
administrative burden, in the implementation of the new
minimum share ownership requirement whilst ensuring that the
Non-Executive Directors (and the Chair) continue to maintain a
meaningful and prudent level of investment which aligns their
interests with shareholders.
Clawback and malus
Shareholder approval will be sought to amend the Clawback
and malus section of the Policy to expressly refer to the
company’s ability to update its clawback policies, and to make
disclosures in relation to clawback, in each case as required by
applicable regulatory requirements, including the recently
adopted Securities and Exchange Commission (SEC) rules
(and the New York Stock Exchange (NYSE) listing standards
implementing those rules) on clawback in the event of an
accounting restatement.
The SEC adopted new rules, in late 2022, which require the
NYSE (amongst others) to adopt new listing standards that
require a listed company to clawback erroneously awarded
incentive-based compensation whenever it is required to
prepare an accounting restatement that corrects an error in a
previously issued financial statement, or that would result in a
material misstatement if the error were corrected in the current
period or left uncorrected in the current period. These new
listing standards are expected to become effective in late
2023. GSK shares are listed and traded on the NYSE in the
form of ADS and GSK will, as a result, be subject to the new
listing standards which are expected to require clawback in
circumstances that are wider than those currently provided for
by the company’s policies. The related SEC rules will also
require GSK to make certain disclosures in connection with its
clawback policy in its annual report on Form 20-F (including
filing a copy of the clawback policy with the SEC).
The proposed changes to the ‘Clawback and malus’ element of
the Policy are intended to ensure clarity by expressly referring
to the company’s ability to update its clawback policies, and to
make disclosures in relation to clawback, in each case as
required by applicable regulatory requirements (including the
SEC and NYSE requirements). The Committee will update its
current recoupment policies as required to meet the new NYSE
listing standards and the related SEC disclosure requirements
once they become effective.
Administrative amendments to the 2022 Remuneration policy
Proof 6 (e) 08.03.2023 at 1 pm
164
GSK Annual Report 2022
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.
Operation and scope of Remuneration policy
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 181. 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
9 March 2023
Basis of preparation
Proof 6 (e) 08.03.2023 at 1 pm
In this section
Directors’ statement of responsibilities
166
Independent Auditor’s report
168
Financial statements
182
Notes to the financial statements
186
Financial statements of GSK plc
prepared under UK GAAP
268
Financial
statements
165
GSK Annual Report 2022
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
166
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) (Financial
Reporting Standard 101 Reduced Disclosure Framework).
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.
In preparing the Group financial statements, International
Accounting Standard 1 requires that directors properly select
and apply accounting policies; present information, including
accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information; provide
additional disclosures when compliance with the specific
requirements in IFRS Standards are insufficient to enable users
to understand the impact of particular transactions, other
event and conditions on the entity’s financial position and
financial performance; and make an assessment of the
company’s ability to continue as a going concern.
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.
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 2022, comprising principal statements and
supporting notes, are set out in the ‘Financial statements’
on pages 182 to 267 of this report. The parent company
financial statements for the year ended 31 December 2022,
comprising the balance sheet and the statement of changes in
equity for the year ended 31 December 2022 and supporting
notes, are set out on pages 268 to 272.
The responsibilities of the auditor in relation to the financial
statements are set out in the Independent Auditor’s report on
pages 168 to 181.
The financial statements for the year ended 31 December 2022
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 corporate
and financial information included on the company’s website.
Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Each of the current Directors, whose names and functions are
listed in the Corporate Governance section of the Annual
Report 2022 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;
–
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; and
–
the annual report and financial statement, taken as a whole,
are fair, balanced and understandable and provide the
information necessary for shareholders to assess the
company’s position and performance, business model
and strategy.
Directors’ statement of responsibilities
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GSK Annual Report 2022
167
Governance and remuneration
Strategic report
Financial statements
Investor information
Directors’ statement of responsibilities continued
Disclosure 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 66 to 95
and pages 55 to 61 contain information on
the performance of the Group, its financial position, cash flows,
net debt position, borrowing facilities and climate related
risks. Further information, including Treasury risk management
policies, exposures to market and credit risk and hedging
activities, is given in Note 44 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 125.
The 2018 UK Corporate Governance Code
The Board considers that GSK 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 97 to
131. 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 2022,
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
Chair
9 March 2023
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GSK Annual Report 2022
168
Independent Auditor’s report to the members of GSK plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
–
The financial statements of GSK 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 2022 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 2022;
–
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 2022;
–
Statement of changes in equity for the year then ended;
and
–
Notes A to M 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 124 and the disclosure provided in
Note 8 regarding fees payable to the Group’s auditor.
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 the revised
operating segments (commercial operations, research &
development and consumer healthcare), in addition to
partners responsible for the component and legal entity
audits in each country. These segment partners met
regularly with senior segment management to understand
the strategy, performance and other matters which arose
throughout the year that could have impacted the financial
reporting. Our risk assessment and audit planning included
consideration of the separation of the consumer healthcare
business from the Group on 18 July 2022. 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;
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169
Governance and remuneration
Strategic report
Financial statements
Investor information
Independent Auditor’s report continued
–
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 in-scope for the
Group audit to enable us to develop 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, which include
in-scope entities in the consumer healthcare segment prior to
demerger: Australia; Belgium; Canada; China; France;
Germany; Italy; Japan; Spain; 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. We have
planned and performed site visits of components where
overseas travel restrictions allowed. To satisfy ourselves that
our oversight and supervision was appropriate we performed
reviews of audit working papers, 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% (2021-1.8%) 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, including in the consumer
healthcare segment pre-demerger, and entity level controls at
the Group level. Common systems allowed for relevant IT
controls to be tested centrally across all components. The
consumer healthcare demerger impacted relevant IT systems
prior to the demerger which was reflected in the scope of our
IT testing. 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 79% (2021: 73%) of the Group’s
revenue, 91% (2021: 76%) of the Group’s profit before tax and
86% (2021: 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
55 to 62 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.
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
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GSK Annual Report 2022
170
Independent Auditor’s report continued
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
£210 million
(2021: £275 million)
£52.5 million
(2021: £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 £210 million. Materiality
reduced compared to the prior
year predominantly due to the
lower benchmarks resulting from
the Consumer Healthcare
demerger. We have removed the
impact of the Gilead Settlement
of £924 million received in Q1
2022 in determining our profit
before tax benchmark as this is a
nonrecurring item which it is not
reflective of the underlying trade
and due to its size would distort
materiality.
The below benchmarks are from
continuing operations only as
these were considered most
relevant to the users of the
financial statements.
Metric
%
Statutory profit before tax
3.7%
Adjusted profit before
tax*
2.9%
Revenue
0.7%
Net cash inflow from
operating activities
3.2%
* 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. The
adjusted profit before tax,
Revenue and Net cash inflow from
operating activities, have been
used as supporting benchmarks.
The component materiality
allocated to the in-scope
components ranged between £40
million and £125 million.
The range of materiality allocated
across components (not including
the parent company) in the audit
of the prior year’s Group financial
statements was between £83
million and £193 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 2022 audit
(2021: 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 (2021: £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,
including the impact of changes in interest rates on
profitability;
–
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.
Report on the audit of the financial statements
continued
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Governance and remuneration
Strategic report
Financial statements
Investor information
Independent Auditor’s report continued
Key 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
2022 the liability was valued at £5,890 million.
We identified the ViiV CCL as a key audit matter because of
the significant 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 impact of healthcare
reform and subsequent sales volumes and pricing. There is
incremental challenge in forecasting sales associated with
recently launched products due to the lack of historical
actual data. The forecasts also required significant audit
effort to perform appropriate audit procedures to challenge
and evaluate the reasonableness of those forecasts.
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 29, 33 and 44. 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 challenged the
reasonableness of these, 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;
–
Challenged 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 considering expected changes in
payer policy and healthcare reform implications;
–
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 nine analysts and considered sales
forecasts on both a total ViiV basis and an individual product
basis, assessing against identified contradictory 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 appropriately reflect trends in the overall
HIV treatment and prevention markets including the impacts of
competition, healthcare reform and a predicted shifts towards
long-acting injectable products.
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.
We have included two additional key audit matters in 2022: the consumer healthcare demerger and the valuation of the contingent
liabilities and significant legal proceedings. This reflects the additional audit effort required this year in relation to these.
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
Report on the audit of the financial statements
continued
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 accounting.
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Report 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 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 US Commercial Operations in 2022 £15,272 million of RAR
deductions were made to gross revenue of £29,814 million,
resulting in net revenue of £14,542 million. The balance sheet
accrual at 31 December 2022 for US Commercial Operations
amounted to £5,855 million.
The four 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 Commercial Operations 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 29. 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 competition and
macroeconomic trends;
–
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;
–
Evaluated 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, in accordance with the
requirements of IFRS 15 Revenue from contracts with customers
to limit the risk of a significant reversal of revenue.
Independent Auditor’s report continued
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Governance and remuneration
Strategic report
Financial statements
Investor information
Report 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 2022, the Group held £13,663 million of
other intangible assets (including licenses, patents,
trademarks, and trade names, but excluding goodwill and
computer software). This includes £2,964 million of
intangible assets acquired as part of business combinations
with Sierra Oncology Inc and Affinivax Inc during the year.
During 2022, impairment charges of £330 million were
recorded.
An individual intangible asset, or an intangible asset which
forms part of a cash-generating unit, is impaired when its
carrying amount exceeds its recoverable amount. The
recoverable amount of these other intangible assets relies
on certain assumptions and estimates of future trading
performance which create estimation uncertainty.
Future trading performance of intangible assets includes
key assumptions such as sales pricing, volume, growth rates
and probability of technical and regulatory success of
ongoing clinical trials. This includes assumptions on timing
of cash flows determined by anticipated launch year, peak
year sales, subsequent sales erosion due to generic product
competition and profit margin levels. In addition, due to the
impact of uncertainty driven by ongoing global
macroeconomic volatility, the valuation of intangible assets
will also be affected by discount rate assumptions made by
the Group.
We identified the valuation of other intangible assets as a
key audit matter due to the inherent judgements involved in
estimating future cash flows. Auditing such assumptions and
estimates required extensive audit effort to challenge and
evaluate the reasonableness of forecasts and judgements.
The disclosures relating to other intangible assets, including
those acquired as part of business combinations, are
included in Note 20 and 41 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 pricing, volume, growth rates and
probability of technical and regulatory success, profit margin
levels, and discount rates used in the assessment in the
valuation of other intangible assets:
–
Inquired with the key individuals from the corporate
development team, commercial forecasting leads, and key
personnel involved in the assets research and development
process to discuss and evaluate the Group’s evidence to
support the future pricing, volume, sales growth rates and
probability of regulatory and technical success;
–
Evaluated the key inputs and assumptions applied in estimating
sales and profit margin forecasts, including benchmarking of
forecasts against external market data. This included
independent market research of therapeutic area price points,
price growth rates, and anticipated competitor market
landscape, currently and at the time of forecast regulatory
approval, plus assessment of any sources of contradictory
evidence;
–
Inspected independent research and literature to consider
corroborative and contradictory evidence to assess
assumptions on probability of technical and regulatory success;
–
Compared the forecast sales and profit margin levels to the
Plan data (asset by asset internal forecasts) approved by the
GSK Leadership Team and the Board of Directors, where the
in-development intangible asset is forecast to launch within the
next 3-year period;
–
Assessed the historical accuracy of sales forecasts by
performing retrospective reviews across marketed assets within
the business;
–
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;
–
Engaged Internal Fair Valuation Specialists (IFVS) to assess the
reasonableness of discount rates and valuation methodology
applied; 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 probability of technical and
regulatory success, launch dates plus other revenue and cost
assumptions number of assumptions such as the revenue
growth rates and profit margins.
Key observations communicated to the Audit & Risk Committee
For those intangible assets which were acquired during the
period as part of the Sierra Oncology Inc and Affinivax Inc
business acquisition, although we identified some control
deficiencies we concluded that the complex assumptions
underpinning the fair value of intangible assets reflected in
the purchase price allocations were reasonable and in
accordance with IFRS.
For those intangible assets in-development and subject to
impairment reviews we concluded that the judgements made
by the directors were reasonable and in accordance with IFRS.
We are satisfied that the controls over intangible assets are
designed and operating effectively or control deficiencies
identified were mitigated by compensating controls.
Independent Auditor’s report continued
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Report 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 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 2022, the Group has recorded provisions of
£551 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.
Independent Auditor’s report continued
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Governance and remuneration
Strategic report
Financial statements
Investor information
Key audit matter description
How the scope of our audit responded to the key audit matter
Consumer Healthcare Demerger
As set out in Note 41, on 18 July 2022, GSK plc separated its
Consumer Healthcare business from the GSK Group to form
Haleon, an independent listed company. The separation
was effected by way of a demerger of 80.1% of GSK’s 68%
holding in the Consumer Healthcare business to GSK
shareholders. GSK retained 13.5% of Haleon (7.5% are held
by Scottish Limited Partnership structures (SLPs)) which are
recognised as an equity investment as set out in Note 22.
The Group derecognised net assets and liabilities of £12.9
billion and recognised a gain on demerger of £10.1 billion.
The Consumer Healthcare trading results to the demerger
date have been presented as a part of discontinued
operations and the comparative results have been restated
on a consistent basis. At the demerger date the assets and
liabilities of the Consumer business have been
derecognised from the balance sheet, with the difference
between the value of the net assets and the fair value of
the demerged business recognised in the consolidated
income statement as a gain on demerger. The cumulative
exchange differences arising on translation of those
Consumer Healthcare foreign currency net assets,
previously included in other comprehensive income, have
also been recognised in the consolidated income
statement.
We identified the demerger of Consumer Healthcare as a
key audit matter because of the significant estimates
related to calculating the gain on demerger and
remeasuring the retained stake upon demerger, assessing
the perimeters of the demerged business, validating the
cumulative exchange differences arising on translation of
the foreign currency net assets of the divested businesses,
evaluating the Group’s tax treatment of the demerger and
assessing the impact on relevant IT systems prior to the
demerger. This required a high degree of auditor judgment
and an increased extent of effort, including the need to
involve our technical accounting, tax, and IT specialists,
when performing audit procedures.
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 Consumer Healthcare demerger:
–
Consulted with technical accounting specialists to evaluate
the entity’s accounting conclusions in respect of the relevant
accounting standards for the demerger steps including:
–
the presentation of Consumer Healthcare results as a part
of discontinued operations;
–
the calculation of the gain on demerger; and
–
the retained stake upon demerger.
–
Recalculated the gain on demerger and the fair value of the
Consumer Healthcare business at the demerger date;
–
Tested the accuracy and completeness of the perimeters of
the demerged business by inspecting legal agreements and
recalculating the cumulative exchange differences arising on
translation of the foreign currency net assets;
–
Engaged tax specialists to assess the impact of the
demerger on the Group tax balances;
–
Engaged IT specialists to assess the impact on the relevant
IT systems prior to the demerger of Consumer Healthcare;
and
–
Tested key controls over IT and the reporting of the
Consumer Healthcare Demerger including the review and
approval of the accounting considerations, accuracy and
completeness of transactions to the demerger date, the
cumulative exchange reserve and the adjustments required
in relation to the classification between continued and
discontinued operations.
Key observations communicated to the Audit & Risk Committee
We are satisfied that the Group’s accounting conclusions,
calculation of the gain from demerger and presentation
of discontinued operations in respect of the demerger of
the Consumer Healthcare business are appropriate and in
accordance with IFRS.
Independent Auditor’s report continued
Report on the audit of the financial statements
continued
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Key audit matter description
How the scope of our audit responded to the key audit matter
IT systems that 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
–
Separation activities undertaken across the Technology
environment as part of the GSK Consumer Healthcare
separation programme.
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, including GSK
Consumer Healthcare separation activities; 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 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
Report on the audit of the financial statements
continued
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Governance and remuneration
Strategic report
Financial statements
Investor information
Key audit matter description
How the scope of our audit responded to the key audit matter
Valuation of the contingent liabilities and significant legal
proceedings
The Group operates in an environment where it is subject to
significant legal and administrative proceedings, including
product liability, intellectual property, tax, anti-trust,
consumer fraud and governmental regulations.
The Group is currently exposed to a number of regulatory
and litigation matters. In the current year, the Group
classified the
Zantac
litigation as a significant legal matter
due to the increase in cases. The Group’s provision for these
matters is £218 million at 31 December 2022. Other matters
are disclosed as contingent liabilities where the criteria for
recognising a provision under IAS 37 Provisions, Contingent
Liabilities and Contingent Assets are not met.
We identified contingent liabilities and significant legal
proceedings as a key audit matter because of the
significant judgement required by the Group in determining
whether, under IAS 37, in particular in relation to the
Zantac
matter, as to:
–
Whether the outcome will result in a probable outflow,
particularly where the outcome of litigation is uncertain
and subject to additional court proceedings;
–
The determination of a reliable estimate can be made of
the amounts of the obligation; and
–
The nature and extent of any contingent liabilities and
underlying significant estimation uncertainties disclosed.
Contingent liabilities and Significant legal proceedings are
disclosed in Notes 35 and 47, respectively. The key audit
matter is discussed within the Corporate Governance
section of the Annual Report.
Audit procedures performed
We performed the following audit procedures:
–
Tested the Group’s controls over the completeness of
provisions, the robustness of the provision against the
requirements of IAS 37, the appropriateness of judgements
used to determine a ‘best estimate’ and completeness and
accuracy of data used in the process;
–
Evaluated the assessment of the provisions, associated
probabilities, and potential outcomes in accordance with IAS
37;
–
Evaluated the methodology, data and significant
judgements and assumptions used in the valuation of the
provisions are appropriate in the context of the applicable
financial reporting framework;
–
Inquired with and inspected correspondence from the
Group’s internal and external counsel to assess the litigation
matter and evaluate the Group’s significant judgements and
assumptions;
–
Where no provision was made, we critically evaluated the
Group’s conclusion supportive and contradictory evidence
and the requirements of IAS 37, particularly with respect to
the
Zantac
matter;
–
In respect of the
Zantac
matter, we inspected the evidence
presented in relevant scientific studies and the outcomes of
other product liability litigation in the same jurisdictions
alongside the entity’s assessment of possible outcomes of
each ongoing and future trials; and
–
Evaluated whether the disclosures made in the financial
statements appropriately reflect the facts and critical
accounting judgements.
Key observations communicated to the Audit & Risk Committee
We are satisfied that the estimation of the provisions and
contingent liability disclosures are consistent with the requirements
of IAS 37.
Independent Auditor’s report continued
Report on the audit of the financial statements
continued
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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.
As referenced on page 62, we have provided limited
assurance in accordance with International Standards
for Assurance Engagements 3000 (ISAE 3000) and
Assurance Engagements on Greenhouse Gas
Emissions 3410 (ISAE 3410) issued by the International
Auditing and Assurance Standards Board (IAASB)
over selected metrics.
Independent Auditor’s report continued
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179
Governance and remuneration
Strategic report
Financial statements
Investor information
Other 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 80.
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
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.
Independent Auditor’s report continued
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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.
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.
Independent Auditor’s report continued
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
181
Governance and remuneration
Strategic report
Financial statements
Investor information
Report 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 167;
–
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 64;
–
the directors’ statement on fair, balanced and
understandable Annual Report set out on page 129;
–
the board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on
pages 51 to 54;
–
the section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems set out on pages 125 to 126; and
–
the section describing the work of the audit and risk
committee set out on page 124 to 129.
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 five 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
9 March 2023
Independent Auditor’s report continued
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
182
Consolidated income statement
for the year ended 31 December 2022
Notes
2022
£m
2021
(1)
£m
2020
(1)
£m
Turnover
6
29,324
24,696
24,354
Cost of sales
(9,554)
(8,163)
(7,929)
Gross profit
19,770
16,533
16,425
Selling, general and administration
(8,372)
(7,070)
(7,437)
Research and development
(5,488)
(5,019)
(4,793)
Royalty income
758
417
321
Other operating (expense)/income
7
(235)
(504)
1,463
Operating profit
8
6,433
4,357
5,979
Finance income
11
76
14
32
Finance expense
12
(879)
(769)
(874)
Loss on disposal of interest in associates
13
–
(36)
–
Share of after tax (loss)/profits of associates and joint ventures
(2)
33
33
Profit before taxation
5,628
3,599
5,170
Taxation
14
(707)
(83)
(67)
Profit after taxation from continuing operations
4,921
3,516
5,103
Profit after taxation from discontinued operations and other gains/(losses) from the demerger
3,049
1,580
1,285
Re-measurement of discontinued operations distributed to shareholders on demerger
7,651
–
–
Profit after taxation from discontinued operations
10,700
1,580
1,285
Total profit after taxation for the year
15,621
5,096
6,388
Profit attributable to non-controlling interests from continuing operations
460
200
230
Profit attributable to shareholders from continuing operations
4,461
3,316
4,873
Profit attributable to non-controlling interests from discontinued operations
205
511
409
Profit attributable to shareholders from discontinued operations
10,495
1,069
876
15,621
5,096
6,388
Total profit attributable to non-controlling interests
665
711
639
Total profit attributable to shareholders
14,956
4,385
5,749
15,621
5,096
6,388
Basic earnings per share (pence) from continuing operations
15
110.8p
82.9p
122.4p
Basic earnings per share (pence) from discontinued operations
260.6p
26.7p
22.0p
Total Basic earnings per share (pence)
371.4p
109.6p
144.4p
Diluted earnings per share (pence) from continued operations
15
109.2p
81.8p
120.9p
Diluted earnings per share (pence) from discontinued operations
257.0p
26.4p
21.7p
Total diluted earnings per share (pence)
366.2p
108.2p
142.6p
Consolidated statement of comprehensive income
for the year ended 31 December 2022
Notes
2022
£m
2021
(a)
£m
2020
(a)
£m
Total profit for the year
15,621
5,096
6,388
Other comprehensive income/(expense) for the year
Items that may be subsequently reclassified to continuing operations income statement:
Exchange movements on overseas net assets and net investment hedges
38
113
(339)
(416)
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries and associates
38
2
(25)
36
Fair value movements on cash flow hedges
(18)
5
(19)
Reclassification of cash flow hedges to income statement
14
12
54
Deferred tax on fair value movements on cash flow hedges
9
(8)
(18)
120
(355)
(363)
Items that will not be reclassified to continuing operations income statement:
Exchange movements on overseas net assets of non-controlling interests
38
(28)
(20)
(10)
Fair value movements on equity investments
(754)
(911)
1,346
Tax on fair value movements on equity investments
56
131
(220)
Remeasurement (losses)/gains on defined benefit plans
(786)
940
(164)
Tax on remeasurement losses/(gains) on defined benefit plans
211
(223)
55
Fair value movements on cash flow hedges
(6)
–
–
(1,307)
(83)
1,007
Other comprehensive expense for the year from continuing operations
38
(1,187)
(438)
644
Other comprehensive income for the year from discontinued operations
356
101
326
Total comprehensive income for the year
14,790
4,759
7,358
Total comprehensive income for the year attributable to:
Shareholders
14,153
4,068
6,753
Non-controlling interests
637
691
605
Total comprehensive income for the year
14,790
4,759
7,358
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41) and/or the impact of Share Consolidation (see Note 37).
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
183
Governance and remuneration
Strategic report
Financial statements
Investor information
Consolidated balance sheet
as at 31 December 2022
Notes
2022
£m
2021
£m
Non-current assets
Property, plant and equipment
17
8,933
9,932
Right of use assets
18
687
740
Goodwill
19
7,046
10,552
Other intangible assets
20
14,318
30,079
Investments in associates and joint ventures
21
74
88
Other investments
23
1,467
2,126
Deferred tax assets
14
5,658
5,218
Derivative financial instruments
44
–
18
Other non-current assets
24
1,194
1,676
Total non-current assets
39,377
60,429
Current assets
Inventories
25
5,146
5,783
Current tax recoverable
14
405
486
Trade and other receivables
26
7,053
7,860
Derivative financial instruments
44
190
188
Current equity investments
22
4,087
–
Liquid investments
30
67
61
Cash and cash equivalents
27
3,723
4,274
Assets held for sale
28
98
22
Total current assets
20,769
18,674
Total assets
60,146
79,103
Current liabilities
Short-term borrowings
30
(3,952)
(3,601)
Contingent consideration liabilities
33
(1,289)
(958)
Trade and other payables
29
(16,263)
(17,554)
Derivative financial instruments
44
(183)
(227)
Current tax payable
14
(471)
(489)
Short-term provisions
32
(652)
(841)
Total current liabilities
(22,810)
(23,670)
Non-current liabilities
Long-term borrowings
30
(17,035)
(20,572)
Corporation tax payable
14
(127)
(180)
Deferred tax liabilities
14
(289)
(3,556)
Pensions and other post-employment benefits
31
(2,579)
(3,113)
Other provisions
32
(532)
(630)
Derivative financial instruments
44
–
(1)
Contingent consideration liabilities
33
(5,779)
(5,118)
Other non-current liabilities
34
(899)
(921)
Total non-current liabilities
(27,240)
(34,091)
Total liabilities
(50,050)
(57,761)
Net assets
10,096
21,342
Equity
Share capital
37
1,347
1,347
Share premium account
37
3,440
3,301
Retained earnings
38
4,363
7,944
Other reserves
38
1,448
2,463
Shareholders’ equity
10,598
15,055
Non-controlling interests
(502)
6,287
Total equity
10,096
21,342
The financial statements on pages 182 to 267 were approved by the Board on 9 March 2023 and signed on its behalf by
Sir Jonathan Symonds
Chair
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
184
Consolidated statement of changes in equity
for the year ended 31 December 2022
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 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)
Realised profits after taxation on disposal of equity
investments
–
–
163
(163)
–
–
–
Share of associates and joint ventures realised profits
on disposal of equity investments
–
–
44
(44)
–
–
–
Shares issued
–
29
–
–
29
–
29
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
(771)
(317)
(20)
(337)
Total comprehensive income for the year
–
–
4,839
(771)
4,068
691
4,759
Distributions to non-controlling interests
–
–
–
–
–
(642)
(642)
Contributions from non-controlling interests
–
–
–
–
–
7
7
Dividends to shareholders
–
–
(3,999)
–
(3,999)
–
(3,999)
Shares issued
1
20
–
–
21
–
21
Realised after tax profits on disposal of equity
investments
–
–
132
(132)
–
–
–
Share of associates and joint ventures realised profits
on disposal of equity investments
–
–
7
(7)
–
–
–
Write-down of shares held by ESOP Trusts
–
–
(168)
168
–
–
–
Share-based incentive plans
–
–
367
–
367
–
367
Transaction 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
Profit for the year
–
–
14,956
–
14,956
665
15,621
Other comprehensive (expense)/income for the year
–
–
(89)
(714)
(803)
(28)
(831)
Total comprehensive income for the year
–
–
14,867
(714)
14,153
637
14,790
Distributions to non-controlling interests
–
–
–
–
–
(1,409)
(1,409)
Non-cash distribution to non-controlling interests
–
–
–
–
–
(2,960)
(2,960)
Contributions from non-controlling interests
–
–
–
–
–
8
8
Changes to non-controlling interests
–
–
–
–
–
(20)
(20)
Deconsolidation of former subsidiaries
–
–
–
–
–
(3,045)
(3,045)
Dividends to shareholders
–
–
(3,467)
–
(3,467)
–
(3,467)
Non-cash dividend to shareholders
–
–
(15,526)
–
(15,526)
–
(15,526)
Realised after tax losses on disposal or liquidation of
equity investments
–
–
14
(14)
–
–
–
Share of associates and joint ventures realised profits
on disposal of equity investments
–
–
7
(7)
–
–
–
Shares issued
–
25
–
–
25
–
25
Write-down of shares held by ESOP Trusts
–
(911)
911
–
–
–
Shares acquired by ESOP Trusts
–
114
1,086
(1,200)
–
–
–
Share-based incentive plans
–
–
357
–
357
–
357
Tax on share-based incentive plans
–
–
(8)
–
(8)
–
(8)
Hedging gain after taxation transferred to
non-financial assets
–
–
–
9
9
–
9
At 31 December 2022
1,347
3,440
4,363
1,448
10,598
(502)
10,096
*
an analysis of Other reserves is presented as part of Note 38, ‘Movements in equity’.
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
185
Governance and remuneration
Strategic report
Financial statements
Investor information
Consolidated cash flow statement
for the year ended 31 December 2022
Notes
2022
£m
2021
(1)
£m
2020
(1)
£m
Cash flow from operating activities
Profit after taxation from continuing operations for the year
4,921
3,516
5,103
Adjustments reconciling profit after tax to operating cash flows
42
3,023
3733
2,571
Cash generated from operations attributable to continuing operations
7,944
7,249
7,674
Taxation paid
(1,310)
(972)
(1,086)
Net cash inflow from continuing operating activities
6,634
6,277
6,588
Cash generated from operations attributable to discontinued operations
932
1,994
2,422
Taxation paid from discontinued operations
(163)
(319)
(569)
Net operating cash flows attributable to discontinued operations
769
1,675
1,853
Total net cash inflows from operating activities
7,403
7,952
8,441
Cash flow from investing activities
Purchase of property, plant and equipment
(1,143)
(950)
(989)
Proceeds from sale of property, plant and equipment
146
132
49
Purchase of intangible assets
(1,115)
(1,704)
(956)
Proceeds from sale of intangible assets
196
641
343
Purchase of equity investments
(143)
(162)
(411)
Purchase of businesses, net of cash acquired
41
(3,108)
–
–
Proceeds from sale of equity investments
238
202
3,269
Contingent consideration paid
(79)
(114)
(120)
Disposal of businesses
41
(43)
(17)
117
Investments in associates and joint ventures
41
(1)
(1)
(4)
Proceeds from disposal of associates and joint ventures
–
277
–
Interest received
64
14
27
Decrease/(increase) in liquid investments
1
18
(1)
Dividends from associates and joint ventures
6
9
31
Net cash outflow from continuing investing activities
(4,981)
(1,655)
1,355
Net cash investing cash flows attributable to discontinued operations
(3,791)
(122)
806
Total net cash (outflow)/inflow from investing activities
(8,772)
(1,777)
2,161
Cash flow from financing activities
Issue of share capital
37
25
21
29
Repayment of long-term loans
(1,594)
–
–
Issue of long-term notes
1,025
_
3,298
Repayment of short-term loans
(5,074)
(2,304)
(3,738)
Increase in/(repayment of) other short-term loans
1,021
301
(3,594)
Repayment of lease liabilities
(202)
(181)
(182)
Interest paid
(848)
(772)
(851)
Dividends paid to shareholders
(3,467)
(3,999)
(3,977)
Distributions to non-controlling interests
(521)
(239)
(442)
Contributions from non-controlling interests
8
7
3
Other financing items
376
40
(89)
Net cash outflow from continuing financing activities
(9,251)
(7,126)
(9,543)
Net financing cash flows attributable to discontinued operations
10,074
(463)
(589)
Total net cash inflow/(outflow) from financing activities
823
(7,589)
(10,132)
(Increase)/decrease in cash and bank overdrafts
43
(546)
(1,414)
470
Cash and bank overdrafts at the beginning of year
3,819
5,262
4,831
Exchange adjustments
152
(29)
(39)
Increase/(Decrease) in cash and bank overdrafts in the year
(546)
(1,414)
470
Cash and bank overdrafts at the end of year
3,425
3,819
5,262
Cash and bank overdrafts at end of year comprise:
Cash and cash equivalents
3,723
4,274
6,292
Overdrafts
(298)
(455)
(1,030)
3,425
3,819
5,262
(1)
The 2021 and 2020 comparative results have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
.
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
Notes to the financial statements
1. Presentation of the financial statements
Description of business
GSK is a global biopharma group which makes innovative
vaccines and specialty medicines to prevent and treat disease.
GSK’s R&D focuses on the science of the immune system,
human genetics and advanced technologies primarily in the
following four therapeutic areas: infectious diseases, HIV,
oncology and immunology/respiratory.
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 GSK plc, and in 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 46, ‘Principal Group
companies’.
Financial period
These financial statements cover the financial year from
1 January to 31 December 2022, with comparative figures for
the financial years from 1 January to 31 December 2021 and,
where appropriate, from 1 January to 31 December 2020.
Income statement and cash flow comparatives have been
restated on a consistent basis from those previously published
to reflect the classification of the Consumer Healthcare
business as a discontinued operation (see Note 41).
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, GSK plc, have
been prepared in accordance with UK GAAP and with UK
accounting presentation. The company balance sheet is
presented on page 268 and the accounting policies are given
on pages 269 to 272.
2. Accounting principles and policies
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 assets, liabilities, revenue and expenses of joint operations
are included in the consolidated financial statements in
accordance with the Group’s 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.
Proof 6 (e) 08.03.2023 at 1 pm
186
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
2. Accounting principles and policies
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 is
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 Group’s interest in
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 (prior to the demerger of the Consumer Healthcare
business) 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 pharmaceutical 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 and royalties due to the counterparty of
£1,635 million (2021: £640 million; 2020: £4 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.
Commercial Operations turnover includes co-promotion revenue of
£3 million (2021: £7 million; 2020: £12 million). Reimbursements to
and from the counterparty under collaboration agreements for
‘selling, general and administration’ and ‘research and development’
costs are recorded net in the respective lines in the Consolidated
income statement.
Proof 6 (e) 08.03.2023 at 1 pm
187
GSK Annual Report 2022
Notes to the financial statements continued
2. Accounting principles and policies
continued
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 administration 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.
Software as a service (SaaS) configuration costs are expensed
as they are incurred where the software being configured is
controlled by the SaaS provider.
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.
188
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 asserted and 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 is included but no
provision is 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.
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
2. Accounting principles and policies
continued
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.
The 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. Lease rental costs for short-term and low-value leases
which are not capitalised 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 remeasured.
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.
Proof 6 (e) 08.03.2023 at 1 pm
189
GSK Annual Report 2022
Notes to the financial statements continued
2. Accounting principles and policies
continued
Acquired in process R&D and marketed products are valued
independently as part of the fair value of businesses acquired from
third parties where they have 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.
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 controlled by the Group. 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 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 the assets, liabilities, revenue and expenses
of joint operations in accordance with its rights and
obligations.
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 reduce it to its recoverable amount; the provision is
then reversed at the point when a high probability of
regulatory approval is determined.
190
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.
Current equity investments
Current equity investments comprise equity investments which
the Group holds with the intention to sell and which it may sell
in the short term. Where acquired with this intention, they 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. Dividend income is recognised in the
income statement when the Group’s right to receive payment is
established. Purchases and sales of Current equity investments
are accounted for on the trade date.
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.
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
Notes to the financial statements continued
2. Accounting principles and policies
continued
Governance and remuneration
Strategic report
Financial statements
Investor information
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.
Cash 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 and accumulated in
the cash flow hedge reserve. Ineffective portions are
recognised in profit or loss immediately. Amounts deferred in
the cash flow hedge reserve are reclassified to the income
statement when the hedged item affects profit or loss, or if the
hedged forecast transaction is to purchase a non-financial
asset, the amount deferred in the cash flow hedge reserve is
transferred directly from equity and included in the carrying
value of the recognised non-financial asset.
Net investment hedges are accounted for in a similar way to
cash flow hedges which are reclassified to the income
statement when the hedged item affects profit or loss.
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. The tax charge for the
period is recognised in the income statement, the statement of
comprehensive income or directly in equity, according to the
accounting treatment of the related transaction.
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. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when they relate to
income taxes levied by the same tax authority and the
Company and its subsidiaries intend to settle their current tax
assets and liabilities on a net basis.
Deferred tax assets and liabilities are not recognised if the
temporary differences arise from the initial recognition of
goodwill or from the initial recognition of other assets and
liabilities in a transaction (other than a business combination)
that affects neither the accounting nor the taxable profit or
loss. Unrecognised deferred tax assets are reassessed at each
reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the
deferred tax asset to be recovered.
Proof 6 (e) 08.03.2023 at 1 pm
191
GSK Annual Report 2022
Notes to the financial statements continued
2. Accounting principles and policies
continued
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.
Assets and liabilities held for sale or distribution
and discontinued operations
Disposal groups are classified as held for sale or distribution if
their carrying amount will be recovered principally through sale
or a distribution to shareholders rather than through continuing
use, they are available for sale or distribution in their present
condition and the sale or distribution is considered highly
probable. Assets held in Assets held for sale or distribution are
measured at the lower of their carrying amount and fair value
less costs to sell or distribute. Non-current assets included in
Assets held for sale or distribution are not depreciated or
amortised. Assets and liabilities classified as held for sale or
distribution are presented in current assets and current
liabilities separately from the other assets and liabilities in the
balance sheet.
A discontinued operation is a component of the Group that
has been disposed of, distributed or is classified as held for sale
or distribution and that represents a separate major line of
business. The results of discontinued operations are presented
separately in the Consolidated income statement, the
Consolidated statement of other comprehensive income and
the Consolidated statement of cash flows and comparatives
are restated on a consistent basis.
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 2022 was £29,324 million (2021
(1)
:
£24,696 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.
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
192
Sales of pharmaceutical and vaccine products in the US have
complex arrangements for rebates, discounts and allowances.
Turnover of Commercial Operations products in the US for
2022 of £14,542 million (2021: £11,914 million) was after
recording deductions of £15,272 million (2021: £12,518 million)
for rebates, allowances, returns and other discounts. At 31
December 2022, the total accrual amounted to £5,855 million
(2021: £5,044 million). Due to 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.
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
3. Critical accounting judgements and key sources of estimation uncertainty
continued
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 £707 million (2021
(1)
: £83
million). At December 2022, current tax payable was £471
million (2021: £489
million), non-current corporation tax
payable was £127 million (2021: £180 million) and current tax
recoverable was £405 million (2021: £486 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 2022, the Group had recognised provisions
of £551 million in respect of uncertain tax positions (2021: £858
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.
(1)
The 2021 comparative results have been restated on a consistent basis
from those previously published to reflect the demerger of the Consumer
Healthcare business (see page 238).
Legal and other disputes
Legal costs for the year were £144 million (2021
(1)
: £50 million).
At 31 December 2022 provisions for legal and other disputes
amounted to £218 million (2021: £196 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 47, ‘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.
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 2022 income statement charge for contingent
consideration was £1,645 million (2021: £1,063 million).
At 31 December 2022, the liability for contingent consideration
amounted to £7,068 million (2021: £6,076 million). Of this
amount, £5,890 million (2021: £5,559 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 33, ‘Contingent
consideration liabilities’.
Proof 6 (e) 08.03.2023 at 1 pm
193
GSK Annual Report 2022
Notes to the financial statements continued
3. Critical accounting judgements and key sources of estimation uncertainty
continued
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. Two UK schemes are in surplus (2021:
three UK schemes), with a combined surplus of £109 million at 31
December 2022 (2021: £606 million). There are further recognised
pension surpluses totalling £120 million spread across five countries
(2021: £135 million across six 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 31,
‘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 31, ‘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 £424 million and an increase in the annual pension
cost of approximately £19 million. Similarly, a 0.25% increase in the
discount rate would lead to a decrease in the net pension deficit
of approximately £400 million and a decrease in the annual
pension cost of approximately £19 million. A 0.75% reduction in the
discount rate would lead to an increase in the net pension deficit
of approximately £1,341 million and an increase in the annual
pension cost of approximately £52 million. Similarly, a 0.75%
increase in the discount rate would lead to a decrease in the net
pension deficit of approximately £1,147 million and a decrease in
the annual pension cost of approximately £60 million. The
selection of different assumptions could affect the future results
of the Group.
4. New accounting requirements
Amendments to accounting standards issued by the IASB and
adopted in the year ended 31 December 2022 did not have a
material impact on the results or financial position of the Group.
Certain new accounting standards, amendments to
accounting standards and interpretations have been
published that are not mandatory for 31 December 2022
reporting periods and have not been adopted early by the
Group. These standards, amendments and interpretations are
not expected to have a material impact on the results or
financial position of the Group in future reporting periods.
5. Exchange rates
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:
2022
2021
2020
Average rates:
US$/£
1.24
1.38
1.29
Euro/£
1.17
1.16
1.13
Yen/£
161
151
137
2022
2021
2020
Period end rates:
US$/£
1.20
1.35
1.36
Euro/£
1.13
1.19
1.11
Yen/£
159
155
141
Proof 6 (e) 08.03.2023 at 1 pm
194
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
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 has revised its operating segments from Q1 2022 and from Q2 2022. Previously GSK reported
results under four segments:
Pharmaceuticals, Pharmaceuticals R&D, Vaccines and Consumer Healthcare. For the first quarter 2022,
GSK reported results under three segments: Commercial Operations, Total R&D and Consumer Healthcare. From Q2 2022, GSK reports
under two segments from continuing operations as the demerger of the Consumer Healthcare segment was completed on 18 July 2022.
Members of the GLT are responsible for each segment. Comparative information has been retrospectively revised on a consistent basis.
R&D investment is essential for the sustainability of the business. However for segment reporting the Commercial Operating profits
exclude allocations of globally funded R&D.
The Total R&D segment is the responsibility of the Chief Scientific Officer and is reported as a separate segment. The operating costs of
this segment includes R&D activities across Specialty Medicines, including HIV and Vaccines. It includes R&D and some SG&A costs
relating to regulatory and other functions.
The Group’s management reporting process allocates intra-Group profit on a product sale to the segment in which that sale is recorded,
and the profit analyses below have been presented on that basis.
Turnover by segment
2022
£m
2021
(revised)
£m
2020
(revised)
£m
Commercial operations
29,324
24,696
24,232
Consumer Healthcare
–
–
122
29,324
24,696
24,354
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 company. GSK completed the divestment of Bangladesh on 30 June 2020.
This business was excluded from the Consumer Healthcare Joint Venture but was included in the Consumer Healthcare segment
performance in 2020.
For 2022, product sales are reported within three product groups: Specialty Medicines, Vaccines and General Medicines.
Commercial Operations:
2022
£m
2021
(1)
(revised)
£m
2020
(1)
(revised)
£m
HIV
5,749
4,777
4,876
Oncology
602
489
372
Immuno-inflammation, respiratory and other
2,609
2,027
1,721
8,960
7,293
6,969
Pandemic
2,309
958
–
Specialty Medicines
11,269
8,251
6,969
Meningitis
1,116
961
1,029
Influenza
714
679
733
Shingles
2,958
1,721
1,989
Established Vaccines
3,085
2,970
3,231
7,873
6,331
6,982
Pandemic Vaccines
64
447
–
Vaccines
7,937
6,778
6,982
Respiratory
6,548
6,048
6,006
Other General Medicines
3,570
3,619
4,275
General Medicines
10,118
9,667
10,281
Total Commercial Operations
29,324
24,696
24,232
Total Consumer Healthcare
–
–
122
(1)
The 2021 and 2020 comparatives have been revised to reflect the Commercial Operations segment.
Proof 6 (e) 08.03.2023 at 1 pm
195
GSK Annual Report 2022
Notes to the financial statements continued
6. Turnover and segment information
continued
During 2022, sales were made to three US wholesalers of £4,045 million (2021: £3,159 million; 2020: £2,928 million), £4,161 million
(2021: £3,081 million; 2020: £3,085 million) and £3,227 million (2021: £2,670 million; 2020: £2,795 million) respectively, after
allocating final-customer discounts to the wholesalers.
Revenue recognised in the year from performance obligations satisfied in previous periods totalled £1,601 million (2021
(1)
: £1,438
million) including £898 million (2021
(1)
: £949 million) impacting turnover arising from changes to prior year estimates of RAR
(returns and rebates) accruals, £115 million (2021: £61 million) of milestone income and £588 million (2021: £428 million) of royalty
income recognised in the current year.
Segment profit
2022
£m
2021
(1)
(revised)
£m
2020
(1)
(revised)
£m
Commercial Operations
13,590
11,467
11,297
Research and development
(5,060)
(4,567)
(4,397)
Consumer Healthcare
–
–
55
Segment profit
8,530
6,900
6,955
Corporate and other unallocated costs
(379)
(407)
(299)
Other reconciling items between segment profit and operating profit
(1,718)
(2,136)
(677)
Total Operating profit
6,433
4,357
5,979
Finance income
76
14
32
Finance costs
(879)
(769)
(874)
Loss on disposal of interest in associates
–
(36)
–
Share of after-tax profits/(losses) of associates and joint ventures
(2)
33
33
Profit before taxation from continuing operations
5,628
3,599
5,170
Taxation
(707)
(83)
(67)
Profit after taxation for the year from continuing operations
4,921
3,516
5,103
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 company. GSK completed the divestment of Bangladesh on 30 June 2020.
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 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. 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
2022
£m
2021
(a)
(revised)
£m
2020
(a)
(revised)
£m
Commercial Operations
829
915
904
Research and development
467
378
355
Segment depreciation and amortisation
1,296
1,293
1,259
Corporate and other unallocated depreciation and amortisation
112
68
67
Other reconciling items between segment depreciation and amortisation and total depreciation and
amortisation
739
761
724
Total depreciation and amortisation
2,147
2,122
2,050
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
Proof 6 (e) 08.03.2023 at 1 pm
196
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
6. Turnover and segment information
continued
PP&E, intangible asset and goodwill impairment by segment
2022
£m
2021
(1)
(revised)
(2)
£m
2020
(1)
(revised)
(2)
£m
Commercial Operations
29
30
87
Research and development
32
55
37
Segment impairment
61
85
124
Corporate and other unallocated impairment
20
63
5
Other reconciling items between segment impairment and total impairment
420
392
583
Total impairment
501
540
712
PP&E and intangible asset impairment reversals by segment
Commercial Operations
(6)
(8)
(14)
Research and development
(19)
(2)
(4)
Segment impairment reversals
(25)
(10)
(18)
Corporate and other unallocated impairment reversals
–
–
(1)
Other reconciling items between segment impairment reversals and total impairment reversals
(1)
(2)
(35)
Total impairment reversals
(26)
(12)
(54)
Net operating assets by segment
2022
£m
2021
(revised)
(2)
£m
Commercial Operations
10,288
9,440
Research and development
7,299
3,461
Segment net operating assets
17,587
12,901
Corporate and other unallocated net operating assets
264
1,504
Discontinued operations
–
25,208
Net operating assets
17,851
39,613
Net debt
(17,197)
(19,838)
Investments in associates and joint ventures
74
88
Current Equity Investment
4,087
–
Derivative financial instruments
7
(22)
Current and deferred taxation
5,176
1,479
Assets held for sale (excluding cash and cash equivalents)
98
22
Net assets
10,096
21,342
The Commercial Operations segment includes the Shionogi-ViiV Healthcare contingent consideration liability of £5,890 million
(2021: £5,559 million) and the Pfizer put option of £1,093 million (2021: £1,008 million).
Geographical information
The UK is regarded as being the Group’s country of domicile.
Turnover by location of customer
2022
£m
2021
(1)
(revised)
(2)
£m
2020
(1)
(revised)
(2)
£m
UK
695
656
659
US
14,542
11,914
11,148
Rest of World
14,087
12,126
12,547
External turnover
29,324
24,696
24,354
Non-current assets by location of subsidiary
2022
£m
2021
£m
UK
5,134
6,618
US
14,024
17,852
Belgium
5,415
5,065
Switzerland
34
6,552
Rest of World
6,559
15,390
Non-current assets
31,166
51,477
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.
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
(2)
The 2021 and 2020 comparatives have been revised to reflect the new segments.
Proof 6 (e) 08.03.2023 at 1 pm
197
GSK Annual Report 2022
Notes to the financial statements continued
7. Other operating income/(expense)
2022
£m
2021
(1)
£m
2020
(1)
£m
Upfront settlement income
(2)
922
–
–
Fair value remeasurements of equity investments
256
37
(6)
Disposal of businesses and assets
215
552
2,621
Fair value remeasurements on contingent consideration recognised in business combinations
(1,607)
(1,058)
(1,286)
Remeasurement of ViiV Healthcare put option liabilities and preferential dividends
(85)
(48)
52
Fair value adjustments on derivative financial instruments
3
(4)
20
Other income
61
17
62
(235)
(504)
1,463
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
(2)
On 1 February 2022, ViiV Healthcare reached agreement with Gilead Sciences, Inc (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 (£922 million) 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 and will be recorded as Royalty income in the Income Statement.
Fair value remeasurement on equity investments in 2022 included a gain/loss of £229 million from the remeasurement of the
Group’s retained investment in Haleon plc to fair value at 31 December 2022 from the initial recognition fair value (five-day
average share price after the demerger). See details in Note 22.
Disposal of businesses and assets in 2022 includes milestone income and the reversal of provisions no longer required.
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 £1,431 million related to
the acquisition of the former Shionogi-ViiV Healthcare joint venture and £193 million payable to Novartis related to the Vaccines
acquisition, together with fair value movements on related hedging contracts.
Proof 6 (e) 08.03.2023 at 1 pm
198
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
8. Operating profit
The following items have been included in operating profit:
2022
£m
2021
(1)
£m
2020
(1)
£m
Employee costs (Note 9)
7,693
7,680
8,555
Advertising
735
433
361
Distribution costs
192
169
176
Depreciation of property, plant and equipment
885
855
822
Impairment of property, plant and equipment, net of reversals
70
87
424
Depreciation of right of use assets
176
179
182
Impairment of right of use assets
40
5
2
Amortisation of intangible assets
1,086
1,088
1,046
Impairment of intangible assets, net of reversals
365
435
230
Impairment of intangible assets held for sale, net of reversals
–
1
–
Impairment of goodwill allocated to a disposal group, net of reversals
–
–
2
Net foreign exchange (gains)/losses
11
(4)
99
Inventories:
Cost of inventories included in cost of sales
6,137
5,885
5,934
Write-down of inventories
687
800
607
Reversal of prior year write-down of inventories
(483)
(325)
(250)
Short-term lease charge
6
7
11
Low-value lease charge
2
3
5
Variable lease payments
9
10
11
Fees payable to the company’s auditor and its associates in relation to the Group (see below)
26.9
31.7
29.9
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 loss of £2 million (2021: £35 million gain; 2020: £36 million loss) 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 £nil (2021: £10 million) is reported through loss on disposal of interest in associates. The recycling of
exchange on disposal of overseas subsidiaries does not include recycling of exchange on disposal of Consumer Healthcare
subsidiaries as this is reported as Profit after taxation on demerger of discontinued operations.
Included within operating profit are Major restructuring charges of £321 million (2021: £424 million; 2020: £1,178 million), see Note
10, ‘Major restructuring costs’.
Fees payable to the company’s auditor and its associates:
2022
£m
2021
£m
2020
£m
Audit of parent company and consolidated financial statements including attestation under s.404
of Sarbanes-Oxley Act 2002
10.9
13.2
13.8
Audit of the company’s subsidiaries
9.7
14.5
14.5
Total audit services
20.6
27.7
28.3
Audit-related and other assurance services
6.3
4.0
1.6
Total audit services, audit-related and other assurance services
26.9
31.7
29.9
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:
2022
£m
2021
£m
2020
£m
Audit
0.2
0.2
0.2
There were immaterial fees of £0.1 million paid in 2022 (versus 2021: £nil; 2020 £0.2 million) to other auditors in respect of audits of
certain of the company’s subsidiaries.
Audit related and other assurance services include £4.4 million (2021: £2.4 million) due to reporting accountant work performed in
preparation for the Consumer Healthcare demerger.
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
Proof 6 (e) 08.03.2023 at 1 pm
199
GSK Annual Report 2022
Notes to the financial statements continued
9. Employee costs
2022
£m
2021
(1)
£m
2020
(1)
£m
Wages and salaries
6,110
5,858
6,464
Social security costs
763
793
775
Pension and other post-employment costs, including augmentations (Note 31)
369
415
466
Cost of share-based incentive plans
314
345
330
Severance and other costs from integration and restructuring activities
137
269
520
7,693
7,680
8,555
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:
2022
£m
2021
(1)
£m
2020
(1)
£m
Share Value Plan
243
258
266
Performance Share Plan
55
51
56
Share option plans
4
5
4
Cash settled and other plans
12
31
4
314
345
330
The average number of persons employed by the Group (including Directors) during the year:
2022
Number
2021
(1)
Number
2020
(1)
Number
Manufacturing
22,946
23,562
24,536
Selling, general and administration
34,642
36,909
37,977
Research and development
11,542
10,874
10,744
Total Continuing Operations
69,130
71,345
73,257
Discontinued Operations
21,292
20,616
22,628
Total
90,422
91,961
95,885
Note: Consumer Healthcare divested on 18 July 2022 is shown as Discontinued Operations in the above table.
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 277.
The compensation of the Directors and senior management (members of the GLT) in aggregate, was as follows:
2022
£m
2021
(1)
£m
2020
(1)
£m
Wages and salaries
31
27
21
Social security costs
5
3
4
Pension and other post-employment costs
2
3
3
Cost of share-based incentive plans
28
27
23
66
60
51
Further information on the remuneration of the Directors is given in the sections of the Annual Report on remuneration labelled as
audited within pages 133 to 164.
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
Proof 6 (e) 08.03.2023 at 1 pm
200
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
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.
In January 2020, the Board approved a Separation Preparation programme to prepare for the separation of GSK into two
companies. Materially all of the Separation Preparation restructuring programme has been included as part of continuing
operations. The legacy Consumer Healthcare Joint Venture integration programme is now included as part of discontinued
operations.
After the acquisition of Sierra Oncology (July 2022) and Affinivax (August 2022), the Board approved a Major restructuring
programme for the Integration of significant acquisitions designed to integrate and achieve synergies.
The total restructuring costs of £321 million in 2022 were incurred in the following areas:
–
Restructuring costs to prepare for separation of GSK into two companies
–
Continued transformation of central functions, including GSK technology platforms and interfaces, to deliver greater digital
synergies, simplification of applications and staff reductions
–
The integration of acquisitions.
The analysis of the costs charged to operating profit from continuing operations under these programmes was as follows:
2022
£m
2021
(1)
£m
2020
(1)
£m
Increase in provision for Major restructuring programmes (see Note 32)
138
321
606
Amount of provision reversed unused (see Note 32)
(111)
(140)
(71)
Impairment losses recognised
122
14
347
Other non-cash charges/(credit)
(7)
25
62
Other cash costs
179
204
234
321
424
1,178
Provision reversals of £111 million (2021
(1)
: £140 million; 2020
(1)
: £71 million) reflected provision releases mainly related to the
Separation Preparation programme. Asset impairments of £122 million and other non-cash credit of £7 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, offset by profit on
disposals. 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 from continuing operations by programme was as follows:
2022
Cash
£m
Non-cash
£m
Total
£m
Separation Preparation programme
177
110
287
Significant acquisitions
20
–
20
Legacy programmes
9
5
14
206
115
321
2021
(a)
Cash
£m
Non-cash
£m
Total
£m
Separation Preparation programme
353
59
412
Legacy programmes
32
(20)
12
385
39
424
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
Proof 6 (e) 08.03.2023 at 1 pm
201
GSK Annual Report 2022
Notes to the financial statements continued
10. Major restructuring costs
continued
The analysis of Major restructuring charges from continuing operations by income statement line was as follows:
2022
£m
2021
(1)
£m
2020
(1)
£m
Cost of sales
102
102
585
Selling, general and administration
180
277
395
Research and development
39
45
198
321
424
1,178
11. Finance income
2022
£m
2021
(1)
£m
2020
(1)
£m
Finance income arising from:
Financial assets measured at amortised cost
31
11
17
Financial assets measured at fair value through profit or loss
31
2
9
Net gains arising from the forward element of forward contracts in net investment hedge relationships
12
–
5
Other finance income
2
1
1
76
14
32
12. Finance expense
2022
£m
2021
(1)
£m
2020
(1)
£m
Finance expense arising on:
Financial liabilities at amortised cost
(789)
(735)
(811)
Net losses arising from:
Financial instruments mandatorily measured at fair value through profit or loss
743
(565)
382
Retranslation of loans
(761)
565
(384)
Reclassification of hedges from other comprehensive income
(2)
(2)
(2)
Unwinding of discounts on provisions
(7)
(2)
(3)
Finance expense arising on lease liabilities
(30)
(27)
(33)
Other finance expense
(33)
(3)
(23)
(879)
(769)
(874)
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
Proof 6 (e) 08.03.2023 at 1 pm
202
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
13. Associates and joint ventures
The Group’s share of after-tax profits and losses of associates and joint ventures is set out below:
2022
£m
2021
(1)
£m
2020
(1)
£m
Share of after-tax profits of associates
1
36
33
Share of after-tax losses of joint ventures
(3)
(3)
–
(2)
33
33
(1)
2021 and 2020 comparatives have not been restated, as the demerged Consumer Healthcare business contained no associates or joint ventures.
Following the disposal of Innoviva, Inc in May 2021 (see details in Note 41), at 31 December 2022 and 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 included 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. Figures for 2021 include share
of Innoviva’s turnover, profit and total comprehensive income until the date of the disposal.
2021
£m
2020
£m
Turnover
108
253
Profit after taxation
106
174
Total comprehensive income
106
174
Aggregated financial information in respect of GSK’s share of other associated undertakings and joint ventures is set out below:
2022
£m
2021
£m
2020
£m
Share of after-tax losses
(2)
–
(8)
Share of other comprehensive income/(expense)
(9)
28
53
Share of total comprehensive income/(expense)
(11)
28
45
The Group’s sales to associates and joint ventures were £nil in 2022 (2021: £nil; 2020: £nil).
Please refer to the Balance sheet information on associates and joint ventures in Note 21.
Proof 6 (e) 08.03.2023 at 1 pm
203
GSK Annual Report 2022
Notes to the financial statements continued
14. 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
2022
£m
2021
(1)
£m
2020
(1)
£m
UK current year charge
200
119
(45)
Rest of World current year charge
1,351
593
745
Charge/(credit) in respect of prior periods
(60)
219
11
Current taxation
1,491
931
711
Deferred taxation
(784)
(848)
(644)
707
83
67
In 2022, GSK made corporate income tax payments globally of £1.5 billion for continuing and discontinued operations, of which
£48 million was UK corporation tax paid to HMRC. These amounts are for corporate income tax only, and do not include the
various other business taxes borne by GSK each year.
The deferred tax credits in each period reflect current year losses where offset against taxable profits in future periods is probable
and the release of deferred tax liabilities. The latter relates primarily to the unwind of deferred tax liabilities on intangible assets.
The deferred tax credit in 2021 also reflected the impact of the remeasurement of deferred tax assets and liabilities following
enactment of the increase in the headline rate of UK corporation tax from 19% to 25%.
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
2022
£m
2022
%
2021
(1)
£m
2021
%
2020
(1)
£m
2020
%
Profit before tax
5,628
3,599
5,170
UK statutory rate of taxation
1,069
19.0
685
19.0
984
19.0
Differences in overseas taxation rates
318
5.6
302
8.4
363
7.0
Benefit of intellectual property incentives
(600)
(10.7)
(382)
(10.6)
(516)
(9.9)
R&D credits
(119)
(2.1)
(100)
(2.8)
(103)
(2.0)
Permanent differences on disposals, acquisitions and transfers
275
4.9
(3)
(0.1)
(316)
(6.1)
Other permanent differences
82
1.5
(4)
(0.1)
90
1.7
Re-assessments of prior year current tax estimates
(60)
(1.1)
219
6.1
11
0.2
Re-assessments of prior year deferred tax estimates
(233)
(4.1)
(281)
(7.8)
(283)
(5.5)
Changes in Tax Rates
(25)
(0.4)
(353)
(9.8)
(163)
(3.1)
Tax charge/tax rate
707
12.6
83
2.3
67
12.9
As a global biopharmaceutical 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 2022 were the US, Belgium, Germany and Japan. This adverse impact was
offset by the benefit of intellectual property incentives such as the UK Patent Box and Belgian Innovation 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 corporate
income tax from 19% to 25% (effective 2023). In 2020, ‘Changes in tax rates’ included credits in relation to the UK, where a
reduction in the corporate income tax rate from 19% to 17% was cancelled, and India, where the tax treatment of dividends
changed with effect from 1 April 2020.
Permanent differences on disposals, acquisitions and transfers in 2022 includes tax on internal restructuring to simplify the group
structure. The tax credit 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 2022 tax rate has also been influenced by updates to estimates of prior period tax liabilities following closure of open
issues with tax authorities in various jurisdictions.
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
Proof 6 (e) 08.03.2023 at 1 pm
204
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
14. Taxation
continued
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.
The UK Government has confirmed that the Spring Finance Bill 2023 will include legislation introducing a 15% global minimum
corporate income tax rate, to have effect from 2024 in line with the OECD’s Pillar Two model framework. The detail of the
measures and how they are to be accounted for is still being finalised and so it is not possible to accurately quantify the impact for
GSK at this stage.
Tax on items charged to equity and statement of comprehensive income
2022
£m
2021
(1)
£m
2020
(1)
£m
Current taxation
Share-based payments
(3)
–
(14)
Defined benefit plans
–
–
(4)
Fair value movements on cash flow hedges
–
5
12
Fair value movements on equity investments
12
36
89
9
41
83
Deferred taxation
Share-based payments
11
(11)
18
Defined benefit plans
(211)
223
(51)
Fair value movements on cash flow hedges
(9)
3
6
Fair value movements on equity investments
(68)
(167)
131
(277)
48
104
Total credit to equity and statement of comprehensive income
(268)
89
187
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
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 2022 the Group had recognised provisions of £551 million in
respect of such uncertain tax positions (2021: £858 million). The net decrease in recognised provisions during 2022 was driven by
the reassessment of estimates, the agreement of a number of open issues with tax authorities in various jurisdictions and amounts
related to discontinued operations. 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 £157 million as at 31 December 2022 (2021: £204 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 £16 billion (2021: £15 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 £660 million (2021: £831 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.
Proof 6 (e) 08.03.2023 at 1 pm
205
GSK Annual Report 2022
Notes to the financial statements continued
14. 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 2021
(296)
(3,982)
843
1,024
874
1,060
60
1,104
687
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
999
640
1,450
91
1,554
1,662
Exchange adjustments
(29)
(264)
–
(40)
64
6
1
160
(102)
Credit/(charge) to income statement
122
126
142
258
(32)
104
(22)
190
888
Credit/(charge) to statement of
comprehensive income
–
–
–
–
182
42
(11)
(12)
201
Acquisitions/Disposals
(1)
(637)
–
–
–
67
–
76
(495)
R&D credits utilisation
–
–
–
–
–
–
–
(76)
(76)
Transfer of assets held for sale/
distribution
62
3,667
–
(118)
(60)
(8)
(2)
(250)
3,291
At 31 December 2022
(57)
(819)
992
1,099
794
1,661
57
1,642
5,369
Deferred tax liabilities in relation to intangible assets predominately relate to temporary differences arising as a result 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 £1,661 million (2021: £1,450 million) relates to trading losses. Such deferred tax assets
are recognised where it is probable that future taxable profit will be available to utilise losses, as supported by long-range product level
forecasts. Current forecasts indicate the assets will be utilised by around 2030. 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:
2022
£m
2021
£m
Deferred tax assets
5,658
5,218
Deferred tax liabilities
(289)
(3,556)
5,369
1,662
2022
2021
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
967
175
1,068
198
More than 10 years
44
13
390
62
Available indefinitely
192
41
200
43
At 31 December
1,203
229
1,658
303
Capital losses expiring:
Available indefinitely
2,326
548
2,356
557
At 31 December
2,326
548
2,356
557
Deferred tax assets are only recognised where it is probable that future taxable profit will be available to utilise losses.
Proof 6 (e) 08.03.2023 at 1 pm
206
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
15. Earnings per share
2022
pence
2021
(1)
pence
2020
(1)
pence
Basic earnings per share from continuing operations
110.8
82.9
122.4
Basic earnings per share from discontinued operations
260.6
26.7
22.0
Total basic earnings per share
371.4
109.6
144.4
Diluted earnings per share from continuing operations
109.2
81.8
120.9
Diluted earnings per share from discontinued operations
257.0
26.4
21.7
Total diluted earnings per share
366.2
108.2
142.6
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41) and/or the impact of Share Consolidation (see Note 37).
Basic 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 cash dividends on the GSK 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
2022
millions
2021
(2)
millions
2020
(2)
millions
Basic
4,026
4,003
3,981
Dilution for share options and awards
58
49
49
Diluted
4,084
4,052
4,030
(2)
Restated to reflect the impact share consolidation (see Note 37).
16. Dividends
2022
2021
2020
Paid/payable
Dividend
per share
(pence)
(3)
Total
dividend
£m
Paid
Dividend
per share
(pence)
(3)
Total
dividend
£m
Paid
Dividend
per share
(pence)
(3)
Total
dividend
£m
First interim
1 July 2022
17.50
704
8 July 2021
23.75
951
9 July 2020
23.75
946
Second interim
6 October 2022
16.25
654
7 October 2021
23.75
951
8 October 2020
23.75
946
Third interim
12 January 2023
13.75
555
13 January 2022
23.75
952
14 January 2021
23.75
946
Fourth interim
13 April 2023
13.75
555
7 April 2022
28.75
1,157*
8 April 2021
28.75
1,151
Total
61.25
2,468
100
4,011
100
3,989
*
The estimate for the fourth interim dividend for 2021 disclosed in the 2021 annual report was £1,152 million, £5 million less than the dividend that was ultimately paid.
(3)
Dividends per share were retrospectively adjusted to reflect the Share Consolidation in all the periods presented. See details in Note 37.
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 2022 financial
statements recognise those dividends paid in 2022, namely the third and fourth interim dividends for 2021, and the first and
second interim dividends for 2022.
The demerger of the Consumer Healthcare business was effected by GSK declaring an interim dividend in specie of Haleon plc
shares. The fair value of the distribution was £15,526 million.
The amounts recognised in each year were as follows:
2022
£m
2021
£m
2020
£m
Cash dividends to shareholders
3,467
3,999
3,977
Dividends in specie to shareholders in Haleon plc shares (Note 41)
15,526
–
–
18,993
3,999
3,977
Proof 6 (e) 08.03.2023 at 1 pm
207
GSK Annual Report 2022
Notes to the financial statements continued
17. Property, plant and equipment
Land and
buildings
£m
Plant,
equipment
and vehicles
£m
Assets in
construction
£m
Total
£m
Cost at 1 January 2021
7,488
12,105
1,890
21,483
Exchange adjustments
(214)
(315)
(47)
(576)
Other additions
16
98
1,091
1,205
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/distribution
(63)
(38)
(1)
(102)
Cost at 31 December 2021
7,212
11,816
1,750
20,778
Exchange adjustments
403
542
105
1,050
Additions through business combinations
5
8
17
30
Other additions
13
79
1,153
1,245
Capitalised borrowing costs
–
–
21
21
Disposals and write-offs
(64)
(222)
(5)
(291)
Reclassifications
146
689
(874)
(39)
Transfer to assets held for sale/distribution
(1,067)
(1,959)
(317)
(3,343)
Cost at 31 December 2022
6,648
10,953
1,850
19,451
Depreciation at 1 January 2021
(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/distribution
27
27
–
54
Depreciation at 31 December 2021
(3,281)
(6,744)
–
(10,025)
Exchange adjustments
(191)
(310)
–
(501)
Charge for the year
(226)
(726)
–
(952)
Disposals and write-offs
47
181
–
228
Transfer to assets held for sale/distribution
376
1,130
–
1,506
Depreciation at 31 December 2022
(3,275)
(6,469)
–
(9,744)
Impairment at 1 January 2021
(280)
(551)
(26)
(857)
Exchange adjustments
7
10
3
20
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)
Exchange adjustments
(9)
(14)
(1)
(24)
Disposals and write-offs
9
47
5
61
Impairment losses
(33)
(45)
(5)
(83)
Reversal of impairments
–
9
–
9
Transfer to assets held for sale/distribution
37
45
2
84
Impairment at 31 December 2022
(260)
(472)
(42)
(774)
Total depreciation and impairment at 31 December 2021
(3,545)
(7,258)
(43)
(10,846)
Total depreciation and impairment at 31 December 2022
(3,535)
(6,941)
(42)
(10,518)
Net book value at 1 January 2021
3,898
4,414
1,864
10,176
Net book value at 31 December 2021
3,667
4,558
1,707
9,932
Net book value at 31 December 2022
3,113
4,012
1,808
8,933
Proof 6 (e) 08.03.2023 at 1 pm
208
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
17. Property, plant and equipment
continued
The weighted average interest rate for capitalised borrowing costs in the year was 4% (2021: 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 7%, 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 9%.
The net impairment losses have been charged to cost of sales: £11 million (2021: £46 million), R&D: £7 million (2021: £3 million) and
SG&A: £55 million (2021: £54 million), and included £34 million (2021: £20 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 2022, £39 million (2021: £74 million) of computer software was reclassified from assets in construction to intangible assets
on becoming ready for use.
GSK has assessed the qualitative and quantitative impact of climate related risks on asset recoverable amounts and concluded
that there are no 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 2021
699
18
113
830
Exchange adjustments
(9)
(1)
(5)
(15)
Additions
152
1
62
215
Depreciation
(149)
(5)
(59)
(213)
Disposals
(53)
(4)
(13)
(70)
Impairments
(7)
–
–
(7)
Net book value at 31 December 2021
633
9
98
740
Exchange adjustments
47
–
8
55
Additions through business combinations
53
–
–
53
Other additions
140
2
91
233
Depreciation
(131)
(3)
(58)
(192)
Transfer to assets held for sale/distribution
(115)
(1)
(11)
(127)
Disposals
(27)
(1)
(8)
(36)
Impairments
(39)
–
–
(39)
Net book value at 31 December 2022
561
6
120
687
The Group has entered into some commitments for lease contracts that have not yet commenced. See Note 36.
An analysis of lease liabilities is set out in Note 30, ‘Net debt’.
Proof 6 (e) 08.03.2023 at 1 pm
209
GSK Annual Report 2022
Notes to the financial statements continued
19. Goodwill
2022
£m
2021
£m
Cost at 1 January
10,552
10,597
Exchange adjustments
550
(55)
Additions through business combinations (Note 41)
1,127
–
Other movements
–
10
Transfer to assets held for sale/distribution
(5,183)
–
Cost at 31 December
7,046
10,552
Net book value at 1 January
10,552
10,597
Net book value at 31 December
7,046
10,552
All Goodwill is allocated to the Group’s segments as follows:
2022
£m
Commercial operations
6,148
Total R&D
898
Net book value at 31 December
7,046
In 2021, prior to changes in the Group’s segment reporting (Note 6) Goodwill was allocated as follows:
2021
£m
Pharmaceuticals
4,228
Vaccines
1,264
Consumer Healthcare
5,060
Net book value at 31 December
10,552
Goodwill of £5,183 million allocated to Consumer Healthcare was transferred to ‘assets held for sale/distribution’ prior to the
Consumer Healthcare demerger (Note 41).
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 7% (2021: 6.5%), 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.
The R&D segment is evaluated on an arms length pricing model, see assumptions below.
Details relating to the discounted cash flow models used in the impairment tests 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
Terminal growth rate
Discount rate
2022
Commercial operations
0% p.a.
7% p.a
R&D
0% p.a.
7% p.a
2021
Pharmaceuticals
0% p.a.
7% p.a
Vaccines
0% p.a.
7% p.a
Consumer Healthcare
2.5% p.a.
6% p.a
The terminal growth rate does not exceed the long-term projected growth rates for relevant markets, reflects the impact of future
generic competition and take account of new product launches. Goodwill is monitored for impairment at the segmental level and
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.
GSK has assessed the qualitative and quantitative impact of climate related risks on asset recoverable amounts and concluded
that there are no material impairments.
Proof 6 (e) 08.03.2023 at 1 pm
210
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
20. Other intangible assets
Computer
software
£m
Licences,
patents,
amortised
brands etc.
£m
Indefinite life
brands
£m
Total
£m
Cost at 1 January 2021
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/distribution
(1)
(6)
(43)
(50)
Reclassifications
74
9
(9)
74
Cost at 31 December 2021
2,424
21,439
18,626
42,489
Exchange adjustments
63
934
1,112
2,109
Capitalised development costs
–
317
–
317
Additions through business combinations
–
2,964
–
2,964
Other additions
149
626
–
775
Disposals and asset write-offs
(203)
(33)
–
(236)
Transfer to assets held for sale/distribution
(513)
(496)
(19,772)
(20,781)
Reclassifications
39
(34)
34
39
Cost at 31 December 2022
1,959
25,717
–
27,676
Amortisation at 1 January 2021
(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)
Exchange adjustments
(33)
(307)
–
(340)
Charge for the year
(204)
(931)
–
(1,135)
Disposals and asset write-offs
129
19
–
148
Transfer to assets held for sale/distribution
254
300
–
554
Amortisation at 31 December 2022
(1,223)
(9,181)
–
(10,404)
Impairment at 1 January 2021
(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)
Exchange adjustments
(2)
(138)
(1)
(141)
Impairment losses
(72)
(313)
(17)
(402)
Transfer to assets held for sale/distribution
10
34
226
270
Reversal of impairments
1
17
–
18
Disposals and asset write-offs
73
7
–
80
Impairment at 31 December 2022
(81)
(2,873)
–
(2,954)
Total amortisation and impairment at 31 December 2021
(1,460)
(10,742)
(208)
(12,410)
Total amortisation and impairment at 31 December 2022
(1,304)
(12,054)
–
(13,358)
Net book value at 1 January 2021
1,053
10,403
18,368
29,824
Net book value at 31 December 2021
964
10,697
18,418
30,079
Net book value at 31 December 2022
655
13,663
–
14,318
The weighted average interest rate for capitalised borrowing costs in the year was 4% (2021: 3%).
The net book value of computer software included £479 million (2021: £526 million) of internally generated costs.
The carrying value at 31 December 2022 of intangible assets, for which impairments have been charged in the year following
those impairments, was £83 million (2021: £694 million). The carrying value at 31 December 2022 of intangible assets, for which
impairment reversals have been charged in the year following those impairment reversals, was £776 million (2021: £104 million).
No individual intangible asset accounted for a material impairment.
The patent expiry dates of the Group’s most significant assets, where relevant, are set out on pages 282 to 284. 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.
Proof 6 (e) 08.03.2023 at 1 pm
211
GSK Annual Report 2022
Notes to the financial statements continued
20. Other intangible assets
continued
Amortisation and impairment losses, net of reversals, have been charged in the income statement as follows:
Amortisation
Net impairment losses
2022
£m
2021
(a)
£m
2022
£m
2021
(a)
£m
Cost of sales
663
750
2
–
Selling, general and administration
116
126
66
65
Research and development
307
212
299
373
1,086
1,088
367
438
(a)
The 2021 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business (see Note 41).
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 41, ‘Acquisitions and disposals’ gives details
of additions through business combinations in the year. The book values of the largest individual items are as follows:
2022
£m
2021
£m
Tesaro Assets
2,858
2,677
Meningitis portfolio
1,855
1,889
Momelotinib
1,499
–
Affinivax Assets
1,473
–
Dolutegravir
1,150
1,093
Benlysta
541
644
Alector Assets
509
509
iTeos Assets
443
444
Shingrix
288
268
Okairos
202
191
BMS Assets
196
219
Spero
163
–
Vir Assets
159
212
Fluarix/FluLaval
147
180
Stiefel trade name
142
151
CureVac Assets
106
164
Lamisil
(a)
–
259
Others
1,932
1,797
13,663
10,697
(a)
Disposed of as part of the Consumer Healthcare demerger (Note 41).
On 1 July 2022, GSK completed the acquisition of Sierra Oncology Inc, The main asset is momelotinib.
On 15 August 2022, GSK completed the acquisition of Affinivax, Inc.
Indefinite life brands related to healthcare brands used within the Consumer Healthcare business. Indefinite life brands were
disposed of as part of the Consumer Healthcare demerger (Note 41).
The Group do not consider that any reasonably possible changes in the key assumptions would cause the recoverable amount of
the Intangible assets disclosed above to fall below their carrying values.
GSK has assessed the qualitative and quantitative impact of climate related risks on asset recoverable amounts and concluded
that there are no material impairments.
Proof 6 (e) 08.03.2023 at 1 pm
212
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
21. Investments in associates and joint ventures
Joint
ventures
£m
Associates
£m
2022
Total
£m
Joint
ventures
£m
Associates
£m
2021
Total
£m
At 1 January
12
76
88
15
349
364
Exchange adjustments
1
1
2
–
(15)
(15)
Additions
–
1
1
–
1
1
Disposals
–
–
–
–
(278)
(278)
Distributions received
–
(6)
(6)
–
(9)
(9)
Net fair value movements through Other comprehensive income
–
(9)
(9)
–
28
28
Impairment of interest in associates
–
–
–
–
(36)
(36)
Profit/(loss) after tax recognised in the consolidated income
statement
(3)
1
(2)
(3)
36
33
At 31 December
10
64
74
12
76
88
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 2021 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 in 2021 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.
22. Current equity investments
Current
Investments
measured at
FVTPL
2022
£m
At 1 January
–
Exchange adjustments
2
Additions
3,852
Net fair value movements through profit or loss
233
At 31 December
4,087
Current equity investments represent Haleon plc shares held after the demerger of Consumer Healthcare. Shares are held for
trading and measured at fair value through profit or loss (FVTPL) based on the Haleon plc share price. Changes in fair value after
the demerger are presented as Other operating income/expense in continuing operations. The Group’s investment in Haleon plc
at the end of December 2022 is held by Glaxo Group Limited (5.4%), Scottish Limited Partnerships (SLPs) which were set up to
collateralise agreed additional funding for GSK’s UK Defined Benefit pension schemes (7.5%) (Note 31) and the ESOP Trusts
(0.6%). Net fair value movement through profit or loss of £233 million includes a fair value gain of £229 million and £4 million of
other adjustments.
Proof 6 (e) 08.03.2023 at 1 pm
213
GSK Annual Report 2022
Notes to the financial statements continued
23. Other investments
Non-current
Investments
designated as
measured at
FVTOCI
£m
Investments
measured at
FVTPL
£m
2022
£m
Investments
designated as
measured at
FVTOCI
£m
Investments
measured at
FVTPL
£m
2021
£m
At 1 January
1,927
199
2,126
2,939
121
3,060
Exchange adjustments
75
25
100
5
–
5
Additions
87
63
150
125
52
177
Net fair value movements through Other comprehensive income
(716)
–
(716)
(902)
–
(902)
Net fair value movements through profit or loss
–
27
27
–
37
37
Disposals
(220)
–
(220)
(240)
(11)
(251)
At 31 December
1,153
314
1,467
1,927
199
2,126
Non-current 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. Movements arising on the translation of overseas net assets for consolidation into the Group accounts are recorded as
Exchange adjustments. Net fair value movements include the impact of other exchange gains of £134 million through Other
comprehensive income and £nil through profit or loss (2021: gains of £15 million through Other comprehensive income and £2
million through profit or loss). Other investments include listed investments of £823 million (2021: £1,736 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 2022 were in Vir Biotechnology, Inc. which had a
fair value at 31 December 2022 of £180 million (2021: £266 million) and Nimbus Therapeutics, LLC which had a fair value at 31
December 2022 of £139 million (2021: £32 million). The fair value of the investment in CureVac N.V., disclosed as a significant
investment at 31 December 2021, was £75 million at 31 December 2022 (2021: £380 million). 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.
On disposal of equity investments measured at FVTOCI, the accumulated fair value movements are reclassified from the fair
value reserve to retained earnings. Investments measured at FVTOCI with a fair value of £220 million (2021: £240 million) were
disposed of during the year. The cumulative gain on these investments after tax was £14 million (2021: £132 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).
Proof 6 (e) 08.03.2023 at 1 pm
214
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
24. Other non-current assets
2022
£m
2021
£m
Amounts receivable under insurance contracts
857
849
Pension schemes in surplus
229
741
Other receivables
108
86
1,194
1,676
Amounts receivable under insurance contracts are held at cash surrender value with movements through profit or loss.
Within the other receivables of £108 million (2021: £86 million), £34 million (2021: £44 million) is classified as financial assets of
which £13 million (2021: £23 million) is classified as fair value through profit or loss. On the remaining balance of £21 million
(2021: £21 million), the expected credit loss allowance was immaterial at 31 December 2022 and 2021.
25. Inventories
2022
£m
2021
£m
Raw materials and consumables
1,576
1,772
Work in progress
2,286
1,889
Finished goods
1,284
2,122
5,146
5,783
26. Trade and other receivables
2022
£m
2021
£m
Trade receivables, net of loss allowance
5,452
6,246
Accrued income
19
12
Prepayments
343
315
Interest receivable
2
3
Employee loans and advances
11
18
Other receivables
1,226
1,266
7,053
7,860
There were no trade or other receivable balances (2021: £nil) due from associates and joint ventures. The most significant component of
other receivables comprises receivables for taxes other than corporate income tax. Other significant balances within other receivables are
royalties receivable and amounts receivable from collaboration partners.
Loss allowance - trade receivables
2022
£m
2021
£m
At 1 January
150
151
Exchange adjustments
9
(3)
Charge for the year
35
52
Transfer to assets held for sale
(60)
–
Subsequent recoveries of amounts provided for
(19)
(39)
Utilised
(24)
(11)
At 31 December
91
150
Of the total trade receivables balance, £58 million (2021: £86 million) is considered credit impaired, against which a £26 million (2021: £4
million) expected credit loss allowance has been applied. No amount was purchased or originated credit impaired.
Within the other receivables of £1,226 million (2021: £1,266 million), £683 million (2021: £553 million) is classified as financial assets of which
£nil (2021: £nil) is classified as held at fair value through profit or loss. At 31 December 2022 an expected credit loss allowance of £6 million
(2021: £5 million) was recognised in respect of financial assets with no charge reported in profit or loss during the year.
For more discussion on credit risk practices, please refer to Note 44.
Proof 6 (e) 08.03.2023 at 1 pm
215
GSK Annual Report 2022
Notes to the financial statements continued
27. Cash and cash equivalents
2022
£m
2021
£m
Cash at bank and in hand
879
1,427
Short-term deposits
2,844
2,847
3,723
4,274
During 2022 £1,421 million was transferred to assets held for sale relating to the Consumer Healthcare business that was
demerged during the year (see Note 41). Cash and cash equivalents included £0.2 billion (2021: £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.
28. Assets held for sale
2022
£m
2021
£m
Property, plant and equipment
83
22
Other
15
–
98
22
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.
In Q2 2022, the Consumer Healthcare business was classified as held for sale. Following completion of the demerger of the
Consumer Healthcare business in Q3 2022, a total of £12.9 billion of net assets and liabilities were distributed/derecognised as
part of the gain on the demerger.
Proof 6 (e) 08.03.2023 at 1 pm
216
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
29. Trade and other payables
2022
£m
2021
£m
Trade payables
3,866
4,535
Wages and salaries
1,488
1,470
Social security
126
152
ViiV Healthcare put option
1,093
1,008
Other payables
418
518
Deferred income
299
307
Customer return and rebate accruals
6,627
6,322
Other accruals
2,346
3,242
16,263
17,554
Trade and other payables included £nil (2021: £nil) due to associates and joint ventures. The Group provides limited supplier
financing arrangements to certain customers. The amounts involved at 31 December 2022 were not material.
Revenue recognised in the year that was included in deferred income at 1 January 2022 was £85 million (2021: £29 million).
Customer return and rebate accruals are provided for by the Group at the point of sale in respect of estimated rebates, discounts
or allowances payable to customers as more fully described in the Group financial review on page 94. At 31 December 2022,
Customer return and rebate accruals included £5,717 million (2021: £5,044 million) in respect of US Commercial Operations.
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
2022
£m
2021
£m
10% increase in sales forecasts*
100
89
15% increase in sales forecasts*
149
133
10% decrease in sales forecasts*
(99)
(89)
15% decrease in sales forecast*
(149)
(134)
1% (100 basis points) increase in discount rate
(32)
(30)
1.50% (150 basis points) increase in discount rate
(48)
(45)
1% (100 basis points) decrease in discount rate
35
34
1.50% (150 basis points) decrease in discount rate
53
50
10 cent appreciation of US Dollar
66
55
15 cent appreciation of US Dollar
103
81
10 cent depreciation of US Dollar
(56)
(47)
15 cent depreciation of US Dollar
(80)
(64)
10 cent appreciation of Euro
29
26
15 cent appreciation of Euro
46
41
10 cent depreciation of Euro
(24)
(22)
15 cent depreciation of Euro
(35)
(32)
*
The sales forecast is for ViiV Healthcare sales only in respect of the ViiV Healthcare put option.
Other accruals includes interest accrued on financial liabilities at amortised cost of £207 million (2021: £244 million).
An explanation of the accounting for ViiV Healthcare is set out on page 71.
Proof 6 (e) 08.03.2023 at 1 pm
217
GSK Annual Report 2022
Notes to the financial statements continued
30. Net debt
Listing exchange
2022
£m
2021
£m
Current assets:
Liquid investments
67
61
Cash and cash equivalents
3,723
4,274
3,790
4,335
Short-term borrowings:
Commercial paper
(1,191)
(252)
Bank loans, overdrafts and other
(448)
(550)
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)
0.125% € European Medium Term Note 2023
London Stock Exchange
(665)
–
0.000% € European Medium Term Note 2023
London Stock Exchange
(443)
–
0.534% US$ Medium Term Note 2023
New York Stock Exchange
(1,038)
–
Lease liabilities
(167)
(203)
(3,952)
(3,601)
Long-term borrowings:
2.800% US$ US Medium Term Note 2023
New York Stock Exchange
–
(926)
0.125% € Euro Medium Term Note 2023
London Stock Exchange
–
(629)
3.375% US$ US Medium Term Note 2023
New York Stock Exchange
–
(925)
0.000% US$ US Medium Term Note 2023
New York Stock Exchange
–
(204)
0.000% € Euro Medium Term Note 2023
London Stock Exchange
–
(420)
0.534% US$ US Medium Term Note 2023
New York Stock Exchange
–
(926)
3.000% US$ US Medium Term Note 2024
New York Stock Exchange
(829)
(739)
1.375% € Euro Medium Term Note 2024
London Stock Exchange
(884)
(836)
4.000% € Euro Medium Term Note 2025
London Stock Exchange
(663)
(627)
3.625% US$ US Medium Term Note 2025
New York Stock Exchange
(827)
(738)
1.000% € Euro Medium Term Note 2026
London Stock Exchange
(620)
(587)
1.250% € Euro Medium Term Note 2026
London Stock Exchange
(885)
(838)
3.000% € Euro Medium Term Note 2027
London Stock Exchange
(442)
–
3.375% £ Euro Medium Term Note 2027
London Stock Exchange
(306)
(595)
3.875% US$ US Medium Term Note 2028
New York Stock Exchange
(1,450)
(1,294)
1.250% £ Euro Medium Term Note 2028
London Stock Exchange
(744)
(743)
3.375% US$ US Medium Term Note 2029
New York Stock Exchange
(822)
(733)
1.375% € Euro Medium Term Note 2029
London Stock Exchange
(441)
(418)
1.750% € Euro Medium Term Note 2030
London Stock Exchange
(663)
(628)
3.125% € Euro Medium Term Note 2032
London Stock Exchange
(616)
–
5.250% £ Euro Medium Term Note 2033
(1)
London Stock Exchange
(640)
(984)
5.375% US$ US Medium Term Note 2034
London Stock Exchange
(412)
(368)
1.625% £ Euro Medium Term Note 2035
London Stock Exchange
(744)
(744)
6.375% US$ US Medium Term Note 2038
New York Stock Exchange
(2,264)
(2,022)
6.375% £ Euro Medium Term Note 2039
(1)
London Stock Exchange
(695)
(695)
5.250% £ Euro Medium Term Note 2042
London Stock Exchange
(472)
(987)
4.200% US$ US Medium Term Note 2043
New York Stock Exchange
(408)
(364)
4.250% £ Euro Medium Term Note 2045
London Stock Exchange
(366)
(789)
Other long-term borrowings
(1)
(1)
Lease liabilities
(841)
(812)
(17,035)
(20,572)
Net debt
(17,197)
(19,838)
(1)
Partially purchased and cancelled on 13 February 2023.
Proof 6 (e) 08.03.2023 at 1 pm
218
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
30. Net debt
continued
Current assets
Liquid investments are classified as financial assets at amortised cost. At 31 December 2022, they included US Treasury Notes
and other government bonds. The effective interest rate on liquid investments at 31 December 2022 was approximately 0.1%
(2021: approximately 0.1%). Liquid investment balances at 31 December 2022 earning interest at floating rates amount to
£67 million (2021: £2 million). Liquid investment balances at 31 December 2022 earning interest at fixed rates amount to
£nil (2021: £59 million).
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 2022 was approximately 3.1% (2021: approximately 0.6%). Cash and cash
equivalents at 31 December 2022 earning interest at floating and fixed rates amounted to £3,441 million and £10 million
respectively (2021: £3,906 million and £39 million) and non-interest bearing holdings amounted to £272 million (2021: £329 million).
GSK’s policy regarding the credit quality of cash and cash equivalents is set out in Note 44, ‘Financial instruments and related
disclosures’.
Short-term borrowings
GSK has a $10 billion (£8.3 billion) US commercial paper programme, of which $900 million (£748 million) was in issue at 31 December
2022 (2021: $nil). GSK has a £5 billion Euro commercial paper programme, of which €500 million (£443 million) was in issue at
31 December 2022 (2021: €300 million (£252 million)). In February 2022 GSK cancelled the £1.9 billion three year and $2.5 billion
(£2.1 billion) 364 day committed facilities and replaced them with new revolving credit facilities of equivalent size with maturities in
September 2025 and September 2023 respectively. Post separation of the Consumer Healthcare business these facilities were
reduced to £1.6 billion and $2.2 billion (£1.8 billion) respectively.
The weighted average interest rate on commercial paper borrowings at 31 December 2022 was 3.5% (2021: -0.5%).
The weighted average interest rate on current bank loans and overdrafts at 31 December 2022 was 7.8% (2021: 7.9%).
The average effective pre-swap interest rate of notes classified as short-term at 31 December 2022 was 0.4% (2021: 3.0%).
Long-term borrowings
At the year-end, GSK had long-term borrowings of £17.0 billion (2021: £20.6 billion), of which £11.1 billion (2021: £11.7 billion) fell due
in more than five years.
During 2022, three bonds were repaid earlier than original maturity, those being the 2.800% US$ US Medium Term Note 2023,
the 3.375% US$ US Medium Term Note 2023 and the 0.000% US$ US Medium Term Note 2023. Also, during 2022 GSK undertook
a tender on outstanding Sterling Notes, repaying face values of £292 million on the 3.375% £ Euro Medium Term Note 2027, £350
million on the 5.250% £ Euro Medium Term Note 2033, £522 million on the 5.250% £ Euro Medium Term Note 2042 and £429
million on the 4.250% £ Euro Medium Term Note 2045.
The average effective pre-swap interest rate of all notes in issue at 31 December 2022 was approximately 3.5% (2021:
approximately 3.3%).
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.
Both effective rates exclude the impact of one-off premiums associated with the early repayment of the Sterling Notes.
Pledged assets
The Group held pledged investments in US Treasury Notes with a par value of $56 million (£47 million), (2021: $56 million
(£42 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 32,
‘Other provisions’.
Lease liabilities
The maturity analysis of discounted lease liabilities recognised on the Group balance sheet is as follows:
2022
£m
2021
£m
Rental payments due within one year
167
203
Rental payments due between one and two years
201
185
Rental payments due between two and three years
127
120
Rental payments due between three and four years
97
93
Rental payments due between four and five years
80
73
Rental payments due after five years
336
341
Total lease liabilities
1,008
1,015
Proof 6 (e) 08.03.2023 at 1 pm
219
GSK Annual Report 2022
Notes to the financial statements continued
31. Pensions and other post-employment benefits
Pension and other post-employment costs
2022
£m
2021
(a)
£m
2020
(a)
£m
UK pension schemes
114
185
239
US pension schemes
48
40
58
Other overseas pension schemes
154
153
170
Unfunded post-retirement healthcare schemes
53
37
(1)
369
415
466
Analysed as:
Funded defined benefit/hybrid pension schemes
152
231
318
Unfunded defined benefit pension schemes
31
23
30
Unfunded post-retirement healthcare schemes
53
37
(1)
Defined benefit schemes
236
291
347
Defined contribution pension schemes
133
124
119
369
415
466
The costs of the defined benefit pension and post-retirement healthcare schemes are charged in the income statement as follows:
2022
£m
2021
(a)
£m
2020
(a)
£m
Cost of sales
104
106
128
Selling, general and administration
90
136
167
Research and development
42
49
52
236
291
347
(a)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
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 2021 projections
with a long-term rate of improvement of 1.0% 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.
Proof 6 (e) 08.03.2023 at 1 pm
220
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
31. Pensions and other post-employment benefits
continued
The average life expectancy assumed now for an individual at the age of 60 and projected to apply in 2042 for an individual then
at the age of 60 is as follows:
UK
US
Male
Years
Female
Years
Male
Years
Female
Years
Current
27.3
28.2
27.3
28.6
Projected for 2042
28.5
29.5
28.8
30.1
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 36% in return-seeking assets and 64% 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 2022,
the value of the insurance contract was £402 million (2021: £570 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.
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 were still
active at 1 April 2022 received 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. As announced, the plan was closed to new entrants at 31 March
2022. From 1 April 2022, former defined benefits plans employees were transferred to the defined contribution plans.
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
2022
% pa
2021
% pa
2020
% pa
2022
% pa
2021
% pa
2020
% pa
2022
% pa
2021
% pa
2020
% pa
Rate of increase of future earnings
n/a
2.00
2.00
n/a
n/a
n/a
3.40
2.90
2.60
Discount rate
4.80
2.00
1.40
5.30
2.70
2.30
3.40
1.10
0.60
Expected pension increases
3.10
3.20
2.80
n/a
n/a
n/a
2.40
2.30
2.10
Cash balance credit/conversion rate
n/a
n/a
n/a
3.90
2.00
1.90
0.80
0.20
0.10
Inflation rate
3.10
3.20
2.80
2.50
2.25
2.00
2.30
1.90
1.30
Sensitivity analysis detailing the effect of changes in assumptions is provided on page 228. The analysis provided reflects the
assumption changes which have the most material impact on the results of the Group.
Proof 6 (e) 08.03.2023 at 1 pm
221
GSK Annual Report 2022
Notes to the financial statements continued
31. Pensions and other post-employment benefits
continued
The amounts recorded in the income statement and statement of comprehensive income for the three years ended 31 December
2022 in relation to the defined benefit pension and post-retirement healthcare schemes were as follows:
Pensions
Post-retirement
benefits
2022
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Amounts charged to operating profit
Current service cost
13
7
126
146
22
Past service cost
6
–
–
6
–
Net interest cost
(11)
20
9
18
32
Gains from settlements
–
–
(22)
(22)
–
Expenses
14
21
–
35
(1)
22
48
113
183
53
Remeasurement gains/(losses) recorded in the statement of
comprehensive income
(1)
(1,169)
36
261
(872)
228
Pensions
Post-retirement
benefits
2021
(2)
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Amounts charged to operating profit
Current service cost
53
9
119
181
17
Past service cost/(credit)
27
2
(10)
19
(3)
Net interest (income)/cost
3
18
7
28
22
Gains from settlements
–
–
(2)
(2)
–
Expenses
15
12
2
29
–
98
41
116
255
36
Remeasurement gains/(losses) recorded in the statement of
comprehensive income
572
98
186
856
68
Pensions
Post-retirement
benefits
2020
(2)
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Amounts charged to operating profit
Current service cost
58
72
125
255
22
Past service cost/(credit)
93
(49)
1
45
(53)
Net interest (income)/cost
3
23
8
34
36
Gains from settlements
–
12
(7)
5
(6)
Expenses
9
–
–
9
–
163
58
127
348
(1)
Remeasurement losses recorded in the statement of
comprehensive income
51
(96)
(45)
(90)
(73)
The amounts included within past service costs in the UK included £6 million (2021
(2)
: £26 million; 2020
(2)
: £23 million) of
augmentation costs which arose from Major restructuring programmes, together with a charge of £nil (2021: £nil; 2020
(2)
: £70 million)
in relation to the impact of the closure of the defined benefit schemes to future accrual.
In 2020, the past service credit of £49 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
(2)
resulted in a credit of £53 million to past service costs in post-
retirement benefits in 2020.
(1)
These numbers do not include remeasurement gains/(losses) related to the demerged Consumer Healthcare business.
(2)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
Proof 6 (e) 08.03.2023 at 1 pm
222
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
31. Pensions and other post-employment benefits
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:
2022
£m
2021
£m
2020
£m
Recognised in Other non-current assets:
Pension schemes in surplus
229
741
183
Recognised in Pensions and other post-employment benefits:
Pension schemes in deficit
(1,585)
(1,870)
(2,287)
Post-retirement benefits
(994)
(1,243)
(1,363)
(2,579)
(3,113)
(3,650)
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 2022
UK
£m
US
£m
Rest of World
£m
Group
£m
Equities:
–
listed
1,351
437
371
2,159
–
unlisted
–
–
2
2
Multi-asset funds
1,101
–
–
1,101
Property:
–
listed
–
–
19
19
–
unlisted
464
140
1
605
Corporate bonds:
–
listed
1,692
779
124
2,595
–
unlisted
–
–
15
15
Government bonds:
–
listed
4,048
723
558
5,329
Insurance contracts
1,003
–
691
1,694
Other (liabilities)/assets
(645)
181
89
(375)
Fair value of assets
9,014
2,260
1,870
13,144
Present value of scheme obligations
(9,117)
(3,030)
(2,353)
(14,500)
Net surplus/(obligation)
(103)
(770)
(483)
(1,356)
Included in Other non-current assets
109
–
120
229
Included in Pensions and other post-employment benefits
(212)
(770)
(603)
(1,585)
(103)
(770)
(483)
(1,356)
Actual return on plan assets
(4,710)
(253)
(550)
(5,513)
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
£211 million (2021: £350 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 £2,376 million at
31 December 2022 (2021: £513 million; 2020: £650 million) is deducted within ‘Other assets’.
Proof 6 (e) 08.03.2023 at 1 pm
223
GSK Annual Report 2022
Notes to the financial statements continued
31. Pensions and other post-employment benefits
continued
At 31 December 2021
UK
£m
US
£m
Rest of World
£m
Group
£m
Equities:
–
listed
3,954
522
731
5,207
–
unlisted
–
–
4
4
Multi-asset funds
1,415
–
–
1,415
Property:
–
listed
–
–
68
68
–
unlisted
502
154
1
657
Corporate bonds:
–
listed
1,503
975
140
2,618
–
unlisted
–
–
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
At 31 December 2020
UK
£m
US
£m
Rest of World
£m
Group
£m
Equities:
–
listed
2,686
539
686
3,911
–
unlisted
–
–
5
5
Multi-asset funds
2,075
–
–
2,075
Property:
–
listed
–
–
57
57
–
unlisted
447
136
2
585
Corporate bonds:
–
listed
1,113
1,066
154
2,333
–
unlisted
–
–
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
Proof 6 (e) 08.03.2023 at 1 pm
224
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
31. 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 2020
12,981
2,789
2,662
18,432
–
Exchange adjustments
–
(86)
138
52
–
Interest income
256
87
29
372
–
Expenses
(9)
(12)
–
(21)
–
Settlements and curtailments
–
–
(20)
(20)
–
Remeasurement
836
72
148
1,056
–
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
133
312
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
–
Exchange adjustments
–
286
122
408
–
Interest income
271
71
28
370
–
Expenses
(14)
(21)
–
(35)
–
Settlements and curtailments
–
–
(8)
(8)
–
Remeasurement
(4,981)
(324)
(578)
(5,883)
–
Employer contributions
755
50
114
919
117
Scheme participants’ contributions
–
–
15
15
18
Transfer to assets held for sale/distribution
–
–
(624)
(624)
–
Benefits paid
(649)
(326)
(105)
(1,080)
(135)
Assets at 31 December 2022
9,014
2,260
1,870
13,144
–
In connection with the demerger of Consumer Healthcare, the 31 December 2020 pension scheme valuations identified cash
funding or technical provisions deficits in three GSK UK Pension Schemes.
During March 2022, GSK transferred 7,004 GSK Consumer Healthcare Holdings Limited (GSKCHH) C Ordinary Shares
(representing 11.03%. (in aggregate) of GSK’s interest in GSKCHH to three Scottish Limited Partnerships (“SLPs”), each providing a
funding mechanism for a separate GSK UK defined benefit pension scheme. As part of the steps relating to the demerger and
separation, the SLPs transferred their applicable portion of GSKCHH C Ordinary Shares to Haleon plc (“Haleon”) in consideration
for shares in Haleon. The SLPs together hold shares representing 7.5% of the total issued share capital of Haleon.
Each pension scheme, through its SLP interest, is entitled to receive a distribution from that SLP in an amount equal to the net
proceeds of sales of Haleon shares, and to receive dividend income on the Haleon shares until it has received an aggregate
amount equal to an agreed threshold (“Proceeds Threshold”). The Proceeds Thresholds total £1,080 million (as increased by
notional interest on the remaining balance from time to time), and payment of this amount would fully fund the cash funding or
“technical provisions” deficits in the three pension schemes shown by the 31 December 2020 valuations.
Once the applicable
Proceeds Threshold has been reached the GSK-controlled General Partner of each SLP is entitled to sell the remaining Haleon
shares held by the SLP and distribute the proceeds to GSK. If a pension scheme does not receive aggregate cash equal to the
applicable Proceeds Threshold within 18 months after separation, then the trustee of that pension scheme will have the ability to
require the SLP to instruct a broker to liquidate any remaining Haleon shares on behalf of the SLP in accordance with an agreed
mandate.
During 2022, the Group made additional funding contributions to the UK pension schemes of £691 million (2021: £44 million; 2020:
£76 million) but no additional funding (2021: £nil; 2020: £nil) to the US schemes.
As at 31 December 2022, total cash contributions totalling £735 million were made towards the Proceeds Thresholds leaving a
principal amount of £345 million outstanding to the UK pension schemes. The cash contributions of £735 million include voluntary
cash contributions made by GSK in Q4 2022 to two of the UK defined benefit pension schemes totalling £334 million in response to
the market volatility in the UK gilt markets.
Proof 6 (e) 08.03.2023 at 1 pm
225
GSK Annual Report 2022
Notes to the financial statements continued
31. Pensions and other post-employment benefits
continued
The outstanding accelerated contributions were collateralised by the creation of three Scottish Limited Partnerships (SLPs), into
which GSK inserted a total of 692,593,037 Haleon ordinary shares across the three SLPs. Each of the three principal UK defined
benefit pension schemes (two benefiting current and former Glaxo Welcome employees, with the third benefiting current and
former SmithKline Beecham employees) has an interest in one of the SLPs as shown below:
Scottish Limited Partnership
General Partner
Limited Partners
GSK (No. 1) Scottish Limited Partnership
GSK GP1 Ltd
GSK LP Ltd
Berkeley Square Pension Trustee Company Ltd acting
on behalf of the GSK Pension Scheme
GSK (No. 2) Scottish Limited Partnership
GSK GP1 Ltd
GSK LP Ltd
Berkeley Square Pension Trustee Company Ltd acting
on behalf of the GSK Pension Fund
GSK (No. 3) Scottish Limited Partnership
GSK GP2 Ltd
GSK LP Ltd
SmithKline Beecham Pension Plan Trustee Ltd acting on
behalf of the SmithKline Beecham Pension Plan
Under each of the SLP partnership agreements, the limited partners have no involvement in the management of the business
and shall not take any part in the control of SLP. The general partner (in all cases, controlled by GSK plc) is responsible for the
management and control of each SLP and, as such, each SLP is consolidated into the results of the Group. Each SLP therefore
takes advantage of the exemption in Regulation 7 of The Partnership (Accounts) Regulations 2008 Act to not prepare and deliver
audited accounts to the UK registrar.
Under the SLP partnership agreement, distributions will be made from partnership income to the defined benefit pension schemes
if equivalent payments have not already been made to the three defined benefit pension schemes by another GSK entity. To date,
£735 million has been paid to the defined benefit pension schemes by GSK under this structure and once contributions under this
structure reach £1,080 million, the defined benefit pension schemes interests’ in the SLPs ends. The remaining economic interest in
the SLPs will be held by GSK LP Ltd, a 100% owned subsidiary of GSK plc. At 31 December 2022, £345 million of these additional
contributions remains to be paid.
Employer contributions for 2023, excluding special funding contributions stated above, are estimated to be approximately
£350 million in respect of defined benefit pension schemes and £100 million in respect of post-retirement benefits.
Pensions
Post-retirement
benefits
Movements in defined benefit obligations
UK
£m
US
£m
Rest of World
£m
Group
£m
Group
£m
Obligations at 1 January 2020
(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
164
439
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)
Exchange adjustments
–
(371)
(124)
(495)
(125)
Service cost
(13)
(7)
(126)
(146)
(22)
Past service cost
(6)
–
–
(6)
–
Interest cost
(260)
(91)
(37)
(388)
(32)
Settlements and curtailments
–
–
29
29
–
Remeasurement
3,812
360
839
5,011
228
Scheme participants’ contributions
–
–
(15)
(15)
(18)
Transfer to assets held for sale/distribution
–
–
621
621
83
Benefits paid
649
326
105
1,080
135
Obligations at 31 December 2022
(9,117)
(3,031)
(2,352)
(14,500)
(994)
Proof 6 (e) 08.03.2023 at 1 pm
226
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
31. Pensions and other post-employment benefits
continued
The defined benefit pension obligation is analysed as follows:
2022
£m
2021
£m
2020
£m
Funded
(13,887)
(19,419)
(20,504)
Unfunded
(613)
(772)
(806)
(14,500)
(20,191)
(21,310)
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 7% (2021: 6.25%) in 2022, grading down to 5% in 2031 and
thereafter. At 31 December 2022, the US post-retirement healthcare scheme obligation was £870 million (2021: £1,059 million;
2020: £1,124 million). Post-retirement benefits are unfunded.
The movement in the net defined benefit liability is as follows:
2022
£m
2021
£m
2020
£m
At 1 January
(1,129)
(2,104)
(1,921)
Exchange adjustments
(87)
65
(18)
Service cost
(146)
(216)
(291)
Past service cost
(6)
(5)
(43)
Interest cost
(18)
(27)
(36)
Settlements and curtailments
21
10
18
Remeasurements:
Return on plan assets, excluding amounts included in interest
(5,883)
424
1,056
(Loss)/gain from change in demographic assumptions
92
(62)
69
Gain/(loss) from change in financial assumptions
5,868
716
(1,340)
Experience (loss)/gain
(949)
(215)
110
Employer contributions
919
312
313
Transfer to assets held for sale/distribution
(3)
–
–
Expenses
(35)
(27)
(21)
At 31 December
(1,356)
(1,129)
(2,104)
The remeasurements included within post-retirement benefits are detailed below:
2022
£m
2021
£m
2020
£m
Gain from change in demographic assumptions
21
19
7
Gain/(loss) from change in financial assumptions
219
35
(93)
Experience gains
(12)
24
4
228
78
(82)
The defined benefit pension obligation analysed by membership category is as follows:
2022
£m
2021
(1)
£m
2020
(1)
£m
Active
1,390
4,196
4,660
Retired
8,540
11,115
11,257
Deferred
4,570
4,880
5,393
14,500
20,191
21,310
The post-retirement benefit obligation analysed by membership category is as follows:
2022
£m
2021
(1)
£m
2020
(1)
£m
Active
306
494
551
Retired
688
748
808
Deferred
–
1
4
994
1,243
1,363
The weighted average duration of the defined benefit obligation is as follows:
2022
years
2021
years
2020
years
Pension benefits
12
15
16
Post-retirement benefits
10
12
12
(1)
Membership numbers are not restated as the disclosure relates to the post-retirement benefit obligations.
Proof 6 (e) 08.03.2023 at 1 pm
227
GSK Annual Report 2022
Notes to the financial statements continued
31. Pensions and other post-employment benefits
continued
Sensitivity analysis
The effect of changes in assumptions used on the benefit obligations and on the 2023 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)
19
Increase/(decrease) in annual post-retirement benefits cost
1
(1)
(Decrease)/increase in pension obligation
(400)
424
(Decrease)/increase in post-retirement benefits obligation
(21)
21
0.75%
increase
£m
0.75%
decrease
£m
(Decrease)/increase in annual pension cost
(60)
52
Increase/(decrease) in annual post-retirement benefits cost
2
(3)
(Decrease)/increase in pension obligation
(1,147)
1,341
(Decrease)/increase in post-retirement benefits obligation
(61)
70
0.25%
increase
£m
0.25%
decrease
£m
Inflation rate
Increase/(decrease) in annual pension cost
17
(15)
Increase/(decrease) in pension obligation
301
(290)
0.75%
increase
£m
0.75%
decrease
£m
Increase/(decrease) in annual pension cost
50
(43)
Increase/(decrease) in pension obligation
945
(827)
1 year
increase
£m
Life expectancy
Increase in annual pension cost
22
Increase in annual post-retirement benefits cost
2
Increase in pension obligation
432
Increase in post-retirement benefits obligation
34
1%
increase
£m
Rate of future healthcare inflation
Increase in annual post-retirement benefits cost
1
Increase in post-retirement benefits obligation
25
Proof 6 (e) 08.03.2023 at 1 pm
228
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
32. Other provisions
Legal
and other
disputes
£m
Major
restructuring
programmes
£m
Employee
related
provisions
£m
Other
provisions
£m
Total
£m
At 1 January 2022
196
652
322
301
1,471
Exchange adjustments
28
21
16
20
85
Charge for the year
145
144
125
141
555
Reversed unused
(12)
(131)
(40)
(78)
(261)
Unwinding of discount
3
1
–
–
4
Utilised
(126)
(277)
(91)
(45)
(539)
Transfer to assets held for sale/distribution
(16)
(60)
(22)
(21)
(119)
Additions through business combinations
–
15
–
8
23
Reclassifications and other movements
–
(8)
(1)
(20)
(29)
Transfer to Pension obligations
–
(6)
–
–
(6)
At 31 December 2022
218
351
309
306
1,184
To be settled within one year
190
259
75
128
652
To be settled after one year
28
92
234
178
532
At 31 December 2022
218
351
309
306
1,184
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 47, ‘Legal proceedings’. Provisions for legal and
other disputes include amounts relating to product liability,
anti-trust, government investigations, contract terminations
and self insurance.
The Group 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, the Group would provide
appropriate disclosures about such cases, but no provision
would be made.
The net charge for the year of £133 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 £3 million in 2022 (2021: £nil).
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.
The Group’s 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 accounts.
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 £190 million of the amount provided
at 31 December 2022 will be settled within one year. At
31 December 2022, it was expected that £nil (2021: £4 million)
of the provision made for legal and other disputes will be
reimbursed by third parties. For a discussion of legal issues,
See Note 47, ‘Legal proceedings’.
Major restructuring programmes
During 2022, the Group had two major restructuring
programmes in progress: the Separation Preparation
programme which focused on preparing for the separation of
GSK into two new companies and the Significant Acquisitions
programme which is focused on the integration of recent
acquisitions.
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 £1 million in 2022
(2021: increased by £2 million).
Pension augmentation includes £6 million relating to the
defined benefit plan arising from staff redundancies,
as shown
in Note 30, ‘Pensions and other post-employment benefits’.
Proof 6 (e) 08.03.2023 at 1 pm
229
GSK Annual Report 2022
Notes to the financial statements continued
Employee related provisions
Employee related provisions include obligations for certain
medical benefits to disabled employees and their spouses in
the US.
At 31 December 2022, the provision for these benefits
amounted to £66 million (2021: £69 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.
Proof 6 (e) 08.03.2023 at 1 pm
230
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
33. 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
Affinivax
£m
Novartis
Vaccines
£m
Other
£m
Total
£m
At 1 January 2020
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 2021
5,359
–
477
33
5,869
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
Remeasurement through income statement
1,431
17
231
(34)
1,645
Exchange movement through reserves
–
2
–
–
2
Initial recognition from business combinations
–
482
–
–
482
Cash payments: operating cash flows
(1,031)
–
(27)
–
(1,058)
Cash payments: investing activities
(69)
–
(10)
–
(79)
At 31 December 2022
5,890
501
673
4
7,068
Of the contingent consideration payable at 31 December 2022, £1,289 million (2021: £958 million) is expected to be paid within
one year.
The consideration payable for the acquisition of the Shionogi-ViiV Healthcare joint venture, Affinivax and the Novartis Vaccines
business are 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% (2021: 8%), the Affinivax
contingent consideration liability is discounted at 9.9% and the Novartis Vaccines contingent consideration liability is discounted
at 7.5% (2021: 7.5%) for commercialised products and at 8.5% (2021: 8.5%) 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 Affinivax contingent consideration is based upon two potential milestone payments, each of $0.6 billion (£0.5 billion) which
will be paid if certain pediatric clinical development milestones are achieved.
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.
2022
2021
Increase/(decrease) in financial liability
and loss/(gain) in Income statement
Shionogi-
ViiV
Healthcare
£m
Affinivax
£m
Novartis
Vaccines
£m
Shionogi-
ViiV
Healthcare
£m
Novartis
Vaccines
£m
10% increase in sales forecasts*
556
n/a
103
506
61
15% increase in sales forecasts*
834
n/a
154
759
92
10% decrease in sales forecasts*
(555)
n/a
(103)
(506)
(57)
15% decrease in sales forecasts*
(833)
n/a
(153)
(759)
(79)
1% increase in discount rate
(199)
(7)
(55)
(198)
(38)
1.5% increase in discount rate
(292)
(10)
(80)
(286)
(55)
1% decrease in discount rate
214
7
65
213
45
1.5% decrease in discount rate
328
11
101
319
70
10 cent appreciation of US Dollar
411
45
22
343
4
15 cent appreciation of US Dollar
645
71
36
495
10
10 cent depreciation of US Dollar
(347)
(38)
(19)
(299)
(2)
15 cent depreciation of US Dollar
(501)
(56)
(27)
(398)
(3)
10 cent appreciation of Euro
109
n/a
23
102
19
15 cent appreciation of Euro
171
n/a
36
160
30
10 cent depreciation of Euro
(91)
n/a
(19)
(85)
(16)
15 cent depreciation of Euro
(130)
n/a
(28)
(124)
(23)
10% increase in probability of milestone success
n/a
82
20
n/a
17
10% decrease in probability of milestone success
n/a
(82)
(10)
n/a
(8)
*
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 71.
Proof 6 (e) 08.03.2023 at 1 pm
231
GSK Annual Report 2022
Notes to the financial statements continued
34. Other non-current liabilities
2022
£m
2021
£m
Accruals
11
13
Deferred income
83
85
Other payables
805
823
899
921
Other payables includes a number of employee-related liabilities including employee savings plans.
35. Contingent liabilities
At 31 December 2022, 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 £58 million (2021: £126 million). At 31 December 2022, £0.5
million (2021: £0.2 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. 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 47, ‘Legal proceedings’.
36. Commitments
Contractual obligations and commitments
2022
£m
2021
£m
Contracted for but not provided in the financial statements:
Intangible assets
10,659
12,082
Property, plant and equipment
743
616
Investments
138
146
Purchase commitments
161
484
Pensions and post-retirement benefits
345
44
Interest on loans
6,322
7,603
Future finance charges on leases
146
153
Lease contracts that have not yet commenced
395
60
18,909
21,188
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 2022 is mainly attributable to the termination of certain agreements, offset by a number of new R&D collaborations including
collaborations with Spero Therapeutics, Inc., Wuxi Biologics Ireland Limited, SpringWorks Therapeutics, Inc. and Arrowhead
Pharmaceuticals, Inc.
In 2022, GSK reached an agreement with the trustees of the UK pension schemes to make additional contributions of £1,080
million, to eliminate the pension deficit identified at the 31 December 2020 actuarial funding valuation. Prior to the Consumer
Healthcare demerger, GSK agreed to collateralise this commitment and accelerate funding with additional contributions
(see Note 31). At 31 December 2022, £345 million of these additional contributions remained unpaid.
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.
Proof 6 (e) 08.03.2023 at 1 pm
232
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
37. Share capital and share premium account
Share Consolidation
Following completion of the Consumer Healthcare business demerger on 18 July 2022, GSK plc Ordinary shares were consolidated to
maintain share price comparability before and after demerger. The consolidation was approved by GSK shareholders at a General
Meeting held on 6 July 2022. Shareholders received 4 new Ordinary shares with a nominal value of 31¼ pence each for every 5 existing
Ordinary share which had a nominal value of 25 pence each. Earnings per share, diluted earnings per share, adjusted earnings per
share and dividends per share were retrospectively adjusted to reflect the Share Consolidation in all the periods presented.
Ordinary shares of 25p each pre-share consolidation
Ordinary shares of 31¼p each post-share consolidation
Share
premium
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
–
29
Ordinary 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
Impact of share consolidation
(1,077,403,011)
–
–
Issued under employee share schemes
1,731,293
–
25
Ordinary shares acquired by ESOP Trusts
–
–
114
At 31 December 2022
4,311,343,341
1,347
3,440
At 31 December 2022, of the issued share capital, 59,878,735 shares were held in the ESOP Trusts, 217,124,760 shares were held as
Treasury shares and 4,034,339,846 shares were in free issue. All issued shares are fully paid and there are no shares authorised
but not in issue. The nominal, carrying and market values of the shares held in the ESOP Trusts are disclosed in Note 45,
‘Employee share schemes’.
38. Movements in equity
Retained earnings and other reserves amounted to £5,811 million at 31 December 2022 (2021: £10,407 million; 2020: £9,960 million)
of which £463 million (2021: £476 million; 2020: £440 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 2020
(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
and associates
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)
Exchange movements on overseas net assets and net investment hedges
109
4
(28)
85
Reclassification of exchange movements on liquidation or disposal of overseas subsidiaries
and associates
2
–
–
2
Movement attributable to continuing operations
(692)
(5)
(209)
(906)
Movement attributable to discontinued operations
(a)
263
–
112
375
At 31 December 2022
(429)
(5)
97
(531)
(a)
Includes £(554) million reclassification to the Consolidated income statement of exchange movements related to the demerger of the Consumer Healthcare business.
Proof 6 (e) 08.03.2023 at 1 pm
233
GSK Annual Report 2022
Notes to the financial statements continued
38. Movements in equity
continued
The analysis of other comprehensive income by equity category is as follows:
2022
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
109
4
–
113
Reclassification of exchange movements on liquidation or disposal of subsidiaries
and associates
2
–
–
2
Fair value movements on cash flow hedges
–
(18)
–
(18)
Tax on fair value movements on cash flow hedges
–
9
–
9
Reclassification of cash flow hedges to income
–
14
–
14
Items that will not be reclassified to income statement:
Exchange movements on overseas net assets of non-controlling interests
–
–
(28)
(28)
Fair value movements on equity investments
–
(754)
–
(754)
Tax on fair value movements on equity investments
–
56
–
56
Remeasurement on defined benefit plans
(786)
–
–
(786)
Tax on remeasurement defined benefit plans
211
–
–
211
Fair value movements on cash flow hedges
–
(6)
–
(6)
Other comprehensive (expense)/income for the year from continuing operations
(464)
(695)
(28)
(1,187)
Other comprehensive (expense)/income for the year from discontinued operations
375
(19)
–
356
Total other comprehensive (expense)/income for the year
(89)
(714)
(28)
(831)
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 subsidiaries
and associates
(25)
–
–
(25)
Fair value movements on cash flow hedges
–
5
–
5
Tax on fair value movements on cash flow hedges
–
(8)
–
(8)
Reclassification of cash flow hedges to income statement
–
12
–
12
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 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 subsidiaries
and associates
36
–
–
36
Fair value movements on cash flow hedges
–
(19)
–
(19)
Tax on fair value movements on cash flow hedges
–
(18)
–
(18)
Reclassification of cash flow hedges to income statement
–
54
–
54
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 gains on defined benefit plans
(187)
–
–
(187)
Tax on remeasurement defined benefit plans
69
–
–
69
Other comprehensive (expense)/income for the year
(133)
1,137
(34)
970
Information on net investment hedges is provided in part (d) of Note 44 ‘Financial instruments and related disclosures’.
Proof 6 (e) 08.03.2023 at 1 pm
234
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
38. Movements in equity
continued
The 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 2020
(135)
409
(48)
2,129
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 income and expenses in the year on impairments of equity
investments
168
–
–
–
168
Transferred to retained earnings in the year on disposal of equity investments
–
(139)
–
–
(139)
Net fair value movement in the year
–
(780)
10
–
(770)
At 31 December 2021
(28)
383
(21)
2,129
2,463
Exchange adjustments
(36)
28
12
–
4
Transferred to retained earnings in the year on disposal of equity investments
–
(21)
17
–
(4)
Balances derecognised on demerger
–
–
(169)
–
(169)
Net fair value movement in the year
–
(698)
141
–
(557)
Ordinary shares acquired by ESOP Trusts
(1,200)
–
–
–
(1,200)
Write-down of shares held by ESOP Trusts
911
–
–
–
911
At 31 December 2022
(353)
(308)
(20)
2,129
1,448
Other reserves include various non-distributable merger and pre-merger reserves amounting to £1,849 million at 31 December 2022
(2021: £1,849 million; 2020: £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 2022 (2021: £280 million; 2020: £280 million).
39. 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
available at the latest practicable date in respect of the ViiV Healthcare sub-group is as follows:
2022
£m
2021
£m
2020
£m
Turnover
5,619
4,637
4,848
Profit after taxation
1,528
1,087
762
Other comprehensive income/(expense)
94
(17)
33
Total comprehensive income
1,622
1,070
795
2022
£m
2021
£m
Non-current assets
2,716
2,796
Current assets
3,354
2,711
Total assets
6,070
5,507
Current liabilities
(3,762)
(3,121)
Non-current liabilities
(8,983)
(8,472)
Total liabilities
(12,745)
(11,593)
Net liabilities
(6,675)
(6,086)
2022
£m
2021
£m
2020
£m
Net cash inflow from operating activities
3,442
2,128
2,249
Net cash outflow from investing activities
(174)
(287)
(294)
Net cash outflow from financing activities
(2,718)
(1,608)
(2,483)
Increase/(decrease) in cash and bank overdrafts in the year
550
233
(528)
Proof 6 (e) 08.03.2023 at 1 pm
235
GSK Annual Report 2022
Notes to the financial statements continued
39. Non-controlling interests
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 £1,528 million (2021: £1,087
million; 2020: £762 million) is stated after charging preferential dividends payable to GSK and Pfizer and after a charge of £1,483
million (2021: £1,218 million; 2020: £1,112 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:
2022
£m
2021
£m
2020
£m
Share of profit for the year attributable to non-controlling interest
415
196
223
Dividends paid to non-controlling interest
480
224
419
Non-controlling interest in the Consolidated balance sheet
(611)
(570)
(539)
Consumer Healthcare Joint Venture
GSK held 68% of the Consumer Healthcare sub-group until the demerger on 18 July 2022 (see details in Note 41), giving rise to a
material non-controlling interest. Summarised financial information in respect of the Consumer Healthcare sub-group at 31
December 2021 is as follows:
2021
£m
Non-current assets
29,200
Current assets
5,251
Total assets
34,451
Current liabilities
(4,238)
Non-current liabilities
(3,733)
Total liabilities
(7,971)
Net assets
26,480
The above financial information relates to the former Consumer Healthcare Joint Venture on a stand-alone basis, 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 were included in GSK’s financial statements
in prior years:
2021
£m
2020
£m
Non-controlling interest in the Consolidated balance sheet
6,609
6,538
40. Related party transactions
At 31 December 2022, there were no loans due to GSK from related parties (2021: £4.6 million was due from Medicxi Ventures I LP).
Cash distributions were received from investment in Medicxi Ventures I LP of £6.0 million (2021: Medicxi Ventures I LP of £5.5
million, Longwood Founders Fund, LP of £3.0 million and Apollo Therapeutics LLP of £0.1 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 £21.6 million. At December
2022, the outstanding liability due to Qura was £8.3 million (2021: £10.7 million).
The Group had no other significant related party transactions which might reasonably be expected to influence decisions made
by the users of these Financial Statements.
The aggregate compensation of the Directors and GLT is given in Note 9, ‘Employee costs’.
Proof 6 (e) 08.03.2023 at 1 pm
236
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
41. Acquisitions and disposals
Details of the acquisition and disposal of significant subsidiaries, associates, joint ventures and other businesses are given below:
2022
Business acquisitions
On 1 July 2022, GSK completed the acquisition of 100% of Sierra Oncology, Inc., a California-based, late-stage biopharmaceutical
company focused on targeted therapies for the treatment of rare forms of cancer, for $1.9 billion (£1.6 billion). The main asset is
momelotinib which targets the medical needs of myelofibrosis patients with anaemia. Total transaction costs were £52 million.
On 15 August 2022, GSK completed the acquisition of 100% of Affinivax, Inc. a clinical-stage biopharmaceutical company based
in Cambridge, Boston, Massachusetts focused on pneumococcal vaccine candidates. The consideration for the acquisition
comprised an upfront payment of $2.2 billion (£1.8 billion) as adjusted for working capital acquired paid upon closing and two
potential milestone payments each of $0.6 billion (£0.5 billion) to be paid upon the achievement of certain paediatric clinical
development milestones. The estimated fair value of the contingent consideration payable was £482 million. The values are
provisional and are subject to change. The total transaction costs were £71 million.
Since acquisition, no sales arising from the Sierra Oncology or Affinivax businesses have been included in Group turnover and no
revenue is expected until regulatory approval is received on the acquired assets.
GSK continues to support the ongoing development of the acquired assets and consequently these assets will be loss making until
regulatory approval on these assets is received. The development of these assets has been integrated into the Group’s existing
R&D activities, so it is impracticable to quantify these development costs or the impact on Total profit after taxation for the period.
Goodwill of £1,127 million (£162 million for Sierra Oncology and £965 million for Affinivax), which is not expected to be deductible for
tax purposes, has been recognised. The goodwill represents workforce in place, and specific synergies available to GSK from the
business combinations. The goodwill has been allocated to the Group’s Commercial Operations and R&D segments, (refer to Note 19
‘Goodwill’ for allocation methodology).
Sierra
Oncology
£m
Affinivax
£m
Total
£m
Net assets acquired
Intangible assets
1,497
1,467
2,964
Property, plant and equipment
–
30
30
Right of use assets
1
52
53
Inventory
60
–
60
Trade and other receivables
2
17
19
Cash and cash equivalents
175
109
284
Lease liabilities
(1)
(55)
(56)
Trade and other payables
(40)
(77)
(117)
Taxation
(259)
(236)
(495)
1,435
1,307
2,742
Goodwill
162
965
1,127
Total
1,597
2,272
3,869
Total cash
1,597
1,790
3,387
Fair value of contingent consideration
–
482
482
On 24 November 2022 GSK signed an agreement to buy out the 25% non-controlling interest in Glaxo Saudi Arabia Ltd for
SAR94 million (£21 million), to be paid in 2023.
Proof 6 (e) 08.03.2023 at 1 pm
237
GSK Annual Report 2022
Notes to the financial statements continued
41. Acquisitions and disposals
continued
Demerger of Consumer Healthcare business
On 18 July 2022, GSK plc separated its Consumer Healthcare business from the GSK Group to form Haleon, an independent listed
company. The separation was effected by way of a demerger of 80.1% of GSK’s 68% holding in the Consumer Healthcare business to
GSK shareholders. Following the demerger, 54.5% of Haleon was held in aggregate by GSK shareholders, 6.0% remains held by GSK
(including shares received by GSK’s consolidated ESOP trusts) and 7.5% remains held by certain Scottish Limited Partnerships (SLPs) set
up to provide collateral for a funding mechanism pursuant to which GSK will provide additional funding for GSK’s UK defined benefit
pension schemes (Note 31). The aggregate ownership by GSK (including ownership by the ESOP trusts and SLPs) after the demerger of
13.5% was measured at fair value with changes through profit or loss. Pfizer continued to hold 32% of Haleon after the demerger.
Under IFRIC 17 ‘Distributions of Non-cash Assets to Owners’ a liability and an equity distribution are measured at the fair value of
the assets to be distributed when the dividend is appropriately authorised and it is no longer at the entity’s discretion. The liability
and equity movement, and associated gain on distribution were recognised in Q3 2022 when the demerger distribution was
authorised and occurred.
The asset distributed was the 54.5% ownership of the Consumer Healthcare business. The net carrying value of the Consumer
Healthcare business in the consolidated financial statements, including the retained 13.5% and net of the amount attributable to the
non-controlling interest, was approximately £11.0 billion at the end of June. GSK’s £6.3 billion share of the shareholder loans made in
Q1 2022 in advance of the pre-separation dividends was eliminated in the consolidated financial statements. The assets distributed
were reduced by Consumer Healthcare transactions up to 18 July that principally included pre-separation dividends declared and
settled after the end of Q2 2022 and before 18 July 2022. Those dividends included: £10.4 billion (£7.1 billion attributable to GSK) of
dividends funded by Consumer Healthcare debt that was partially on-lent during Q1 2022 and dividends of £0.6 billion (£0.4 billion
attributable to GSK) from available cash balances.
The fair value of the 54.5% ownership of the Consumer Healthcare business distributed was £15.5 billion. This was measured by
reference to the quoted average Haleon share price over the first five days of trading, this being a fair value measured with
observable inputs which was considered to be representative of the fair value at the distribution date. A gain on distribution of this
fair value less book value of the attributable net assets of the Consumer Healthcare business of £7.7 billion was recorded in the
Income Statement in 2022. There was an additional gain of £2.4 billion to remeasure the retained 13.5% from its book value to fair
value of £3.9 billion using the same fair value methodology as used for the distributed shares. The gain on distribution and on
remeasurement of the retained stake upon demerger was presented as part of discontinued operations. Any future gains or losses on
the retained stake in Haleon will be recognised in continuing operations. In addition, there was a reclassification of the Group’s share
of cumulative exchange differences arising on translation of the foreign currency net assets of the divested subsidiaries and
offsetting net investment hedges from reserves into the Income Statement of £0.6 billion. The total gain on demerger of Consumer
Healthcare was £10.1 billion. These transactions were presented in profit from discontinued operations in 2022.
2022
£m
Fair value of the Consumer Healthcare business distributed (54.5%)
15,526
Fair value of the retained ownership in Haleon plc (13.5%)
3,853
Total fair value
19,379
Carrying amount of the net assets and liabilities distributed/de-recognised
(12,887)
Carrying amount of the non-controlling interest de-recognised
3,038
Gain on demerger before exchange movements and transaction costs
9,530
Reclassification of exchange movements and net investment hedge movements on disposal of overseas subsidiaries
554
Total gain on the demerger of Consumer Healthcare
10,084
Proof 6 (e) 08.03.2023 at 1 pm
238
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
41. Acquisitions and disposals
continued
Consumer Healthcare was presented as a discontinued operation as at 30 June 2022 and disclosed as such in the interim financial
statements. The Consolidated Income Statement and Consolidated Cash Flow Statement distinguish discontinued operations from
continuing operations. Comparative figures have been restated on a consistent basis. Financial information relating to the operations
of Consumer Healthcare for the period is set out below and includes financial information until 18 July 2022.
This financial information differs both in purpose and basis of preparation from the Historical Financial Information and the
Interim Financial Information included in the Haleon prospectus and from that which will be published by Haleon on 2 March
2023. As a result, whilst the two sets of financial information are similar, they are not the same because of certain differences in
accounting and disclosure under IFRS.
Total results
2022
£m
2021
£m
2020
£m
Turnover
5,581
9,418
9,745
Expense
(4,730)
(7,575)
(7,947)
Profit before tax
851
1,843
1,798
Taxation
(235)
(263)
(513)
Tax rate %
27.6%
14.3%
28.5%
(Loss)/profit after taxation from discontinued operations: Consumer Healthcare
616
1,580
1,285
Other gains/(losses) on demerger
2,433
–
–
Remeasurement of discontinued operations distributed to shareholders on demerger
7,651
–
–
Profit after taxation on demerger of discontinued operations
10,700
1,580
1,285
Non-controlling interest in discontinued operations
205
511
409
Earnings attributable to shareholders from discontinued operations
10,495
1,069
876
Earnings per share from discontinued operations
260.6p
26.7p
22.0p
Other business disposals
There were no other material business disposals in 2022.
Cash flows
Business
acquisitions
£m
Business
disposals
- demerger
£m
Business
disposals
- other
£m
Cash consideration
(3,392)
–
–
Net deferred consideration paid
–
–
(34)
Cash and cash equivalents (divested)/acquired
284
(933)
(9)
(3,108)
(933)
(43)
Transaction costs paid
(79)
(141)
–
Cash (outflow)/inflow
(3,187)
(1,074)
(43)
Cash consideration for business acquisitions included £5 million related to other business acquisition activity.
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
Proof 6 (e) 08.03.2023 at 1 pm
239
GSK Annual Report 2022
Notes to the financial statements continued
41. Acquisitions and disposals
continued
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
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.
Proof 6 (e) 08.03.2023 at 1 pm
240
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
41. Acquisitions and disposals
continued
The profit on the disposal of the businesses in the year of £2,795 million was calculated as follows:
Horlicks
divestment
£m
Other
(1)
£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
143
Intangible assets
15
103
118
Property, 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
–
240
Reclassification of exchange from other comprehensive income
36
–
36
Total
288
28
316
Gain on disposals
2,792
3
2,795
The 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 (outflow)/inflow
15
259
(4)
(1)
Other includes Consumer Healthcare disposals where the income statement impact is not restated.
Proof 6 (e) 08.03.2023 at 1 pm
241
GSK Annual Report 2022
Notes to the financial statements continued
42. Adjustments reconciling Total profit after tax to operating
cash flows
2022
£m
2021
(1)
£m
2020
(1)
£m
Total profit after tax from continuing operations
4,921
3,516
5,103
Tax on profits
707
83
67
Share of after-tax profits of associates and joint ventures
2
(33)
(33)
Finance expense net of finance income
803
755
842
Depreciation
1,061
1,034
1,004
Amortisation of intangible assets
1,086
1,088
1,046
Impairment and assets written off
481
529
684
Profit on sale of businesses
(36)
(47)
(2,815)
Profit on sale of intangible assets
(185)
(539)
(279)
Loss on sale of investments in associates
–
36
–
Profit on sale of equity investments
(1)
(8)
(69)
Changes in working capital:
Decrease/(increase)in inventories
(269)
51
100
Increase in trade receivables
(158)
(780)
(279)
Increase in trade payables
494
229
132
(Increase) in other receivables
(458)
(382)
(349)
Contingent consideration paid (see Note 33)
(1,058)
(742)
(765)
Other non-cash increase in contingent consideration liabilities
1,628
1,063
1,275
Increase in other payables
(5)
1,505
885
Increase/(decrease) in pension and other provisions
(962)
(299)
428
Share-based incentive plans
346
343
337
Fair value adjustments
(283)
(31)
373
Other
(170)
(122)
(13)
Operating cash flow from continuing operations
7,944
7,249
7,674
Operating cash flow from discontinued operations
932
1,994
2,422
Total cash generated from operations
8,876
9,243
10,096
(1)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare business
(see Note 41).
Proof 6 (e) 08.03.2023 at 1 pm
242
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
43. Reconciliation of net cash flow to movement in net debt
2022
£m
2021
£m
2020
£m
Net debt, at beginning of year, as adjusted
(19,838)
(20,780)
(25,215)
Increase in cash and bank overdrafts
(7,597)
(2,504)
(1,579)
Increase/(decrease) in liquid investments
(1)
(18)
1
Increase in long-term loans
(1,025)
–
(3,298)
Repayment of short-term Notes
5,074
2,304
3,738
Repayment of/(increase in) other short-term loans
(1,021)
(301)
3,594
Repayment of medium term notes (MTNs)
1,594
–
–
Repayment of lease liabilities
202
181
182
Debt of subsidiary undertakings acquired
(24)
–
–
Exchange adjustments
(1,531)
314
(128)
Other non-cash movements
(207)
(134)
(102)
Decrease/(increase) in net debt from continuing operations
(4,536)
(158)
2,408
Decrease/(increase) in net debt from discontinued operations
7,177
1,100
2,027
Total net debt at end of year
(17,197)
(19,838)
(20,780)
Analysis of changes in net debt
At 1 January
2022
£m
Exchange
£m
Other
£m
Interest
expense
£m
Change
in fair value
£m
Reclass-
ifications
£m
Demerger
£m
Cash flow
£m
At
31 December
2022
£m
Liquid investments
61
7
–
–
–
–
(1)
67
Cash and cash equivalents
3,861
99
1
–
–
–
7,496
(7,734)
3,723
Overdrafts
(450)
15
–
–
–
–
–
137
(298)
Liquid investments attributed to
continuing operations
3,411
114
1
–
–
–
7,496
(7,597)
3,425
Liquid investments attributed to
discontinued operations
407
37
–
–
–
–
(7,496)
7,052
–
3,818
151
1
–
–
–
–
(545)
3,425
Debt due within one year:
Commercial paper
(252)
(30)
–
–
–
–
–
(909)
(1,191)
European/US MTN & Bank facilities
(2,596)
(174)
–
–
–
(4,426)
–
5,050
(2,146)
Lease liabilities
(173)
(14)
5
–
–
(186)
–
201
(167)
Other
(52)
(2)
(9)
–
–
–
–
(87)
(150)
Debt due within one year attributed to
continuing operations
(3,073)
(220)
(4)
–
–
(4,612)
–
4,255
(3,654)
Debt due within one year attributed to
discontinued operations
(72)
(3)
(15)
–
–
(3)
1,559
(1,466)
–
(3,145)
(223)
(19)
–
–
(4,615)
1,559
2,789
(3,654)
Debt due after one year:
European/US MTN & Bank facilities
(19,760)
(1,386)
–
(43)
–
4,426
–
569
(16,194)
Lease liabilities
(725)
(59)
(243)
–
–
186
–
–
(841)
Debt due after one year attributed to
continuing operations
(20,485)
(1,445)
(243)
(43)
–
4,612
–
569
(17,035)
Debt due after one year attributed to
discontinued operations
(87)
(777)
(6)
(4)
48
3
10,059
(9,236)
–
(20,572)
(2,222)
(249)
(47)
48
4,615
10,059
(8,667)
(17,035)
Net debt
(19,838)
(2,287)
(267)
(47)
48
–
11,618
(6,424)
(17,197)
Interest payable
(244)
(5)
(33)
(865)
–
–
92
848
(207)
Derivative financial instruments
(22)
–
–
–
670
–
–
(640)
8
Total liabilities from financing activities*
(23,983)
(2,450)
(301)
(912)
718
–
11,710
(5,670)
(20,888)
*
Excluding cash and cash equivalents, overdrafts and liquid investments.
Proof 6 (e) 08.03.2023 at 1 pm
243
GSK Annual Report 2022
Notes to the financial statements continued
43. Reconciliation of net cash flow to movement in net debt
continued
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
5
–
–
(2,694)
2,210
(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)
–
–
–
72
–
(20)
(22)
Total liabilities from financing activities*
(26,441)
342
(157)
(775)
72
–
2,976
(23,983)
*
Excluding cash and cash equivalents, overdrafts and liquid investments.
For further information on significant changes in net debt see Note 30, ‘Net debt’.
Proof 6 (e) 08.03.2023 at 1 pm
244
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
The objective of GSK’s Treasury activities 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 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
£17.2 billion (see Note 30, ‘Net debt’) and total equity, including
items related to non-controlling interests, of £10.1 billion (see
‘Consolidated statement of changes in equity’ on page 184).
Total capital, including that provided by non-controlling
interests, is £27.3 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 2022, GSK had £4 billion of borrowings
repayable within one year and held £3.8 billion of cash and
cash equivalents and liquid investments of which £3.1 billion
was held centrally.
GSK has access to short-term finance under a $10 billion
(£8.3 billion) US commercial paper programme; $900 million
(£748 million) was in issue at 31 December 2022 (2021: $nil).
GSK has access to short-term finance under a £5 billion Euro
commercial paper programme; €500 million (£443 million)
was in issue at 31 December 2022 (2021: €300 million (£252
million)). In February 2022 GSK cancelled the £1.9 billion three
year and $2.5 billion (£2.1 billion) 364 day committed facilities
and replaced them with new revolving credit facilities of
equivalent size with maturities of September 2025 and
September 2023 respectively. Post separation of the Consumer
Healthcare business these facilities were reduced to
£1.6 billion and $2.2 billion (£1.8 billion) respectively.
These committed facilities were undrawn at 31 December
2022. GSK considers this level of committed facilities to be
adequate, given current liquidity requirements.
GSK has a £20.0 billion Euro Medium Term Note programme
and at 31 December 2022, £10.3 billion of notes were in issue
under this programme. The Group also had $9.7 billion
(£8.1 billion) of notes in issue at 31 December 2022 under a US
shelf registration. GSK is currently in the process of renewing its
US shelf registration statement in order to maintain access to
the US debt markets. GSK’s borrowings mature at dates
between 2023 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
GSK’s objective 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. Short-term borrowings
including bank facilities are exposed to the risk of future
changes in market interest rates as are the majority of cash
and liquid investments.
Proof 6 (e) 08.03.2023 at 1 pm
245
GSK Annual Report 2022
Notes to the financial statements continued
44. Financial instruments and related disclosures
continued
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
2022 to be £10,180 million (31 December 2021: £11,417 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 249 for details on the Group’s total financial assets. At 31
December 2022, GSK’s greatest concentration of credit risk
was £1.1 billion with a wholesaler in the US (2021: £0.9 billion
with a wholesaler in the US). See page 247 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 & 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 257 sets out the Group’s
financial assets and liabilities on an offset basis.
Proof 6 (e) 08.03.2023 at 1 pm
246
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
continued
At 31 December 2022, £60 million (2021: £54 million) of cash is categorised as held with unrated or sub-investment grade rated
counterparties (lower than BBB-/Baa3) of which £nil (2021: £7 million) is cash in transit. The remaining exposure is concentrated in
overseas banks used for local cash management or investment purposes, including: £23 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; £6 million with Produbanco in Ecuador;
£2 million with J Trust Royal Bank in Cambodia; £2 million with Banco Do Brasil in Brazil; £1 million with Banco de Honduras in Honduras;
and £1 million with BAC San José in Costa Rica. Of the £49 million of bank balances and deposits held with BBB/Baa rated
counterparties, £1.4 million was held with BBB-/Baa3 rated counterparties, including balances or deposits of £1 million with State Bank
of India 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 2022.
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.
2022
AAA/Aaa
£m
AA/Aa
£m
A/A
£m
BBB/Baa
£m
BB+/Ba1
and below
/unrated
£m
Total
£m
Bank balances and deposits
–
–
1,215
49
60
1,324
US Treasury and Treasury repo only money market funds
146
–
–
–
–
146
Liquidity funds
2,253
–
–
–
–
2,253
Government securities
–
67
–
–
–
67
Third party financial derivatives
–
–
188
–
–
188
Total
2,399
67
1,403
49
60
3,978
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
–
60
–
1
–
61
Third party financial derivatives
–
–
200
–
–
200
Total
1,449
67
2,887
78
54
4,535
Proof 6 (e) 08.03.2023 at 1 pm
GSK’s centrally managed cash reserves amounted to £3.1 billion
at 31 December 2022, all available within three months. This
includes £2.2 billion of cash managed by the Group for ViiV
Healthcare, a 78.3% 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
79% (2021: 75%) of the sales of the US Commercial Operations
business in 2022.
At 31 December 2022, the Group had trade receivables due
from these three wholesalers totalling £3,001 million or 55% of
total trade receivables (2021: £2,430 million or 39%). 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.
This concentration of trade receivables is reflective of standard
market practice in the US pharmaceuticals sector where a
significant portion of sales are made to these three wholesalers,
as disclosed in Note 6. GSK’s assessment is that there is limited
credit risk associated with these customers.
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 (eg Moody’s, Standard & Poor’s)
reports, payment performance history (from trade references,
industry credit groups) and bank references.
247
GSK Annual Report 2022
Notes to the financial statements continued
44. Financial instruments and related disclosures
continued
Trade 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 26,
‘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 2022, £332 million
(2021: £315 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 249 presents the carrying amounts and the
fair values of the Group’s financial assets and liabilities
excluding lease liabilities at 31 December 2022 and
31 December 2021.
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.
Proof 6 (e) 08.03.2023 at 1 pm
248
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
continued
2022
2021
Notes
Carrying
value
£m
Fair
value
£m
Carrying
value
£m
Fair
value
£m
Financial assets measured at amortised cost:
Other non-current assets
b
21
21
21
21
Trade and other receivables
b
3,789
3,789
4,830
4,830
Liquid investments
67
67
61
61
Cash and cash equivalents
1,324
1,324
2,825
2,825
Financial assets measured at fair value through other comprehensive
income (FVTOCI):
Other investments designated at FVTOCI
a
1,153
1,153
1,927
1,927
Trade and other receivables
a,b
2,327
2,327
1,943
1,943
Financial assets mandatorily measured at fair value through profit or loss (FVTPL):
Current equity investments and Other investments
a
4,401
4,401
199
199
Other non-current assets
a,b
13
13
23
23
Trade and other receivables
a,b
50
50
59
59
Held for trading derivatives that are not in a designated and
effective hedging relationship
a,d,e
165
165
83
83
Cash and cash equivalents
a
2,399
2,399
1,449
1,449
Derivatives designated and effective as hedging instruments (fair value movements
through Other comprehensive income)
a,d,e
25
25
123
123
Total financial assets
15,734
15,734
13,543
13,543
Financial liabilities measured at amortised cost:
Borrowings excluding obligations under lease liabilities:
–
bonds in a designated hedging relationship
d
(6,322)
(6,035)
(4,982)
(5,311)
–
other bonds
(12,017)
(11,930)
(17,373)
(20,746)
–
bank loans and overdrafts
(447)
(447)
(550)
(550)
–
commercial paper in a designated hedging relationship
(443)
(443)
(252)
(252)
–
other commercial paper
(748)
(748)
–
–
–
other borrowings
(2)
(2)
(1)
(1)
Total borrowings excluding lease liabilities
f
(19,979)
(19,605)
(23,158)
(26,860)
Trade and other payables
c
(14,065)
(14,065)
(15,431)
(15,431)
Other provisions
d
(63)
(63)
(113)
(113)
Other non-current liabilities
c
(84)
(84)
(52)
(52)
Financial liabilities mandatorily measured at fair value through profit or loss (FVTPL):
Contingent consideration liabilities
a,c
(7,068)
(7,068)
(6,076)
(6,076)
Held for trading derivatives that are not in a designated and
effective hedging relationship
a,d,e
(77)
(77)
(171)
(171)
Derivatives designated and effective as hedging instruments (fair value movements
through Other comprehensive income)
a,d,e
(106)
(106)
(57)
(57)
Total financial liabilities excluding lease liabilities
(41,442)
(41,068)
(45,058)
(48,760)
Net financial assets and financial liabilities excluding lease liabilities
(25,708)
(25,334)
(31,515)
(35,217)
The valuation methodology used to measure fair value in the above table is described and categorised on page 248.
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 251 to 252.
Proof 6 (e) 08.03.2023 at 1 pm
249
GSK Annual Report 2022
Notes to the financial statements continued
44. Financial instruments and related disclosures
continued
Fair value of investments in GSK shares
At 31 December 2022, the Employee Share Ownership Plan (ESOP) Trusts held GSK shares with a carrying value of £354 million
(2021: £28 million) and a market value of £861 million (2021: £373 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 2022, 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 2022, GSK held Treasury shares at a cost of £3,797 million (2021: £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 investments which provide access to
biotechnology developments of potential interest.
At 31 December 2022
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
823
–
330
1,153
Trade and other receivables
–
2,327
–
2,327
Financial assets mandatorily measured at fair value through profit or loss (FVTPL):
Current equity investments and Other investments
4,087
–
314
4,401
Other non-current assets
–
–
13
13
Trade and other receivables
–
50
–
50
Held for trading derivatives that are not in a designated and effective hedging relationship
–
165
–
165
Cash and cash equivalents
2,399
–
–
2,399
Derivatives designated and effective as hedging instruments (fair value movements through OCI)
–
25
–
25
7,309
2,567
657
10,533
Financial liabilities at fair value
Financial liabilities mandatorily measured at fair value through profit or loss (FVTPL):
Contingent consideration liabilities
–
–
(7,068)
(7,068)
Held for trading derivatives that are not in a designated and effective hedging relationship
–
(77)
–
(77)
Derivatives designated and effective as hedging instruments (fair value movements through OCI)
–
(106)
–
(106)
–
(183)
(7,068)
(7,251)
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
6
83
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)
Proof 6 (e) 08.03.2023 at 1 pm
250
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
continued
Movements in the year for financial instruments measured using Level 3 valuation methods are presented below:
2022
£m
2021
£m
At 1 January
(5,657)
(5,064)
Exchange adjustments
46
4
Net losses recognised in the income statement
(1,627)
(1,024)
Net gains recognised in other comprehensive income
91
185
Contingent consideration related to business acquisitions in the period
(482)
–
Settlement of contingent consideration liabilities
1,137
856
Additions
97
99
Disposals and settlements
(16)
(19)
Transfers from Level 3
–
(694)
At 31 December
(6,411)
(5,657)
Of the total net losses of £1,627 million (2021: £1,024 million) attributable to Level 3 financial instruments which were recognised in
the income statement, £1,623 million (2021: £1,024 million) were in respect of financial instruments which were held at the end of
the year and were reported in Other operating income/expense. Charges of £1,431 million (2021: £1,026 million) arose from
remeasurement of the contingent consideration payable for the acquisition of the former Shionogi-ViiV Healthcare joint venture
and £231 million (2021: £32 million) arose from remeasurement of the contingent consideration payable for the acquisition of the
Novartis Vaccines business. The acquisition of Affinivax in 2022 resulted in the additon of £482 million of contingent consideration
to Level 3 financial liabilities, with a further £17 million remeasurement charge arising for the period between acquisition and 31
December 2022. There were no transfers into or out of Level 3 financial instruments in the year (2021 – transfers related to equity
instruments which transferred to a Level 1 valuation methodology as a result of listing on a recognised stock exchange during the
year). Movements arising on the translation of overseas net assets for consolidation into the Group accounts are recorded as
Exchange adjustments. Net gains and losses include the impact of other exchange movements.
Financial liabilities measured using Level 3 valuation methods at 31 December included £5,890 million (2021: £5,559 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. A further £673 million (2021: £479 million) is 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. As a result of the Group’s acquisition of Affinivax in 2022, contingent consideration payable of £501
million is recognised at 31 December 2022. This consideration is expected to be paid over a number of years and will vary in line
with the achievement of certain development milestones and movements in the USD/GBP exchange rate. Sensitivity analysis on
these balances is provided in Note 33, ‘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.
2022
2021
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 26)
50
2,327
3,789
6,166
887
7,053
59
1,943
4,830
6,832
1,028
7,860
Other non-current assets
(Note 24)
13
–
21
34
1,160
1,194
23
–
21
44
1,632
1,676
63
2,327
3,810
6,200
2,047
8,247
82
1,943
4,851
6,876
2,660
9,536
Trade and other receivables include trade receivables of £5,452 million (2021: £6,246 million). The Group has portfolios in each of the
three business models under IFRS 9: £50 million (2021: £59 million), measured at FVTPL, is held to sell the contractual cash flows as
the receivables will be sold under a factoring arrangement, £2,327 million (2021: £1,943 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 £3,075 million (2021:
£4,244 million), measured at amortised cost, is held to collect the contractual cash flows and there is no factoring agreement in
place.
Proof 6 (e) 08.03.2023 at 1 pm
251
GSK Annual Report 2022
Notes to the financial statements continued
44. Financial instruments and related disclosures
continued
(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.
2022
2021
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 29)
–
(14,065)
(14,065)
(2,198)
(16,263)
–
(15,431)
(15,431)
(2,123)
(17,554)
Other provisions
(Note 32)
–
(63)
(63)
(1,121)
(1,184)
–
(113)
(113)
(1,358)
(1,471)
Contingent consideration
liabilities (Note 33)
(7,068)
–
(7,068)
–
(7,068)
(6,076)
–
(6,076)
–
(6,076)
Other non-current
liabilities
(Note 34)
–
(84)
(84)
(815)
(899)
–
(52)
(52)
(869)
(921)
(7,068)
(14,212)
(21,280)
(4,134)
(25,414)
(6,076)
(15,596)
(21,672)
(4,350)
(26,022)
(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:
2022
Fair value
2021
Fair value
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Non-current
Cash flow hedges – Interest rate swap contracts
(principal amount – £nil (2021: £1,996 million))
–
–
12
(1)
Current
Cash flow hedges – Foreign exchange contracts
(principal amount – £167 million (2021: £160 million))
5
–
–
(3)
Net investment hedges – Foreign exchange contracts
(principal amount – £7,197 million (2021: £5,469 million))
20
(106)
111
(53)
Derivatives designated and effective as hedging instruments
25
(106)
123
(57)
Non-current
Embedded and other derivatives
–
–
6
–
Current
Foreign exchange contracts
(principal amount – £5,908 million (2021: £9,728 million))
163
(76)
77
(169)
Embedded and other derivatives
2
(1)
–
(2)
Derivatives classified as held for trading
165
(77)
83
(171)
Total derivative instruments
190
(183)
206
(228)
Proof 6 (e) 08.03.2023 at 1 pm
252
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
continued
Fair value hedges
At 31 December 2022 and 31 December 2021, the Group had no designated fair value hedges.
Net investment hedges
At 31 December 2022, 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), Singaporean (SGD),
Canadian (CAD) and Japanese (JPY) foreign operations as shown in the table above.
The carrying value of bonds on page 249 included £6,322 million (2021: £4,982 million) that were designated as hedging
instruments in net investment hedges.
Cash flow hedges
During 2021 and 2022, 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, and to hedge foreign currency
payments due on collaboration or licensing arrangements.
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
and in the current year. 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. No ineffectiveness
was recorded from cash flow hedges in 2022 (2021: £nil). No ineffectiveness was recorded from net investment hedges (2021: £nil).
2022
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
1.23
USD
100
2
2
3 to 6 months
1.16
EUR
50
2
2
Over 6 months
1.15
EUR
24
1
1
Sell foreign currency
Less than 3 months
1.14
EUR
(7)
–
–
167
5
5
Proof 6 (e) 08.03.2023 at 1 pm
253
GSK Annual Report 2022
Notes to the financial statements continued
44. Financial instruments and related disclosures
continued
2022
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
1.14
EUR
6,559
(103)
(317)
160.90
JPY
194
(3)
(9)
Over 6 months
1.57
CAD
270
18
15
1.59
SGD
174
2
1
Borrowings
Less than 3 months
EUR
293
(293)
(4)
3 to 6 months
EUR
150
(150)
(3)
Over 6 months
EUR
6,341
(6,322)
(300)
13,981
(6,851)
(617)
2022
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
Balance in cash flow hedge
reserve arising from hedging
relationships for which hedge
accounting is no longer
applied
£m
Cash flow hedges
Variability in cash flows from a highly probable forecast transaction
(2)
2
–
Variability in cash flows from foreign exchange exposure arising on
Euro denominated coupon payments relating to debt issued
(3)
2
–
Net investment hedges
Net investment in foreign operations
617
(1,120)
–
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
EUR
48
(1)
(1)
Over 6 months
1.17
EUR
23
–
–
160
(3)
(1)
2021
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
5,348
58
578
SGD
–
–
55
155.19
JPY
121
–
15
Borrowings
Less than 3 months
EUR
252
(252)
11
Over 6 months
EUR
4,998
(4,982)
459
10,719
(5,176)
1,118
Proof 6 (e) 08.03.2023 at 1 pm
254
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
continued
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)
£3 million (2021: £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:
2022
Amount reclassified to profit or loss
Amount reclassified to balance sheet
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
Due to
hedged item
affecting
profit or loss
£m
Line item in
profit or loss
in which
reclassification
adjustment
is included
Due to hedged
item affecting
balance sheet
£m
Line item
in balance
sheet in which
reclassification
adjustment
is included
Cash flow hedges
Variability in cash flows from
a highly probable forecast
transaction
(5)
–
Finance
income or
expense
–
–
–
8
Intangible
assets
Variability in cash flows from
foreign exchange exposure
arising on Euro denominated
coupon payments relating to
debt issued
4
–
Finance
income or
expense
–
(2)
Finance
income or
expense
–
–
Net investment hedges
Net investment in foreign
operations
(617)
–
Finance
income or
expense
–
194 Discontinued
operations
(1)
–
–
2021
Amount reclassified to profit or loss
Amount reclassified to balance sheet
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
Due to
hedged item
affecting
profit or loss
£m
Line item in
profit or loss
in which
reclassification
adjustment
is included
Due to hedged
item affecting
balance sheet
£m
Line item
in balance
sheet 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 or
expense
–
–
Finance
income or
expense
–
–
Net investment hedges
Net investment in foreign
operations
1,117
–
Finance
income or
expense
–
(7)
Finance
income or
expense
–
–
(1)
Reclassified to the Consolidated income statement on the demerger of the Consumer Healthcare business.
Proof 6 (e) 08.03.2023 at 1 pm
255
GSK Annual Report 2022
Notes to the financial statements continued
44. Financial instruments and related disclosures
continued
Interest 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 at 31 December 2022. At 31 December 2021, the interest rate risk on an element of
future debt issuance had been managed by entering into forward starting interest rate swaps, effectively to lock in the interest
rates on the debt in advance. These were closed out at the time of issuing the debt, and the resulting gain or loss held in the Cash
flow hedge reserve and reclassified to income statement as the interest payments on the debt impacted the income statement
until the debt was derecognised on demerger of the Consumer Healthcare business in July 2022.
Forward starting interest rate swaps
The forward starting interest rate contracts, exchanging floating interest for fixed interest, were 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 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. There were no such swaps at 31 December 2022. 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.
£24 million (2021: £11 million) of balances in the cash flow hedge reserve arise from hedge relationships for which hedge
accounting is no longer applied.
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)
Proof 6 (e) 08.03.2023 at 1 pm
256
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
continued
The following table details the effectiveness of the hedging relationships and the amounts reclassified from the hedging reserve to profit
or loss:
2022
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
Due to
hedged future
cash flows
no longer
expected to
occur
£m
Due to
hedged item
affecting
profit or loss
£m
Line item
in profit or loss
in which
reclassification
adjustment
is included
Cash flow hedges
Pre-hedging of long-term interest rates:
Matured in the past
(23)
–
Finance
income or
expense
–
3
Finance
income or
expense
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
Due to
hedged future
cash flows
no longer
expected to
occur
£m
Due to
hedged item
affecting
profit or loss
£m
Line item
in profit or loss
in which
reclassification
adjustment
is included
Cash flow hedges
Variability in cash flows
(11)
–
Finance
income or
expense
–
17
Finance
income or
expense
Pre-hedging of long-term interest rates:
Matured in the past
–
–
Finance
income or
expense
–
2
Finance
income or
expense
5-10 years
4
–
–
–
10-30 years
3
–
–
–
>30 years
4
–
–
–
(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 2022 and 31 December 2021. The column ‘Net
amount’ shows the impact on the Group’s balance sheet if all offset rights were exercised.
At 31 December 2022
Gross
financial
assets/
(liabilities)
£m
Gross
financial
(liabilities)/
assets set off
£m
Net financial
assets/
(liabilities) per
balance sheet
£m
Related
amounts not
set off in the
balance sheet
£m
Net
£m
Financial assets
Trade and other receivables
6,166
–
6,166
–
6,166
Derivative financial instruments
190
–
190
(163)
27
Financial liabilities
Trade and other payables
(14,065)
–
(14,065)
–
(14,065)
Derivative financial instruments
(183)
–
(183)
163
(20)
Proof 6 (e) 08.03.2023 at 1 pm
257
GSK Annual Report 2022
Notes to the financial statements continued
44. Financial instruments and related disclosures
continued
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
balance
£m
Financial assets
Trade and other receivables
6,851
(19)
6,832
(3)
6,829
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)
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.
2022
2021
Total
debt
£m
Total
£m
Floating and fixed rate debt less than one year
(3,785)
(3,398)
Between one and two years
(1,714)
(4,030)
Between two and three years
(1,490)
(1,576)
Between three and four years
(1,505)
(1,365)
Between four and five years
(748)
(1,425)
Between five and ten years
(4,736)
(4,411)
Greater than ten years
(6,001)
(6,953)
Total
(19,979)
(23,158)
Original issuance profile:
Fixed rate interest
(18,355)
(22,355)
Floating rate interest
(1,624)
(803)
(19,979)
(23,158)
Proof 6 (e) 08.03.2023 at 1 pm
258
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
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.
2022
2021
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
99
5
15 cent appreciation of the US Dollar
155
8
10 cent appreciation of the Euro
(7)
(26)
15 cent appreciation of the Euro
(12)
(41)
10 yen appreciation of the Yen
–
–
15 yen appreciation of the Yen
(1)
–
2022
2021
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
(84)
(4)
15 cent depreciation of the US Dollar
(121)
(6)
10 cent depreciation of the Euro
6
22
15 cent depreciation of the Euro
9
32
10 yen depreciation of the Yen
–
–
15 yen depreciation of the Yen
–
–
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.
2022
2021
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
(1,290)
(964)
15 cent appreciation in Euro
(2,034)
(1,515)
2022
2021
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
1,080
814
15 cent depreciation of the Euro
1,557
1,176
Proof 6 (e) 08.03.2023 at 1 pm
259
GSK Annual Report 2022
Notes to the financial statements continued
44. Financial instruments and related disclosures
continued
The 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 30 adjusted for the effects of foreign exchange derivatives that are not part of
net debt but affect future foreign currency cash flows.
2022
2021
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
(999)
(767)
15
cent appreciation of the US Dollar
(1,570)
(1,199)
10 cent appreciation of the Euro
11
444
15 cent appreciation of the Euro
17
698
10 yen appreciation of the Yen
13
17
15 yen appreciation of the Yen
20
26
2022
2021
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
846
661
15 cent depreciation of the US Dollar
1,222
959
10 cent depreciation of the Euro
(9)
(375)
15 cent depreciation of the Euro
(13)
(542)
10 yen depreciation of the Yen
(12)
(15)
15 yen depreciation of the Yen
(17)
(21)
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. A 1% (100 basis points) movement in USD interest rates would cause an increase of £nil
to equity (2021: £197 million). A 1.5% (150 basis points) movement in USD interest rates would cause an increase of £nil to equity
(2021: £297 million). A 1% (100 basis points) or 1.5% (150 basis points) movement in EUR or Sterling interest rates is not deemed to
have a material effect on equity.
2022
2021
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
36
(25)
1.5% (150 basis points) increase in Sterling interest rates
55
(38)
1% (100 basis points) increase in US Dollar interest rates
(34)
11
1.5% (150 basis points) increase in US Dollar interest rates
(51)
17
1% (100 basis points) increase in Euro interest rates
(13)
3
1.5% (150 basis points) increase in Euro interest rates
(19)
5
Proof 6 (e) 08.03.2023 at 1 pm
260
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
44. Financial instruments and related disclosures
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 2022
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
(3,786)
(594)
(167)
(25)
(15,362)
(19,934)
Between one and two years
(1,717)
(570)
(201)
(22)
(1,097)
(3,607)
Between two and three years
(1,496)
(531)
(127)
(19)
(1,034)
(3,207)
Between three and four years
(1,508)
(489)
(97)
(15)
(1,277)
(3,386)
Between four and five years
(751)
(472)
(80)
(13)
(1,008)
(2,324)
Between five and ten years
(4,765)
(1,810)
(201)
(41)
(2,641)
(9,458)
Greater than ten years
(6,063)
(1,856)
(135)
(11)
(1,134)
(9,199)
Gross contractual cash flows
(20,086)
(6,322)
(1,008)
(146)
(23,553)
(51,115)
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)
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.
2022
2021
Gross cash inflows
Gross cash outflows
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
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
Less than one year
–
24,418
–
(24,410)
–
41,252
(13)
(41,290)
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
–
24,418
–
(24,410)
351
41,252
(337)
(41,290)
Proof 6 (e) 08.03.2023 at 1 pm
261
GSK Annual Report 2022
Notes to the financial statements continued
45. 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 GSK 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 GSK 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 GSK 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 GSK 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 value of the plans for participating employees has been maintained after the demerger of the Consumer Healthcare business
through the effect of the share consolidation (see Note 37). The total charge for share-based incentive plans in 2022 was £314
million (2021
(1)
: £345 million; 2020
(1)
: £330 million). Of this amount, £243 million (2021
(1)
: £258million; 2020
(1)
: £266 million) arose
from the Share Value Plan. See Note 9, ‘Employee Costs’ for further details.
(1)
The 2021 and 2020 comparatives have been restated to reflect on a consistent basis from those previously published to reflect the demerger of the Consumer Healthcare
business. See Note 41.
GSK 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 3.2% (2021: 3.8%; 2020: 5.0%) over the
duration of the award.
Number of shares and ADS issuable
Shares
(1)
Number (000)
Weighted
fair value
ADS
(1)
Number (000)
Weighted
fair value
At 1 January 2020
29,459
15,850
Awards granted
11,115
£13.58
6,633
$34.43
Awards exercised
(10,284)
(5,353)
Awards cancelled
(1,416)
(1,014)
At 31 December 2020
28,874
16,116
Awards granted
11,220
£13.28
6,358
$36.68
Awards exercised
(10,074)
(5,240)
Awards cancelled
(1,776)
(1,705)
At 31 December 2021
28,244
15,529
Awards granted
10,987
£13.00
6,133
$30.64
Awards exercised
(9,538)
(4,919)
Awards cancelled
(1,718)
(1,314)
At 31 December 2022
27,975
15,429
(1)
The 2021 and 2020 comparatives have been restated to reflect the demerger of the Consumer Healthcare business and aid year on year volume comparability of awards
granted to GSK employees.
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%). For
awards granted from 2022, the performance conditions are based on five measures over a three-year performance period.
These are TSR (30%), pipeline progress (20%), profit measure (20%), sale measure (20%) and ESG environment (10%).
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 2022, awards for the continuing business were made of 4.0 million shares at a weighted fair value of £13.36 and 1.0 million
ADS at a weighted fair value of $35.88. At 31 December 2022, there were outstanding awards over 12.6 million shares and 2.8
million ADS.
Proof 6 (e) 08.03.2023 at 1 pm
262
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
45. Employee share schemes
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:
2022 Grant
2021 Grant
2020 Grant
Risk-free interest rate
3.37%
0.74%
(0.07)%
Dividend yield
3.3%
3.8%
6.2%
Volatility
36%
27%
27%
Expected life
3 years
3 years
3 years
Savings-related options grant price (including 20% discount)
£11.39
£12.07
£10.34
Options outstanding for the Share Save Plan
Savings-related
share option schemes
Number
000
Weighted
exercise
price
At 31 December 2022
5,803
£11.38
Range of exercise prices on options outstanding at year end
£10.34
–
£14.15
Weighted average market price on exercise during year
£16.15
Weighted average remaining contractual life
2.0 years
Options over 1.2 million shares were granted during the year under the savings-related share option scheme at a weighted
average fair value of £4.34. At 31 December 2022, 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 GSK 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.
Shares held for share award schemes
2022
2021
Number of shares (000)
59,814
23,065
£m
£m
Nominal value
19
6
Carrying value
353
27
Market value
860
371
Shares held for share option schemes
2022
2021
Number of shares (000)
65
139
£m
£m
Nominal value
–
–
Carrying value
1
1
Market value
1
2
Proof 6 (e) 08.03.2023 at 1 pm
263
GSK Annual Report 2022
Notes to the financial statements continued
46. Principal Group companies
The following represent the principal subsidiaries and their countries of incorporation of the Group at 31 December 2022. 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
%
Glaxo Group Limited
Glaxo Operations UK Limited
Glaxo Wellcome UK Limited
GlaxoSmithKline Capital plc
GlaxoSmithKline Export Limited
GlaxoSmithKline Finance plc
GlaxoSmithKline Holdings Limited
(a)
GlaxoSmithKline IHC Limited
GlaxoSmithKline Intellectual Property (No.2) Limited
GlaxoSmithKline Intellectual Property (No.3) Limited
GlaxoSmithKline Intellectual Property (No.4) Limited
GlaxoSmithKline Intellectual Property Development Limited
GlaxoSmithKline Intellectual Property Limited
GlaxoSmithKline Research & Development Limited
GlaxoSmithKline Services Unlimited
(a)
GlaxoSmithKline UK Limited
GlaxoSmithKline US Trading Limited
Setfirst Limited
SmithKline Beecham Limited
ViiV Healthcare Finance Limited
ViiV Healthcare UK (No.3) Limited
Viiv Healthcare UK Limited
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
78.3
78.3
78.3
Europe
%
GlaxoSmithKline AG (Switzerland)
GlaxoSmithKline B.V. (Netherlands)
GlaxoSmithKline Biologicals SA (Belgium)
GlaxoSmithKline GmbH & Co. KG (Germany)
GlaxoSmithKline Pharma GmbH (Austria)
GlaxoSmithKline Pharmaceuticals SA (Belgium)
GlaxoSmithKline S.A. (Spain)
GlaxoSmithKline S.p.A. (Italy)
GlaxoSmithKline Single Member A.E.B.E. (Greece)
GlaxoSmithKline Trading Services Limited (Republic of Ireland)
(b)
GSK Capital B.V. (Netherlands)
(b)
GSK Services Sp z o.o. (Poland)
GSK Vaccines GmbH (Germany)
GSK Vaccines S.r.l. (Italy)
JSC GlaxoSmithKline Trading (Russia)
Laboratoire GlaxoSmithKline (France)
Laboratorios ViiV Healthcare, S.L. (Spain)
ViiV Healthcare GmbH (Germany)
ViiV Healthcare S.r.l. (Italy)
ViiV Healthcare SAS (France)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
78.3
78.3
78.3
78.3
Scotland
%
GSK (No.1) Scottish Limited Partnership
(c)
GSK (No.2) Scottish Limited Partnership
(c)
GSK (No.3) Scottish Limited Partnership
(d)
US
%
Affinivax, Inc
Corixa Corporation
GlaxoSmithKline Capital Inc.
GlaxoSmithKline Holdings (Americas) Inc.
GlaxoSmithKline LLC
GSK Equity Investments, Limited
Human Genome Sciences, Inc
Stiefel Laboratories, Inc
Tesaro, Inc.
ViiV Healthcare Company
100
100
100
100
100
100
100
100
100
78.3
Others
%
Glaxo Saudi Arabia Limited (Saudi Arabia)
Glaxo Wellcome Manufacturing Pte Ltd (Singapore)
GlaxoSmithKline (Thailand) Limited (Thailand)
GlaxoSmithKline Australia Pty Ltd (Australia)
GlaxoSmithKline Brasil Limitada (Brazil)
GlaxoSmithKline Far East B.V. (Taiwan)
GlaxoSmithKline Ilaclari Sanayi ve Ticaret A.S. (Turkey)
GlaxoSmithKline Inc. (Canada)
GlaxoSmithKline K.K. (Japan)
GlaxoSmithKline Korea Limited (Republic of Korea)
GlaxoSmithKline Limited (Hong Kong)
GlaxoSmithKline Mexico S.A. de C.V. (Mexico)
GlaxoSmithKline Pakistan Limited (Pakistan)
GlaxoSmithKline Pharmaceuticals Limited (India)
GSK Enterprise Management Co, Ltd (China)
GSK Pharma Vietnam Company Limited (Vietnam)
ID Biomedical Corporation of Quebec (Canada)
ViiV Healthcare K.K (Japan)
ViiV Healthcare ULC (Canada)
75
100
100
100
100
100
100
100
100
100
100
100
82.6
75
100
100
100
78.3
78.3
(a)
Directly held wholly-owned subsidiary of GSK plc.
(b)
Tax resident in UK.
(c)
GSK GP 1 Limited is a subsidiary undertaking of GSK plc and Berkeley Square Pension Trustee Company Limited and is the general partner of GSK (No.1) Scottish Limited
Partnership and GSK (No.2) Scottish Limited Partnership. GSK GP 1 Limited’s share capital is 99% indirectly owned by GSK plc and 1% owned by Berkeley Square Pension
Trustee Company Limited.
(d)
GSK GP 2 Limited is a subsidiary undertaking of GSK plc and is the general partner of GSK (No.3) Scottish Limited Partnership. GSK GP 2 Limited’s share capital is 100%
indirectly owned by GSK plc.
The subsidiaries and associates listed above principally affect the figures in the Group’s financial statements. Each of
GlaxoSmithKline Capital Inc., GlaxoSmithKline Capital plc, GlaxoSmithKline Finance plc, GSK Captial BV 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, GlaxoSmithKline Finance plc, GSK Capital
BV and GlaxoSmithKline LLC.
See pages 307 to 314 for a complete list of subsidiary undertakings, associates and joint ventures, which form part of these financial
statements.
Proof 6 (e) 08.03.2023 at 1 pm
264
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
47. Legal proceedings
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 32, ‘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 2022, the Group’s aggregate provision for
legal and other disputes (not including tax matters described
in Note 14, ‘Taxation’) was £218 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. On 11 July 2022, Teva filed a petition for writ of
certiorari with the Supreme Court of the United States seeking
to overturn the Federal Court decision. On 3 October 2022, the
Supreme Court invited the United States Solicitor General to
file briefs expressing the views of the United States.
Dolutegravir Proceedings
–
Tivicay/Triumeq
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. A settlement has been reached in the case.
– 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. A settlement has been reached with Lupin.
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 not set a trial date.
Product 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 2023.
Proof 6 (e) 08.03.2023 at 1 pm
265
GSK Annual Report 2022
Notes to the financial statements continued
47. Legal proceedings
continued
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
4,500 personal injury cases in US state courts and the federal
Zantac Multidistrict Litigation (MDL) court proceeding in the
Southern District of Florida. There are approximately 84,000
plaintiffs named in these cases. A significant majority of these
plaintiffs were named in a series of multi-plaintiff complaints
filed in Delaware state court and most of these plaintiffs were
previously in the MDL Census Registry. They were removed
because they allege a cancer other than the 5 cancers being
pursued by the MDL plaintiffs. In the MDL, plaintiffs originally
identified 10 different types of cancers they wished to pursue.
Plaintiffs subsequently dropped 5 of the 10 cancers, and
proceeded only as to bladder, esophageal, gastric, liver, and
pancreatic cancers, although plaintiffs in state courts continue
to pursue claims beyond the 5 designated cancers. There are
46,697 unfiled claims relating to the Group and other co-
defendants (32,970 mapped to the Group) concerning the
5 designated cancers in the MDL Census Registry. There are
also over 2,000 California state court cases subject to an
agreement between the Group and the plaintiffs which
suspends the statute of limitations to allow the plaintiffs to
bring their claims at a later date. These filed and unfiled counts
are subject to change.
On 6 December 2022, the court presiding over the federal
MDL proceeding granted Defendants’ Daubert motions,
finding that Plaintiffs’ experts’ causation opinions regarding
whether
Zantac
can cause the five cancers at issue in the MDL
(liver, bladder, pancreatic, esophageal, and stomach) are
unreliable and thus inadmissible. Without expert causation
opinions, the MDL Court granted summary judgment to GSK
and the other brand defendants. The MDL Court found that
“there is no scientist outside this litigation who concluded
ranitidine causes cancer, and the plaintiffs’ scientists within this
litigation systemically utilized unreliable methodologies,” and
failed to use “consistent, objective, science-based standards
for the even-handed evaluation of data.” This ruling effectively
dismissed approximately 2,200 filed cases in the MDL and is
binding on all of the claims in the Census Registry. Plaintiffs
have indicated they will appeal the MDL decision.
In the California
Zantac
litigation Cases JCCP 5150 (JCCP), the
Court held a Sargon hearing regarding the admissibility of
expert witness testimony, including the testimony of general
and specific causation expert witnesses, for the first bellwether
trial. The hearing occurred over a four-day period in February
and March 2023. The first bellwether trial, which is a bladder
cancer case, was expected to start on 27 February 2023 in the
California JCCP, however the Court has moved the trial date to
24 July 2023. Three other California bellwether trials have been
scheduled for May, August and October 2023, although these
dates are likely to be extended as well.
The Illinois Supreme Court recently consolidated all Illinois
ranitidine cases in Cook County for pretrial proceedings with
trial dates to be set at a later date, including the previously
scheduled Madison County trial.
Beyond the personal injury actions, class actions alleging
economic injury and a third-party payer class action also
have been filed in federal court. Plaintiffs have moved to
stay the class actions pending appeal of the Daubert ruling.
Defendants oppose the request for stay and are asking the
Court to dismiss the class actions. Outside the US, there are
seven class actions pending against the Group in Canada,
along with a class action in Israel.
Given the complex ownership and marketing of
Zantac
prescription and over-the-counter (OTC) medicine over many
years, numerous claims involve several defendants. As a result,
some defendants have served one another, including the
Group, with notice of potential indemnification claims about
possible liabilities connected particularly with
Zantac
OTC.
Given the early stage of the proceedings, the Group cannot
meaningfully assess what liability, if any, it may have, nor can it
meaningfully assess the liability of other parties under relevant
indemnification provisions.
In addition, 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.
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.
Proof 6 (e) 08.03.2023 at 1 pm
266
GSK Annual Report 2022
Notes to the financial statements continued
Governance and remuneration
Strategic report
Financial statements
Investor information
47. Legal proceedings
continued
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. At that time, the Court granted judgment for the Group
in all cases pending in the MDL (approximately 431 cases) and
closed the MDL proceeding. Plaintiffs appealed this decision
and, on 9 January 2023, the United States Court of Appeals
for the First Circuit affirmed the district court’s decision in
favour of the Group.
There remains one state court case 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 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.”
A former GSK Korea employee was also 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. On 1 February 2023, the court rendered a
guilty verdict in respect of all defendants. GSK Korea was fined
KRW 70 million which is approximately £45,000. Appeal
proceedings are ongoing.
The Korea Fair Trade Commission also has commenced
proceedings
regarding the same matter. GSK Korea is
cooperating with the authorities on these matters.
Anti-trust/competition
Certain governmental actions and private lawsuits have been
brought against the Group alleging violation of competition or
anti-trust laws.
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 have conducted
briefing on class certification as to the remaining brand-only
purchasers, with plaintiffs also seeking to add a smaller
category of purchasers.
On 1 February 2023, the district court denied Plaintiffs’
renewed class certification motion. A follow-on complaint
was filed in the US District Court for the Eastern District of
Pennsylvania on 2 February 2023 by a group of alleged
purchasers.
Commercial and corporate
The Group is involved in certain contractual and/or
commercial disputes.
Zejula
Royalty Dispute
In October 2012, Tesaro, Inc. (now a wholly owned subsidiary of
GSK) entered into two worldwide patent license agreements
with AstraZeneca UK Limited related to niraparib (later
approved as
Zejula
). In May 2021, AstraZeneca filed a lawsuit
against Tesaro in the High Court, England and Wales alleging
that Tesaro failed to pay some of the royalties due under the
license agreements. Tesaro has counterclaimed based on a
calculated overpayment. A trial is scheduled for March 2023
.
48. Post balance sheet events
There is no material post balance sheet event that requires an adjustment or a disclosure within the financial statements.
Proof 6 (e) 08.03.2023 at 1 pm
267
GSK Annual Report 2022
268
Notes
2022
£m
2022
£m
2021
£m
2021
£m
Fixed assets – investments
E
22,881
54,995
Current assets:
Trade and other receivables
F
17,748
2,720
Cash at bank
20
17
Total current assets
17,768
2,737
Trade and other payables
G
(545)
(598)
Total current liabilities
(545)
(598)
Net current assets
17,223
2,139
Total assets less current liabilities
40,104
57,134
Provisions for liabilities
H
(13)
(12)
Other non-current liabilities
I
(645)
(458)
Net assets
39,446
56,664
Capital and reserves
Share capital
J
1,347
1,347
Share premium account
J
3,440
3,301
Other reserves
K
1,420
1,420
Retained earnings:
At 1 January
50,596
49,653
Profit/(loss) for the year
710
4,942
Treasury shares transferred to the ESOP Trust
1,089
–
Dividends in specie
(15,689)
–
Dividends paid to shareholders
(3,467)
(3,999)
K
33,239
50,596
Equity shareholders’ funds
39,446
56,664
The financial statements on pages 268 to 272 were approved by the Board on 9 March 2023 and signed on its behalf by
Sir Jonathan Symonds
Chair
GSK plc
Registered number: 3888792
Company statement of changes in equity
for the year ended 31 December 2022
Share
capital
£m
Share premium
account
£m
Other
reserves
£m
Retained
earnings
£m
Total
equity
£m
At 1 January 2021
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
Profit and Total comprehensive income attributable to shareholders
–
–
–
710
710
Treasury shares transferred to the ESOP Trust
1,089
1,089
Dividends to shareholders (Note D)
–
–
–
(3,467)
(3,467)
Dividends in specie (Note D)
–
–
–
(15,689)
(15,689)
Shares issued under employee share schemes
–
139
–
–
139
At 31 December 2022
1,347
3,440
1,420
33,239
39,446
Company balance sheet –
UK GAAP
(including FRS 101 ‘Reduced Disclosure Framework’) as at 31 December 2022
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
269
Governance and remuneration
Strategic report
Financial statements
Investor information
A) Presentation of the financial statements
Description of business
GSK plc is the parent company of GSK, a major global
biopharma group which makes innovative vaccines and
specialty medicines to prevent and treat disease.
GSK’s R&D
focuses on the science of the immune system, human genetics
and advanced technologies primarily in the following four
therapeutic areas: infectious diseases, HIV, oncology and
immunology/respiratory.
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 2022, with comparative figures as at 31
December 2021.
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
GSK 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.
Assets held for sale/distribution
Non-current assets are held for disposal/demerger only if
available for immediate disposal/demerger in their present
condition, a disposal/demerger is highly probable and
expected to be completed within one year from the date
of classification.
Such assets are measured at the lower of
carrying value and fair value less the cost of disposal.
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’)
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
270
Notes to the company balance sheet – UK GAAP
(including FRS 101 ‘Reduced Disclosure Framework’) continued
D) Dividends
The Directors declared four interim dividends resulting in a dividend for the year of 61.25 pence adjusted for the share
consolidation. For further details, see Note 16 to the Group financial statements, ‘Dividends’.
In addition, the demerger of the Consumer Healthcare business was implemented by GSK declaring an interim dividend as
follows.
£m
Dividend in specie of Haleon plc shares distributed to external shareholders
15,526
Dividend in specie of Haleon plc shares distributed to the ESOP Trusts
163
15,689
E) Fixed assets – investments
2022
£m
2021
£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
Shares in GlaxoSmithKline Mercury Limited
33
33
Shares in GSK LP Limited
2,493
–
21,069
53,376
Capital contribution relating to share-based payments
1,139
1,139
Contribution relating to contingent consideration
673
480
22,881
54,995
The investments in GlaxoSmithKline Consumer Healthcare Holdings Limited were derecognised of as part of the demerger of the
Consumer Healthcare business, which was executed in specie shares (see Note 41 to the Group financial statements).
F) Trade and other receivables
2022
£m
2021
£m
Amounts due within one year:
UK Corporation tax recoverable
–
9
Other debtors
2
–
Amounts owed by Group undertakings
17,422
2,319
17,424
2,328
Amounts due after more than one year:
Amounts owed by Group undertakings
324
392
17,748
2,720
The movement in the Amounts owed by Group undertakings in the period, as reflected within Notes F and G, primarily reflects the
receipt of dividend income from subsidiaries including the pre-demerger dividend from GlaxoSmithKline Consumer Healthcare
Holdings Limited and utilisation of the company’s current account to fund the payment of interim dividends.
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 (2021: £12,600) relating to the audit of the
company has been charged in operating profit.
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
271
Governance and remuneration
Strategic report
Financial statements
Investor information
Notes to the company balance sheet – UK GAAP
(including FRS 101 ‘Reduced Disclosure Framework’) continued
G) Trade and other payables
2022
£m
2021
£m
Amounts due within one year:
Other creditors
396
457
Contingent consideration payable
28
22
Corporation tax
18
–
Amounts owed to Group undertakings
103
119
545
598
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 £19.5 billion of debt instruments (2021: £22.4 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 26).
H) Provisions for liabilities
2022
£m
2021
£m
At 1 January
12
7
Charge for the year
43
24
Utilised
(42)
(19)
At 31 December
13
12
The provisions relate to a number of legal and other disputes in which the company is currently involved.
I) Other non-current liabilities
2022
£m
2021
£m
Contingent consideration payable
645
458
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 33 to the Group financial
statements, ‘Contingent consideration liabilities’.
J) Share capital and share premium account
Ordinary shares
Share
premium
account
Number
£m
£m
Share capital issued and fully paid
At 1 January 2021
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
Impact of share consolidation
(1,077,403,011)
–
–
Issued under employee share schemes
1,731,293
–
25
Ordinary shares acquired by ESOP Trust
–
–
114
At 31 December 2022
4,311,343,341
1,347
3,440
At 31 December 2022, of the issued share capital, 59,878,735 shares were held in the ESOP Trusts, 217,124,760 shares were held as
Treasury shares and 4,034,339,846 shares were in free issue. All issued shares are fully paid and there are no shares authorised but
not in issue. The nominal, carrying and market values of the shares held in the ESOP Trusts are disclosed in Note 45, ‘Employee
share schemes’.
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
272
K) Retained earnings and other reserves
The profit of GSK plc for the year was £710 million (2021: £4,942 million profit). After dividends paid and distributed in specie of
£19,156 million
(including the Consumer Healthcare business demerger dividend of £15,689 million) (2021: £3,999 million), and the
effect of £1,089 million Treasury shares transferred to a subsidiary company (2021: £nil) retained earnings at 31 December 2022
stood at £33,239 million (2021: £50,596 million), of which £8,140 million was unrealised (2021: £38,896 million). Dividends to
shareholders are paid out of the realised profits of the company, which at 31 December 2022 amounted to £25,099 million (2021:
£11,700 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) Divestment
On 18 July 2022, GSK plc separated its Consumer Healthcare business from the GSK Group to form Haleon plc, an independent
listed company. The separation was effected by way of a demerger of 80.1% of GSK’s 68% holding in the Consumer Healthcare
business to GSK shareholders. Following the demerger, 54.47% of Haleon plc is held in aggregate by GSK Shareholders, 6.03% is
held by GSK (including shares received by GSK’s consolidated ESOT trusts) and 7.5% is held by three Scottish Limited Partnerships
(SLPs) set up to provide collateral for a funding mechanism pursuant to which GSK will provide additional funding for GSK’s UK
Pension Schemes. The aggregate ownership by GSK (including ownership by the ESOT trust and SLPs) after the demerger is 13.53%.
Following completion of the Consumer Healthcare business demerger, on 18 July 2022, GSK plc Ordinary shares were consolidated
in order to maintain share price comparability before and after demerger. The consolidation was approved by GSK plc
shareholders at a General Meeting held on 6 July 2022. Shareholders of GSK plc received 4 new Ordinary shares with a nominal
value of 31.25 pence each for each existing 5 Ordinary share which had a nominal value of 25 pence each.
M) Group companies
See pages 307 to 314 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
Proof 6 (e) 08.03.2023 at 1 pm
Investor
information
In this section
Commercial Operations turnover
274
Three year record
276
Product development pipeline
278
Products, competition and intellectual property
282
Principal risks and uncertainties
285
Share capital and control
296
Dividends
298
Financial calendar 2023
299
Annual General Meeting 2023
299
Tax information for shareholders
299
Shareholder services and contacts
302
US law and regulation
304
Group companies
307
Glossary of terms
315
GSK Annual Report 2022
273
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
274
Commercial Operations turnover by therapeutic area 2022
Total
US
Europe
International
2022
Growth
2022
Growth
2022
Growth
2022
Growth
£m
£%
CER%
£m
£%
CER%
£m
£%
CER%
£m
£%
CER%
HIV
5,749
20
12
3,756
30
17
1,310
10
10
683
-
(3)
Dolutegravir products
5,191
14
6
3,311
19
8
1,239
8
8
641
-
(3)
Tivicay
1,381
–
(7)
823
8
(3)
273
(5)
(4)
285
(14)
(19)
Triumeq
1,799
(4)
(11)
1,217
2
(8)
361
(20)
(19)
221
(8)
(9)
Juluca
636
23
14
494
26
13
127
14
15
15
15
8
Dovato
1,375
75
65
777
82
64
478
58
59
120
>100
>100
Rukobia
82
82
64
79
84
65
3
50
50
–
–
–
Cabenuva
340
>100
>100
294
>100
>100
40
>100
>100
6
>100
>100
Apretude
41
–
–
41
–
–
–
–
–
–
–
–
Others
95
(25)
(29)
31
(37)
(45)
28
(22)
(22)
36
(14)
(17)
Oncology
602
23
17
313
14
3
253
30
31
36
80
75
Zejula
463
17
12
235
11
–
194
19
20
34
70
75
Blenrep
118
33
25
66
8
(3)
52
86
86
–
–
–
Jemperli
21
>100
>100
13
>100
>100
8
>100
>100
–
–
–
Other
–
–
–
(1)
–
–
(1)
–
–
2
–
–
Immuno-inflamm. respiratory and other
2,609
29
20
1,830
29
16
366
13
13
413
45
47
Benlysta
1,146
31
20
949
31
18
83
22
22
114
44
43
Nucala
1,423
25
18
881
28
15
300
17
17
242
24
28
Other
40
>100
>100
–
–
–
(17)
–
–
57
>100
>100
Specialty Medicines excl. pandemic
8,960
23
15
5,899
29
16
1,929
13
13
1,132
14
13
Pandemic
2,309
>100
>100
828
38
24
456
>100
>100
1,025
>100
>100
Xevudy
2,309
>100
>100
828
38
24
456
>100
>100
1,025
>100
>100
Specialty Medicines
11,269
37
29
6,727
30
17
2,385
34
35
2,157
69
70
Meningitis
1,116
16
11
573
26
14
362
2
3
181
18
20
Bexsero
753
16
12
333
32
19
337
3
4
83
20
23
Menveo
345
27
18
240
20
8
20
(5)
(10)
85
67
71
Other
18
(54)
(54)
–
–
–
5
–
–
13
(62)
(62)
Influenza
714
5
(4)
549
20
9
57
(44)
(44)
108
(11)
(16)
Fluarix/Flulaval
714
5
(4)
549
20
9
57
(44)
(44)
108
(11)
(16)
Shingles
2,958
72
60
1,964
46
32
688
>100
>100
306
>100
>100
Shringrix
2,958
72
60
1,964
46
32
688
>100
>100
306
>100
>100
Established vaccines
3,085
4
–
1,157
18
7
720
3
4
1,208
(7)
8
Infanrix, Pediarix
594
9
3
327
8
(3)
131
13
13
136
10
6
Boostrix
594
14
7
360
33
20
138
(1)
(1)
96
(14)
(15)
Hepatitis
571
24
16
343
28
15
142
30
31
86
5
(1)
Rotarix
527
(3)
(3)
95
(14)
(23)
122
3
5
310
(1)
1
Synflorix
305
(15)
(15)
–
–
–
34
(24)
(22)
271
(13)
(14)
Priorix, Priorix Tetra, Varilrix
188
(28)
(29)
10
–
–
97
(22)
(22)
81
(40)
(43)
Cervarix
117
(15)
(20)
–
–
–
22
(12)
(8)
95
(16)
(22)
Others
189
26
26
22
(8)
(17)
34
55
45
133
28
32
Vaccines excluding pandemic
7,873
24
17
4,243
31
18
1,827
27
28
1,803
8
6
Pandemic vaccines
64
(86)
(86)
–
(100)
(100)
57
–
–
7
(97)
(97)
Pandemic adjuvant
64
(86)
(86)
–
(100)
(100)
57
–
–
7
(97)
(97)
Vaccines
7,937
17
11
4,243
22
10
1,884
31
32
1,810
(3)
(5)
Respiratory
6,548
8
3
3,209
10
(1)
1,384
3
3
1,955
10
9
Arnuity Ellipta
56
19
9
48
20
10
–
–
–
8
14
–
Anoro Ellipta
483
(4)
(9)
233
(16)
(24)
165
11
11
85
10
10
Avamys/Veramyst
321
8
6
–
–
–
65
–
2
256
10
8
Flixotide/Flovent
545
23
15
353
28
16
74
7
7
118
18
16
Incruse Ellipta
196
(4)
(10)
104
(5)
(14)
64
(9)
(7)
28
8
–
Relvar/Breo Ellipta
1,145
2
(2)
498
2
(8)
347
4
4
300
–
2
Seretide/Advair
1,159
(15)
(17)
308
(37)
(43)
287
(11)
(11)
564
3
1
Trelegy Ellipta
1,729
42
32
1,253
47
32
236
18
19
240
47
48
Ventolin
771
7
2
411
5
(5)
116
7
8
244
11
10
Other Respiratory
143
4
6
1
–
–
30
11
7
112
2
5
Other General Medicines
3,570
(1)
(2)
363
10
(1)
695
(14)
(13)
2,512
1
2
Dermatology
376
(6)
(5)
(1)
–
–
107
(18)
(18)
270
–
1
Augmentin
576
35
38
–
–
–
151
22
23
425
41
44
Avodart
330
(1)
(3)
–
–
–
107
(9)
(8)
223
5
–
Lamictal
511
7
1
265
14
3
109
(3)
(3)
137
2
–
Other
1,777
(10)
(10)
99
–
(9)
221
(31)
(31)
1,457
(7)
(6)
General Medicines
10,118
5
1
3,572
10
(1)
2,079
(3)
(3)
4,467
5
5
Total Commercial Operations
29,324
19
13
14,542
22
10
6,348
18
19
8,434
14
14
Financial record
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
Financial record continued
275
Governance and remuneration
Strategic report
Financial statements
Investor information
Commercial Operations turnover by therapeutic area 2021
Total
US
Europe
International
2021
Growth
2021
Growth
2021
Growth
2021
Growth
£m
£%
CER%
£m
£%
CER%
£m
£%
CER%
£m
£%
CER%
HIV
4,777
(2)
3
2,898
(4)
3
1,194
(2)
1
685
4
11
Dolutegravir products
4,567
(3)
2
2,774
(6)
–
1,151
(1)
1
642
7
14
Tivicay
1,381
(10)
(4)
763
(12)
(7)
286
(22)
(20)
332
15
24
Triumeq
1,882
(18)
(14)
1,190
(18)
(13)
452
(20)
(18)
240
(15)
(12)
Juluca
517
4
10
393
2
8
111
14
18
13
18
27
Dovato
787
>100
>100
428
87
99
302
>100
>100
57
>100
>100
Rukobia
45
>100
>100
43
>100
>100
2
>100
>100
–
–
–
Cabenuva
38
>100
>100
32
–
–
5
–
–
1
>100
>(100)
Apretude
–
–
–
–
–
–
–
–
–
–
–
–
Others
127
(22)
(18)
49
(8)
(4)
36
(28)
(26)
42
(30)
(23)
Oncology
489
31
37
274
19
26
195
43
46
20
>100
>100
Zejula
395
17
22
212
3
10
163
27
30
20
>100
>100
Blenrep
89
>100
>100
61
>100
>100
28
>100
>100
–
–
–
Jemperli
5
>100
>100
2
–
–
3
>100
>100
–
–
–
Other
–
–
–
(1)
(>100)
(>100)
1
>100
(>100)
–
–
–
Immuno-Inflamm. respiratory and other
2,027
18
25
1,417
17
25
325
11
13
285
31
41
Benlysta
874
22
29
727
19
26
68
21
25
79
55
67
Nucala
1,142
15
22
690
15
23
257
8
11
195
23
34
Other
11
38
38
–
–
–
–
–
–
11
38
38
Specialty Medicines excl. pandemic
7,293
5
10
4,589
3
10
1,714
4
7
990
12
20
Pandemic
958
–
–
602
–
–
69
–
–
287
–
–
Xevudy
958
–
–
602
–
–
69
–
–
287
–
–
Specialty Medicines
8,251
18
25
5,191
17
24
1,783
9
11
1,277
45
55
Meningitis
961
(7)
(2)
453
5
11
354
(1)
2
154
(36)
(30)
Bexsero
650
–
5
253
(3)
3
328
1
4
69
5
20
Menveo
272
3
9
200
16
23
21
(19)
(15)
51
(23)
(18)
Other
39
(66)
(65)
–
–
–
5
(17)
(17)
34
(69)
(68)
Influenza
679
(7)
(2)
456
(15)
(9)
101
3
6
122
22
28
Fluarix/Flulaval
679
(7)
(2)
456
(15)
(9)
101
3
6
122
22
28
Shingles
1,721
(13)
(9)
1,344
(20)
(15)
281
51
54
96
(25)
(23)
Shringrix
1,721
(13)
(9)
1,344
(20)
(15)
281
51
54
96
(25)
(23)
Established vaccines
2,970
(8)
(4)
977
(7)
(1)
700
(13)
(10)
1,293
(6)
(3)
Infanrix, Pediarix
543
(14)
(9)
303
(3)
4
116
(33)
(32)
124
(14)
(10)
Boostrix
521
9
14
270
5
12
140
–
2
111
41
44
Hepatitis
460
(20)
(16)
269
(19)
(14)
109
(22)
(21)
82
(20)
(17)
Rotarix
541
(3)
1
111
(10)
(4)
118
(1)
2
312
(2)
3
Synflorix
357
(11)
(8)
–
–
–
45
(15)
(13)
312
(11)
(7)
Priorix, Priorix Tetra, Varilrix
260
–
4
–
–
–
125
(1)
2
135
–
5
Cervarix
138
(1)
–
–
–
–
25
(17)
(17)
113
4
5
Others
150
(21)
(19)
24
(20)
(13)
22
16
26
104
(26)
(26)
Vaccines excluding pandemic
6,331
(9)
(5)
3,230
(13)
(7)
1,436
–
2
1,665
(10)
(6)
Pandemic vaccines
447
–
–
242
–
–
–
–
–
205
–
–
Pandemic adjuvant
444
–
–
242
–
–
–
–
–
202
–
–
Others
3
–
–
–
–
–
–
–
–
3
–
–
Vaccines
6,778
(3)
2
3,472
(6)
–
1,436
–
2
1,870
1
5
Respiratory
6,048
1
6
2,920
14
21
1,344
(7)
(5)
1,784
(11)
(5)
Arnuity Ellipta
47
4
11
40
8
16
–
–
–
7
(12)
(13)
Anoro Ellipta
504
(8)
(3)
278
(15)
(9)
149
5
8
77
(1)
3
Avamys/Veramyst
298
–
7
–
–
–
65
(2)
2
233
1
8
Flixotide/Flovent
444
6
12
275
50
60
69
(14)
(11)
100
(36)
(32)
Incruse Ellipta
205
(7)
(3)
109
(7)
(2)
70
(5)
(3)
26
(10)
(7)
Relvar/Breo Ellipta
1,121
–
5
488
3
9
334
4
6
299
(9)
(2)
Seretide/Advair
1,357
(12)
(7)
486
12
19
322
(28)
(27)
549
(16)
(11)
Trelegy Ellipta
1,217
49
57
854
52
62
200
19
21
163
81
92
Ventolin
718
(9)
(4)
390
(9)
(3)
108
(7)
(5)
220
(8)
(3)
Other Respiratory
137
(36)
(31)
–
–
–
27
–
–
110
(41)
(36)
Other General Medicines
3,619
(15)
(15)
331
(25)
(20)
807
(21)
(19)
2,481
(12)
(13)
Dermatology
399
(6)
(1)
(1)
>(100)
>(100)
131
(6)
(4)
269
(5)
2
Augmentin
426
(13)
(7)
–
–
–
124
(14)
(12)
302
(12)
(4)
Avodart
332
(29)
(25)
1
(80)
(80)
118
(25)
(23)
213
(30)
(25)
Lamictal
478
(11)
(6)
232
(14)
(9)
112
(7)
(5)
134
(9)
(3)
Other
1,984
(16)
(19)
99
(40)
(36)
322
(29)
(27)
1,563
(10)
(16)
General Medicines
9,667
(6)
(3)
3,251
8
15
2,151
(13)
(11)
4,265
(11)
(10)
Total Commercial Operations
24,696
1
6
11,914
7
14
5,370
(3)
(1)
7,412
(3)
–
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
Financial record continued
276
A record of financial performance is provided, analysed in accordance with current reporting practice. The information included in
the selected financial data (except for number of employees and adjusted results) is prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act 2006 and also with IFRS as issued by the
International Accounting Standards Board. Three year financial data is presented reflecting the restated results following the
demerger of the Consumer Healthcare business. The financial results of 2019 and 2018 are not restated and are not presented here.
Group turnover by geographic region
2022
£m
2021
(revised)
(1)
£m
2020
(revised)
(1)
£m
US
14,542
11,914
11,148
Europe
6,348
5,370
5,545
International
8,434
7,412
7,661
29,324
24,696
24,354
Group turnover by product group
2022
£m
2021
(revised)
(1)
£m
2020
(revised)
(1)
£m
Specialty Medicines
11,269
8,251
6,969
Vaccines
7,937
6,778
6,982
General Medicines
10,118
9,667
10,281
Consumer Healthcare
(2)
–
–
122
29,324
24,696
24,354
Specialty Medicines turnover
2022
£m
2021
(revised)
(1)
£m
2020
(revised)
(1)
£m
HIV
5,749
4,777
4,876
Oncology
602
489
372
Immuno-inflammation and other
2,609
2,027
1,721
Pandemic
2,309
958
–
11,269
8,251
6,969
Vaccines turnover
2022
£m
2021
£m
2020
£m
Meningitis
1,116
961
1,029
Influenza
714
679
733
Shingles
2,958
1,721
1,989
Established Vaccines
3,085
2,970
3,231
Pandemic Vaccines
64
447
–
7,937
6,778
6,982
General Medicines
2022
£m
2021
£m
2020
£m
Respiratory
6,548
6,048
6,006
Other General Medicines
3,570
3,619
4,275
10,118
9,667
10,281
Financial results – Total
2022
£m
2021
(1)
£m
2020
(1)
£m
Turnover
29,324
24,696
24,354
Profit after taxation from continuing operations
4,921
3,516
5,103
Profit after taxation from discontinued operations and other gains/(losses) from the demerger
3,049
1,580
1,285
Remeasurement of discontinued operations distributed to shareholders on demerger
7,651
–
–
Profit after taxation from discontinued operations
10,700
1,580
1,285
Profit after taxation for the year
15,621
5,096
6,388
pence
pence
(3)
pence
(3)
Basic earnings per share from continuing operations
110.8p
82.9p
122.4p
Basic earnings per share from discontinued operations
260.6p
26.7p
22.0p
Total basic earnings per share
371.4p
109.6p
144.4p
Diluted earnings per share from continuing operations
109.2p
81.8p
120.9p
Diluted earnings per share from discontinued operations
257.0p
26.4p
21.7p
Total diluted earnings per share
366.2p
108,2p
142.6p
(1)
GSK has revised its operating segments during the year. See Note 6 to the consolidated financial statements for more details.
(2)
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
completed the divestment of Bangladesh on 30 June 2020.
(3)
The 2021 and 2020 comparatives have been restated on a consistent basis from those previously published to reflect the demerger of the Consumer
Healthcare business (see Note 41) and the impact of Share Consolidation (see Note 37) of the consolidated financial statements.
Three-year selected financial data
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
Financial record continued
277
Governance and remuneration
Strategic report
Financial statements
Investor information
Financial results – Adjusted
2022
£m
2021
(1)
£m
2020
(1)
£m
Turnover
29,324
24,696
24,354
Continuing operating profit
8,151
6,493
6,656
Continuing profit before taxation
7,358
5,774
5,851
Continuing profit after taxation
6,220
4,856
5,035
The reconciliations between Total and Adjusted operating profit over the last three years can be summarised as follows:
2022
£m
2021
(1)
£m
2020
(1)
£m
Total continuing operating profit
6,433
4,357
5,979
Intangible asset amortisation
739
761
724
Intangible asset impairment
296
347
200
Major restructuring
321
424
1,178
Transaction-related items
1,750
1,143
1,237
Divestments, significant legal and other items
(1,388)
(539)
(2,662)
Adjusted continuing operating profit
8,151
6,493
6,656
The reconciliation between total and Adjusted earnings per share over the last three years can be summarised as follows:
pence
pence
(1)
pence
(1)
Total continuing earnings per share
110.8p
82.9p
122.4p
Intangible asset amortisation
14.6p
15.2p
14.6p
Intangible asset impairment
5.8p
6.6p
4.1p
Major restructuring
5.9p
8.7p
24.3p
Transaction-related items
34.1p
18.1p
19.0p
Divestments, significant legal and other items
(31.5)p
(21.2)p
(70.0)p
Adjusted continuing earnings per share
139.7p
110.3p
114.4p
%
%
%
Return on capital employed
n/m
25.8
35.6
For 2021 and 2022 return on capital employed is calculated as total profit before taxation as a percentage of average net assets
over the year and is not restated. Return on capital employed is not calculated for 2022 as it is not meaningful (n/m) as the
average net assets over the year include Consumer Healthcare.
Balance sheet
2022
2021
2020
Non-current assets
39,377
60,429
60,184
Current assets
20,769
18,674
20,247
Total assets
60,146
79,103
80,431
Current liabilities
(22,810)
(23,670)
(22,148)
Non-current liabilities
(27,240)
(34,091)
(37,475)
Total liabilities
(50,050)
(57,761)
(59,623)
Net assets
10,096
21,342
20,808
Shareholders’ equity
10,598
15,055
14,587
Non-controlling interests
(502)
6,287
6,221
Total equity
10,096
21,342
20,808
Number of employees
2022
2021
(1)
2020
(1)
US
11,946
14,289
15,706
Europe
31,800
38,809
40,711
International
25,654
36,998
37,649
69,400
90,096
94,066
Manufacturing
23,292
32,141
33,848
Selling
26,310
34,846
36,391
Administration
7,605
11,014
11,730
Research and development
12,193
12,095
12,097
69,400
90,096
94,066
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.
(1)
The employee numbers have not been restated for the purposes of the Consumer Healthcare demerger.
Three year selected financial data
continued
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
278
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
momelotinib
†
JAK1, JAK2 and ACVR1 inhibitor
myelofibrosis
Registration
S:Nov22
S:Jun22
Jemperli
(dostarlimab)
†
Anti-Programmed Cell Death protein 1 receptor
(PD-1) antibody
1L endometrial cancer
1L endometrial cancer combination with
Zejula
(niraparib)
Non-small cell lung cancer
1
III
III
II
Zejula
(niraparib)
†
Poly (ADP-ribose) polymerase (PARP) 1/2 inhibitor
1L maintenance ovarian cancer combination
with
Jemperli
(dostarlimab)
1L maintenance non small cell lung cancer
(NSCLC) combination with pembrolizumab
Pre-metastatic, select biomarker population
Breast Cancer
III
III
III
Blenrep
(
belantamab
mafodotin)
†
ADC targeting B-cell maturation antigen
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
II
I
cobolimab
†
Anti-T-cell immunoglobulin and mucin domain-3
(TIM-3) antibody
Non-small cell lung cancer combination with
Jemperli
(dostarlimab) and docetaxel
III
4428859
(EOS884448)
†
anti-TIGIT
Non-small cell lung cancer combination with
Jemperli
(platform study)
II
4074386
†
Anti-lymphocyte activation gene-3 (LAG-3)
antibody
Cancer
I
4381562
†
anti-PVRIG
Cancer
I
3745417
STING cytosolic DNA pathway agonist
Advanced solid tumors
Myeloid malignancies
I
I
6097608
†
anti-CD96
Cancer
I
XMT-2056
2
(wholly owned
by Mersana
Therapeutics)
STING agonist ADC
Cancer
I
HIV^
Apretude
(cabotegravir)
HIV integrase strand transfer inhibitor (long-acting)
HIV pre-exposure prophylaxis
HIV infection (400 mg/ml formulation)
Approved
I
S:Jun22
A: Dec21
3640254
HIV maturation inhibitor
HIV infection
II
3
3810109
†
HIV broadly neutralising antibody
HIV infection
II
3739937
HIV maturation inhibitor
HIV infection
I
4004280
HIV capsid protein inhibitor
HIV infection
I
4011499
HIV capsid protein inhibitor
HIV infection
I
4524184
†
HIV integrase inhibitor
HIV infection
I
Brand names appearing in italics are trade marks owned by or licensed to the GSK group of companies.
Footnotes
1
non-registrational
2
GSK has an exclusive global license option to co-develop and commercialize the candidate
3
will not progress to Phase 3
†
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
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
279
Governance and remuneration
Strategic report
Financial statements
Investor information
Pipelines, products and competition continued
Achieved regulatory
review milestones
Compound
Mechanism of Action/Vaccine Type
Indication
Phase
MAA
NDA/BLA
Infectious Diseases
Xevudy
(sotrovimab)
†
Anti-spike protein antibody
COVID-19
Approved
A:Dec21
EUA:
May21
4
Priorix
(MMR vaccine)
Live attenuated
Measles, mumps, rubella prophylaxis (US)
Approved
A: Jun22
Menveo
vaccine
Conjugated-liquid formulation
Meningococcal A, C, W, Y disease prophylaxis
in adolescents
Approved
A: Oct22
Rotarix
vaccine
Live attenuated, PCV (Porcine circovirus)
free
Rotavirus prophylaxis (US)
Approved
A: Nov22
VidPrevtyn Beta
COVID-19 vaccine
(Sanofi)
† 5
Recombinant protein-adjuvanted
vaccine
COVID-19
Approved
A: Nov22
3844766
(RSV vaccine)
†
Recombinant protein – adjuvanted
vaccine
Respiratory syncytial virus prophylaxis in older adult
population 60 years of age and older
Respiratory syncytial virus prophylaxis in older adult
population 50-59 years of age
Registration
III
S:Oct22
S:Oct22
SKYCovione
(SK Bioscience)
† 5
Recombinant protein nanoparticle-
adjuvanted vaccine
COVID-19
Registration
6
S:Jul22
gepotidacin
†
Triazaacenaphthylene bacterial type II
topoisomerase inhibitor
Uncomplicated urinary tract infection (uUTI)
Urogenital gonorrhea (GC)
III
III
bepirovirsen
†
HBV antisense
Hepatitis B
Hepatitis B sequential therapy with Pegylated
Interferon
III
II
Bexsero
vaccine
Recombinant protein vaccine
Meningococcal B disease prophylaxis 2 months of
age and older (US)
III
3536819
(Men ABCWY vaccine)
Recombinant protein – conjugated
vaccine
Meningococcal A, B, C, W, Y disease prophylaxis
in adolescents
III
tebipenem pivoxil
†
Antibacterial carbapenem
Complicated urinary tract infection (UTI)
7
III
3036656
†
Leucyl t-RNA synthetase inhibitor
Tuberculosis
II
BVL-GSK098
†
Ethionamide booster
Tuberculosis
II
VIR-2482
† 8
Neutralizing monoclonal antibody
Influenza
II
3437949
†
(Malaria fractional
dose)
Recombinant protein – adjuvanted
vaccine
Malaria prophylaxis (
Plasmodium falciparum
)
II
3536852
†
Generalized Modules for Membrane
Antigens (GMMA) vaccine
Shigella diarrhea prophylaxis
II
3528869
†
(Therapeutic HBV)
Prime-boost with viral vector co- or
sequentially administrated with
adjuvanted recombinant proteins
Treatment of chronic Hepatitis B infections – aims at
functional cure by controlling and resolving the
clinical sequelae of the infection and reducing the
need for further treatment
II
4023393
(Men ABCWY, 2nd Gen)
Recombinant protein – conjugated
vaccine
Meningococcal A, B, C, W, Y disease prophylaxis in
adolescents and children 6 weeks and older
II
4178116
(Varicella new strain)
Live attenuated vaccine
Active immunization for the prevention of varicella in
individuals from 12 months of age and older
II
sanfetrinem cilexetil
†
Serine beta lactamase inhibitor
Tuberculosis
II
4106647
†
Recombinant protein-adjuvanted
vaccine
Active immunization of girls and women, boys
and men (9-45 years), for the prevention of cancer,
genital warts and precancerous or dysplastic
lesions (girls, boys AIN only) caused by Human
papillomavirus
(HPV)
II
Brand names appearing in italics are trade marks owned by or licensed to the GSK group of companies.
Footnotes
4
As of Apr22, sotrovimab is no longer authorized to treat COVID-19 in U.S. due to increases in the proportion of COVID-19 cases caused by the Omicron BA.2
sub-variant
5
GSK is contributing pandemic adjuvant to COVID-19 vaccines collaborations
6
Approved in South Korea (Jun22)
7
Phase 2 or 3 study start expected in 2023
8
GSK has exclusive option to co-develop post Phase 2
Pharmaceuticals and Vaccines product development pipeline
continued
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
280
Achieved regulatory
review milestones
Compound
Mechanism of Action/Vaccine Type
Indication
Phase
MAA
NDA/BLA
Infectious Diseases continued
4388067
(CHBV ASO combo)
†
Targeted Immunotherapy (viral vector;
adjuvanted recombinant proteins) &
Direct Acting Antiviral (GSK's
bepirovirsen)
Treatment of chronic Hepatitis B virus infection
in individuals >18 years without decompensated
cirrhosis
II
5101955
†
Vaccine using Multiple Antigen
Presenting System (MAPS) platform
Prevention of pneumonia and invasive
pneumococcal disease caused by the
Streptococcus pneumoniae 24 serotypes included
in the vaccine in children aged 6 weeks – 17 years.
II
5101956
†
Vaccine using Multiple Antigen
Presenting System (MAPS) platform
Prevention of pneumonia and invasive
pneumococcal disease caused by the
Streptococcus pneumoniae 24 serotypes included
in the vaccine in adults aged 18 years and older
II
4406371
(MMRV new strain)
Live attenuated vaccine
Active immunization for the prevention of measles,
mumps, rubella, and varicella in children 12 months
through 12 years of age
II
3882347
†
FimH antagonist
Uncomplicated urinary tract infection (uUTI)
I
3186899
† 9
CRK-12 inhibitor
Visceral leishmaniasis
I
3494245
†
Proteasome inhibitor
Visceral leishmaniasis
I
2556286
†
Mtb cholesterol dependent inhibitor
Tuberculosis
I
4182137 (VIR-7832)
†
Anti-spike protein antibody
COVID-19
I
3923868
PI4K beta inhibitor
Viral COPD exacerbations
I
2904545
†
Recombinant protein – adjuvanted
vaccine
Active immunization for the prevention of the primary
C. difficile
diseases and for prevention of recurrences
I
4429016
†
Recombinant protein – bioconjugated
– adjuvanted vaccine
Klebsiella pneumoniae
prophylaxis
I
3993129
Recombinant subunit – adjuvanted
vaccine
Cytomegalovirus (CMV) infection prophylaxis in
females 16-49 years of age
I
4382276
†
mRNA vaccine
Active immunization for the prevention of disease
caused by influenza viruses
in adults 18 years and
older
I
4396687
†
mRNA vaccine
Active immunization to prevent COVID-19 disease
caused by SARS-CoV-2 virus in individuals 12 years
and older
I
3943104
†
(Therapeutic HSV)
Recombinant protein-adjuvanted
Active immunization to suppress recurrence of
Genital Herpes in adults aged 18 years and older.
I
4077164
†
Bivalent Generalized Modules for
Membrane Antigens (GMMA) vaccine
Invasive non-typhoidal salmonella
I
4077164
†
Bivalent Generalized Modules for
Membrane Antigens (GMMA) vaccine
and typhoid conjugate vaccine (TCV)
Invasive non-typhoidal salmonella and typhoid
fever
I
3536867
†
Bivalent Typhoid and Paratyphoid A
conjugate
Salmonella typhoid and paratyphoid (A) enteric fever I
3965193
PAPD5/PAPD7 inhibitor
Hepatitis B
I
5251738
†
TLR8 agonist
Hepatitis B
I
3772701
†
P falciparum
whole cell inhibitor
(pyrrolidine amides)
Malaria
I
4348413
Generalized Modules for Membrane
Antigens (GMMA) vaccine
Active immunization to prevent gonorrhea in
individuals age 16 years and older, regardless of
previous gonorrhea infection history
I
Brand names appearing in italics are trade marks owned by or licensed to the GSK group of companies.
Footnotes
9
Transition activities underway to enable further progression by partner
Pharmaceuticals and Vaccines product development pipeline
continued
Pipelines, products and competition continued
Proof 6 (e) 08.03.2023 at 1 pm
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281
Governance and remuneration
Strategic report
Financial statements
Investor information
Pipelines, products and competition continued
Achieved regulatory
review milestones
Compound
Mechanism of Action/Vaccine Type
Indication
Phase
MAA
NDA/BLA
Immunology and Respiratory
Nucala
(mepolizumab) Anti-IL5
COPD
III
depemokimab
†
Anti-IL5 (long-acting)
Asthma
Chronic rhinosinusitis with nasal polyps (CRSwNP)
Eosinophilic granulomatosis with polyangiitis (EGPA)
Hypereosinophilic syndrome (HES)
III
III
III
III
latozinemab
†
Anti-Sortilin monoclonal antibody
Frontotemporal Dementia (FTD) due to
Heterozygous Mutations in the Progranulin Gene
Amyotrophic Lateral Sclerosis (ALS)
Frontotemporal Dementia (FTD) due to Mutations
in the C9orf72 Gene
III
II
II
Benlysta
(belimumab)
B lymphocyte stimulator monoclonal
antibody
Systemic sclerosis associated interstitial lung
disease
7
II
3858279
†
Anti-CCL17
Osteoarthritis pain
I
4527226 (AL101)
†
Anti-sortilin monoclonal antibody
Neurodegenerative disease
I
1070806
Anti-IL18
Atopic dermatitis
I
3888130
†
Anti-IL7
Multiple sclerosis (MS)
I
Opportunity Driven
Jesduvroq
(daprodustat)
Prolyl hydroxylase inhibitor
Anaemia of chronic kidney disease
Approved
S:Feb22
A:Feb23
linerixibat
Ileal bile acid transporter (IBAT)
inhibitor
Cholestatic pruritus in PBC (primary biliary
cholangitis)
III
4532990
†
HSD17B13 silencer
Non-alcoholic steatohepatitis (NASH)
7
II
4172239
†
DNMT1 inhibitor
Sickle cell disease
10
I
Brand names appearing in italics are trade marks owned by or licensed to the GSK group of companies.
Footnotes
7
Phase 2 or 3 study start expected in 2023
10 Imminent study start
Pharmaceuticals and Vaccines product development pipeline
continued
Proof 6 (e) 08.03.2023 at 1 pm
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282
Major
Patent expiry dates
1
Products
Compounds
Indication(s)
competitor brands
US
EU
Respiratory
Anoro Ellipta
umeclidinium bromide/
vilanterol trifenatate
COPD
Spiolto/Stiolto Respimat,
Utibron/Ultibro
Breezhaler, Duaklir
Genuair
Bevespi Aerosphere,
Brimica Genuair
2027
(NCE)
2027-2030
(device)
2029
(NCE)
2022-2026
(device)
Avamys/Veramyst
fluticasone furoate
Allergic rhinitis
Dymista, Xhance,
Nasonex, Fluticasone Gx
expired
expired
Relvar/Breo Ellipta
fluticasone furoate/
vilanterol trifenatate
Asthma, COPD
Symbicort, Foster,
Budesonide/Formoterol
Gx Sirdupla, Dulera
2025
(NCE)
2027-2030
(device)
2027
(NCE)
2022-2026
(device)
Seretide/Advair
salmeterol xinafoate/
fluticasone propionate
Asthma, COPD
Symbicort, Foster,
Budesonide/
Formoterol 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, asthma
Trimbow pMDI/
NEXThaler,
Breztri
Aerosphere, Trixeo
Aerosphere, Enerzair
Breezhaler
2027
(NCE)
2027-2030
(device)
2029
(NCE)
2022-2026
(device)
Ventolin
HFA
Salbutamol sulphate
Asthma, COPD
generic companies
2023-2026
(HFA-device)
expired
(HFA-device)
Xevudy
sotrovimab
Early treatment of
COVID-19
REGEN-COV,
bamlanivimab/
etesevimab, Evusheld
2041
(NBE)
NA
Central nervous system
Lamictal
lamotrigine
Epilepsy, bipolar disorder
Vimpat, Trokendi XR,
Inovelon, Keppra
expired
expired
Keppra
levetiracetam
Epilepsy
Briviact, Vimpat,
Lamictal, Depakene,
Depacon
NA
NA
Cardiovascular and urogenital
Avodart & Duodart
dutasteride
dutasteride + tamsulosin
Benign prostatic
hyperplasia (BPH)
Generic products,
Finasteride, Alpha
Blockers
expired
expired
Anti-bacterials
Augmentin
Amoxicillin trihydrate/potassium
clavulanate
Common bacterial
infections
Generic products
(Clavam, Moxikind-CV,
Enhancin, Curam,
Calamox)
Oral Cephalosporins
– Cefuroxime axetil,
Cefixime, Cefpodoxime,
Cefdinir, Cephalexin
Oral Macrolides –
Azithromycin,
Clarithromycin
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.
Pipelines, products and competition continued
Pharmaceutical products, competition and intellectual property
Proof 6 (e) 08.03.2023 at 1 pm
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Governance and remuneration
Strategic report
Financial statements
Investor information
Major
Patent expiry dates
1
Products
Compounds
Indication(s)
competitor brands
US
EU
Dermatology
Dermovate,
Betnovate,
Cutivate,
Eumovate
Clobetasol propionate,
Betamethasone valerate,
Fluticasone propionate,
Clobetasone butyrate
Inflammatory skin
conditions
Generic products,
Other topical
corticosteroids like
Mometasone furoate,
Methylprednisolone
aceponate and
Hydrocortisone.
Not marketed
in US
Expired
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
Jesduvroq, Duvroq
Daprodustat
anaemia of chronic kidney
disease
Evrenzo (roxadustat),
vadadustat
2027
(NCE)
2027
(NCE)
HIV
Apretude
Cabotegravir
HIV prevention
Descovy, 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)
1
See Note 47 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
Pipelines, products and competition continued
Proof 6 (e) 08.03.2023 at 1 pm
GSK Annual Report 2022
284
Pipelines, products and competition continued
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
expired
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
expired
expired
FluLaval
split inactivated influenza
antigens (2 virus subtypes A
and 2 subtype B)
seasonal influenza prophylaxis
Vaxigrip, Mutagrip,
Fluzone, Influvac,
Aggripal, Fluad,
Intenza, Flumist
expired
expired
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 47 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.
Proof 6 (e) 08.03.2023 at 1 pm
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Governance and remuneration
Strategic report
Financial statements
Investor information
285
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 biopharmaceutical 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 and vaccine 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 47, ‘Legal proceedings.’
More details regarding our risk management framework and
how we identify our principal risks can be found on pages 51
to 54 and incorporated herein. Other risks, not at the level of
principal risk, and opportunities, related to Environmental,
Social, and Governance (ESG), including environmental
sustainability and climate change, are managed through our
six focus areas, as described in our ESG Performance Report.
Additional information on climate related risk management is
in our climate related financial disclosure. See pages 55 to 62.
UK regulations require a description of principal risks and
uncertainties and explanation of how these are being
managed or mitigated. Below is a description of each of our
principal risks together with a summary of how we manage
each risk across our businesses. They are not listed in order of
significance and are consistent with the principal risks detailed
on pages 53 to 54. In July 2022, the Board agreed that
Separation was no longer a principal risk following the
successful demerger and analysis of any residual risk.
Risk definition
The risk that GSK, including our third parties, potentially fails to
appropriately collect, review, follow up, or report human safety
information, including adverse events, from all potential
sources or that GSK potentially fails to act on any relevant
findings in a timely manner.
Risk impact
GSK will not tolerate an unfavourable benefit-to-risk profile for
patients who use our products. As the most important
consequence of ineffective pharmacovigilance is the potential
for harm to patients, we maintain robust processes for
managing human safety information, conducting timely safety
signal detection, and ensuring appropriate measures are in
place to manage risks to patients. GSK also intends to fully
comply with pharmacovigilance and other relevant regulations
worldwide. Non-compliance could result in inspection findings,
regulatory scrutiny, civil or criminal sanctions and either
temporary or permanent loss of product marketing
authorisation. We regularly review and respond to all patient
safety risks to limit the potential for 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; our failure
to do so effectively could result most importantly in harm to
patients, as well as reputational damage and/or product
liability litigation. We conduct internal safety surveillance and
rely on access to safety information from external sources.
Information on the safety and efficacy of our products in
humans is collected during clinical development, with more
comprehensive information incorporated from real-world use
once our products are marketed. There are examples of
regulatory agencies using real-world evidence from sources
which may not be accessible to the industry to supplement and
validate the evidence we use to support the safety and efficacy
of our products. There is a potential emerging risk that
technology companies or other data custodians may similarly
draw and communicate conclusions about the safety of our
products based on digital health data collected through their
platforms that is inaccessible by either the industry or
regulatory agencies.
Principal risks and uncertainties
Patient safety
Proof 6 (e) 08.03.2023 at 1 pm
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Principal risks and uncertainties continued
286
Risk definition
The risk that GSK or our third parties potentially fail to ensure
appropriate controls and governance of quality for
development and commercial products; compliance with
industry practices and regulations in manufacturing and
distribution activities; and terms of GSK product licenses and
supporting regulatory activities.
Risk impact
A failure to ensure product quality could have far-reaching
implications for patient 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, with 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 met our
commitments for the 2021 European Medicines Agency (EMA)
requirements for licensing of Medical Devices. We continue to
plan for the deployment of the New Annex 1 guidance for the
manufacture of Sterile Medicinal products which was published
in September 2022 and sets an expectation for compliance by
August 2023. We are actively managing this implementation in
the context of global equipment and component supply chain
constraints effecting the industry. We are increasingly applying
advanced digital technologies and insights to drive scientific
excellence to enhance the development, manufacture and
testing of our products. For example, we use new electronic
documentation systems and advanced laboratory information
management tools. Our quality organisations are aligned to
make sure quality procedures and governance can facilitate
the new company strategy. Pre-pandemic levels of on-site
inspections have resumed, and we continue to take steps to
ensure our inspection readiness.
Product quality
Patient safety continued
Our licence to operate depends on our compliance with
regulatory requirements worldwide, not only those directly
related to patient safety but extending to privacy and
information security regulations as well. Regulatory
compliance depends on appropriate identification and
management of human safety information by all employees
and third parties acting on our behalf. We are pursuing
innovative solutions to enhance our ability to perform
pharmacovigilance, including Artificial Intelligence and
Machine Learning technology to augment our capacity to
manage increasing volumes of adverse event reports from
varied sources, and advancing technical solutions for
delivering safety information and risk minimisation measures to
patients and health care providers.
The COVID-19 pandemic has had an impact on
pharmacovigilance activities by increasing public focus on
safety and efficacy of medicines and vaccines, highlighting the
importance of robust business continuity planning for
uninterrupted safety oversight and regulatory compliance
(including the ability to accommodate remote regulatory
inspections), and accelerating automation to manage
increasing volumes of adverse events.
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 2022, we completed the simplification and optimisation of
our core patient safety processes, which we expect to improve
cross-functional stakeholder engagement in safety activities
across GSK. We began automated end-to-end processing of
individual case safety reports to deliver better case quality
and consistency as well as enhanced efficiency. Our
Pharmacovigilance Operations model expanded to ensure
connectivity between central and local safety teams. We have
created resources for R&D leaders that enable them to
advocate the need for industry access to safety data from all
sources as the best way to safeguard patients. In 2023, we will
transition from a two-vendor to a single-vendor model for key
operational activities which will improve efficiency and reduce
the risk of regulatory non-compliance. We will also expand our
Global Safety team to include additional expertise to optimise
our strategy and approach to product-related risk mitigation/
minimisation.
Proof 6 (e) 08.03.2023 at 1 pm
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Principal risks and uncertainties continued
Governance and remuneration
Strategic report
Financial statements
Investor information
287
Financial controls and reporting
Risk definition
The risk that GSK fails to comply with current tax laws, fails to
report accurate financial information in compliance with
accounting standards and applicable legislation, or incurs
significant losses due to treasury activities.
Risk impact
Non-compliance with existing or new financial or new ESG
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. 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.
Failure to comply with applicable sanctions laws and
regulations could result in GSK being investigated by relevant
government agencies and authorities and/or in legal
proceedings against us. Government investigations and
litigation, can be unpredictable and regardless of their
outcome, may be costly, require significant management
attention, and damage our reputation. 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.
Product quality continued
Mitigating activities
We align an extensive global network of quality and
compliance professionals, from site-level to senior
management within 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 the
development and commercialisation of our vaccines, specialty,
and general medicines. 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.
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 medicines and vaccines to protect our
patients and the public.
Our established complaint process ensures we respond
appropriately to product quality issues raised by patients.
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 all product assessments for the presence of
nitrosamines and reported as necessary to all Health
Authorities. We have also developed mitigation plans which
will be executed throughout 2023 per the regulatory
requirements. We are actively working with industry bodies
and the European Regulatory Authorities to complete the
safety evaluation of Titanium Dioxide in Medicines as well
as identifying any potential substitutes.
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Principal risks and uncertainties continued
288
Financial controls and reporting continued
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 and vaccines, 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.
Laws, regulations, orders and other measures restrict dealings
with certain countries, governments, government officials,
entities, individuals, use of financial institutions and movement
of funds. Circumvention of sanctions and export controls can
be a criminal offence and GSK seeks to comply with its
sanctions obligations.
While we believe the Group complies
with all applicable sanctions in all material respects, such laws
are complex and continue to evolve rapidly.
Mitigating activities
We keep up to date with the latest developments in financial
reporting requirements by reviewing updates from regulators,
working with our external auditor and legal advisors and
performing and responding to emerging risks. 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 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. We have a standardised
global financial reporting operating model.
The design and operating effectiveness of key financial
reporting controls are regularly reviewed by management and
tested by external third parties. The few locations which are
not on the standard model apply a minimum standard set of
controls which are 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. The Treasury Management Group 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 246 to 248. 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. 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. 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, jointly led by
GSK Finance and Legal & Compliance, is made up of various
systems and controls including, but not limited to, policies and
procedures, training and awareness, screening, monitoring and
risk reporting.
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Investor information
289
Risk definition
The risk that GSK or our third parties potentially fail to comply
with applicable laws, regulations, or internal requirements and
to ensure appropriate controls and governance over bribery
and corruption in business activities.
Risk impact
Failure to mitigate this risk could expose GSK and associated
persons to governmental investigation, regulatory action, and
civil and criminal liability. It may compromise GSK’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. It might erode investor confidence in our
governance, risk management and future performance, and
have a consequential negative impact on share performance.
It could also lead to the imposition of significant financial
penalties and the imposition of additional reporting
obligations.
Context
There continues to be a strong enforcement appetite for
foreign bribery investigations and prosecutions, with a
particular focus on the conduct of multinational companies
wherever they operate. Financial penalties handed down in
proven corruption cases are often very significant.
Disruption to global supply chains and the commercial
pressures caused by higher than usual inflation rates are likely
to increase the risks of bribery and corruption in certain
contexts.
However, greater transparency and collaboration among
enforcement authorities, advances in technology and the use
of data analytics are providing better platforms to streamline
processes and detect potential issues.
Mitigating activities
We have an enterprise-wide ABAC programme designed to
ensure compliance with applicable laws and regulations
prohibiting bribery and corruption and related offences. It
builds on our business standards and culture to form a
comprehensive and practical approach to compliance that
responds 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 continue to enhance our controls around third-party
engagements to ensure that they are sufficient to meet
evolving and emerging risks.
We plan to continue with pre- and post-transaction ABAC due
diligence, and to increase the capabilities in the organisation
around the onboarding, continual monitoring and
management of third parties.
We continue to assess and understand our money laundering
risk exposure and mitigate any existing risk.
Our Code of Conduct, culture, 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 with local markets.
We built our ABAC programme based on best-in-class
principles to help us manage risk from the top down and the
bottom up. For example, the programme includes senior-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. We continue to actively consider
improvements to the programme.
The ABAC programme is underpinned by our global ABAC
policy and other written standards and controls which address
the business activities that give rise to bribery and corruption
risks and establish due diligence requirements for the
engagement of third parties. The programme also mandates
enhanced controls over interactions with government officials
and during business development transactions. We have a
dedicated team responsible for the programme’s
implementation and evolution. The ABAC team works with
other groups across the organisation to address and improve
controls and monitoring requirements. Audit & Assurance and
independent business monitoring teams complement the
ABAC team’s work and provide added assurance.
We use issues found during oversight and assurance exercises
and investigations to identify areas for specific intervention in
our markets and to drive the continuous improvement of the
programme.
We provide mandatory ABAC training at least annually to
employees and relevant third parties differentiated according
to seniority, roles and responsibilities, and geographic location.
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 triggers investigation as appropriate.
Anti-bribery and corruption (ABAC)
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290
Risk definition
The risk that GSK or our third parties potentially engage in
commercial activities that fail to comply with laws, regulations,
industry codes, and internal controls and requirements.
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 the trust established with external stakeholders.
Context
We operate in a highly regulated and extremely competitive
biopharma 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 effects of the
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, lengthy, and uncertain, and carries with
it the potential for failure at any stage. Even after successful
product development, we face challenges in how we launch,
and our competitors’ products or pricing strategies could
render our assets less competitive. We support product
innovation through our continued focus on
both in-person and
virtual engagement, with a constant 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 that products are 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 and get ahead of disease together.
Mitigating activities
To achieve our strategic objectives, we must meet price
expectations of payers, HCPs, consumers, and the community.
Our culture provides 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 evolved policies and standards incrementally
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 businesses continue to use our internal control framework
to support the 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. 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.
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 sales representatives to better recognise and
reward individual effort. In nearly all
markets, the capped
variable pay element of representatives’ compensation is
evaluated on the basis of individual sales targets.
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,
or when new and competitive data is published. To support this,
we have rolled out a global end-to-end process across GSK in
2022 to drive consistent ways of working and efficiencies and
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.
Commercial practices
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Scientific and patient engagement
Risk definition
The risk that GSK or our third parties potentially fail to engage
externally to gain insights, educate and communicate on the
science of our medicines and associated disease areas, and
provide grants and donations in a legitimate and transparent
manner compliant with laws, regulations, industry codes and
internal controls and requirements.
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
Scientific and patient engagements are diverse non-
promotional activities directed at healthcare professionals,
patients, payers, and external stakeholders. Such
engagements aim to improve patient care through the
exchange or provision of knowledge on the use of our products
and related diseases. Scientific and patient engagement with
external stakeholder groups is vital to GSK, as a research-
based biopharma company that is ambitious for patients and
is necessary to advance science and medicine.
We expect our activities to be scientifically sound and
accurate, conducted ethically and transparently, and
compliant with applicable codes, laws, and regulations.
There are many industry and local codes and laws and
other regulations that apply (such as Privacy, Data integrity).
That means measured risk-taking, rooted in sound ethical
considerations, 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
scientific and patient 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 for medical education, advice
seeking, gathering insights on unmet needs of patients,
scientific communication of our research, and disease
awareness.
Since the COVID-19 pandemic we have seen a continued
increase in virtual engagements (e.g. with external experts,
advisory boards, patient advocacy, patient engagements and
scientific congresses). We further developed and modernised
our digital approach to HCPs, our patient engagement
framework and insight-gathering, and applied our internal
principles and policies to this rapidly changing and growing
environment.
We continuously improve our internal controls and networks to
identify emerging risks early and to support staff to conduct
activities in compliance with GSK’s culture and policies, local
laws, and regulations, while building effective risk
management and management monitoring systems.
Data ethics and privacy
Risk definition
The risk that GSK or our third parties potentially fail to ethically
collect; use; re-use through artificial intelligence, data analytics
or automation; secure; share and destroy personal information
in accordance with laws, regulations, and internal controls and
requirements.
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
national laws also enable individuals to bring collective legal
actions against companies such as GSK for failure to follow
data privacy laws.
Context
Data protection and privacy legislation is diverse, with limited
global harmonisation or simplification. It is challenging for
multinationals to standardise their approach to compliance
with data privacy laws. Governments are enforcing compliance
with data protection and privacy laws more rigorously. The
approach and focus of data protection and privacy regulators
also differs between regions and countries, which further
creates challenges for global organisations seeking to
implement a single harmonised global privacy programme.
Increases in the volume of data processed and advances in
technology have resulted in a greater focus on data
governance and the ethical use of personal information, over
and above compliance with data privacy laws. Companies
seeking to foster innovation in artificial intelligence and other
new technologies are faced with evolving decisions from
global policymakers on how best to promote trust in these
systems and avoid unintended outcomes or harmful impacts.
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292
Risk definition
The risk that GSK or our third parties potentially fail to
adequately conduct ethical and credible pre-clinical and
clinical research, collaborate in research activities compliant
with laws, regulations, and internal controls and requirements.
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 involving 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 evaluating our products
once they have been approved. This research includes clinical
trials in healthy volunteers and patients and adheres to
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.
Research practices
Additionally, there are a number of emerging laws concerning
the localisation of data, restrictions on international transfers
and data security, which are changing existing frameworks
that GSK has previously relied upon. This increasing trend for
data sovereignty affects our ability to drive medical innovation
and to effectively operate internationally.
Mitigating activities
Our General Counsel is GSK’s Enterprise Risk Owner (ERO), and
chairs 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 countries where local data privacy laws require
appointment of a Data Protection Officer (DPO), GSK has
made such appointments, including an EU DPO.
As a result of GSK’s focus on technology, data-driven science,
use of artificial intelligence/machine learning and evolving
global data strategy, we have sought to address the key risks
by creating a new team with Group Legal and Compliance
responsible for advising on global digital privacy and
cybersecurity strategy. The ERO has appointed a Head of
Digital, Privacy and Cybersecurity (Head of DPC), who has
day-to-day accountability for designing and implementing the
control framework.
The Head of DPC leads a global, cross-functional core team of
digital- and privacy-qualified attorneys and privacy
compliance professionals, supported by a network of privacy
leaders within business units/functions, privacy contracts
locally, and the wider Legal and Compliance team. GSK has a
global privacy framework based on the EU General Data
Protection Regulation, which is deployed in every market
based on factors including the robustness of local privacy
legislation, established data protection authorities, and GSK’s
footprint. Beyond those countries, we are deploying a
proportionate control framework to set up minimum privacy
standards irrespective of any applicable legislation.
Our core team 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
–
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 have sufficient
training and experience to carry out their roles effectively.
We continuously improve our processes, such as issue
identification, reporting and handling, through monitoring. Our
core team works with the business to ensure we build in privacy
controls into all existing and new business initiatives, as well as
ensuring we meet our accountability obligations in accordance
with global data protection and privacy laws.
Data ethics and privacy continued
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293
Research practices continued
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.
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,
which 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; 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 breadth of our
data (for example: genomics and artificial intelligence and
machine learning). We focus on building data integrity, 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.
Environment, health, and safety (EHS)
Risk definition
The risk that GSK or our third parties potentially fail to ensure
appropriate controls and governance of the organization’s
assets, facilities, infrastructure, and business activities,
including execution of hazardous activities, handling of
hazardous materials, or release of substances harmful to the
environment that disrupts supply or harms employees, third
parties or the environment.
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 GSK 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 businesses.
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 2020 we created a safety
improvement plan, focusing on Life Saving Rules, Safety
Leadership and Warehouse Safety. All significant milestones for
these programmes were delivered in 2022 according to plan.
Our Safety Leadership Experience and warehouse
improvements will continue implementation into 2023.
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294
Risk definition
The risk that GSK or our third parties potentially fail to ensure
appropriate controls and governance over unauthorised
access, disclosure, theft, unavailability or corruption of GSK’s
information, key systems or technology infrastructure.
Risk impact
Failure to adequately protect our information and 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 external environment continues to be extremely
challenging, making it hard to keep pace with increasingly
sophisticated cyber threats. This is due to many factors
including increased geopolitical conflict and digital
nationalism, rising frequency and severity of data breaches
and growing capability and sophistication of bad actors and
cyber criminals. GSK’s business relies on operating a highly
connected information network of internal and external
systems, which hold 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. Acceleration in the
use of digital, data and analytics and cloud computing
capabilities to drive GSK’s pipeline and performance requires
us to continuously adapt and strengthen our controls and
defensive capabilities. GSK also relies on third-party
contractors, partners and suppliers who face similar cyber
threats and this continues to be a vector of risk to manage
as well.
Mitigating activities
Cyber Security Office and Cyber Maturity Programme
GSK has a Cyber Security Office and our Chief Information
Security Officer is responsible for identifying and putting in
place measures to help GSK mitigate and manage cyber
security risks. This includes active monitoring and initiating
remediation or other actions in response to cyber security
intelligence and threats, while also enhancing our capabilities
through an ongoing programme of investment in people,
process and technology to improve our ability to prevent,
detect, respond and recover from any cyber security incidents.
A risk based Third-party security risk management program is
also in place to aid in assessing cyber security risk during
selection of third parties and also provide ongoing monitoring
of our external partner and supplier ecosystem.
Information Security Governance
The Cyber Security Office periodically provides updates on key
information security risks and issues, as well as progress reports
on the Cyber Maturity Programme to both the Risk Oversight &
Compliance Council and the Audit & Risk Committee. The
Information Security Enterprise Risk Plan and Cyber Maturity
Programme are overseen by the Chief Digital and Technology
Officer as well as the Chief Financial Officer.
Cyber Security Awareness, Training and Readiness
Cyber Security Awareness and Training programs including
phishing simulation programs are in place to increase
awareness of cyber related risks and reinforce the message
that security is everyone’s responsibility at GSK. Periodic crisis
simulation tabletop exercises are planned at various levels of
the organisation to test our ability to respond to cyber
incidents.
Compliance with various governmental cyber security
regulations
The Cyber Security Office, with the General Counsel’s
guidance, works to stay abreast of various emergent
governmental regulations, emergent trends and compliance
expectations regarding cyber security or information security.
As new regulatory guidance becomes available, remedial
compliance related actions are put in place as appropriate.
Information security
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Risk definition
The risk that GSK or our third parties potentially fail to deliver a
continuous supply of compliant finished product or respond
effectively to a crisis incident in a timely manner to recover and
sustain critical supply operations.
Risk impact
We recognise how important the continuity of supply of our
products is to the patients 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.
External factors continued to challenge supply continuity in
2022. In the early part of the year COVID-19 continued to
disrupt our sourcing of biosciences materials across our
Medicines and Vaccines supply chains (e.g. vials, syringes
and single-use systems components). The Ukraine conflict has
resulted in supply disruption to the region. To manage these
disruptions, we deployed bespoke de-risking plans using crisis
and continuity plans to manage the detail and mitigate the risk
of supply continuity problems, e.g. by dual sourcing of
materials or re-routing of shipments to avoid conflict zones.
Keeping our patients supplied with their medicines is our
priority.
New technology and modality platforms within supply chains
are changing the requirements for the skillsets of people
working in this field. We have implemented a new Chemistry,
Manufacturing and Controls Operating Model in 2022. This
brings cross-fertilisation of talent focus on the skills needed for
the future for innovative manufacturing.
Industrial relations are also a current risk to supply continuity,
with the threat of industrial action being averted in our UK
manufacturing sites through successful dialogue with unions.
Continued business monitoring is in place to assess the risk of
the spread of industrial relations challenges resulting from
global cost of living pressures.
Mitigating activities
Risk Management
Our Medicines and Vaccine supply chains are set up to ensure
sustainable global supply. The GSK Internal Control Framework
drives our approach to risk management, and it has been
designed to identify emerging new risks and support clear
decision making. Risk oversight is managed 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 in Medicines and
Vaccines closely monitor the inventory status and delivery of
our products. Our core commercial cycle links supply chain
forecasting with our commercial ambition. It is 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 put particular emphasis on
mitigating supply risks associated with medically-critical,
high-revenue products and new product launches, for example
using dual sourcing for key products or APIs. We use the
monthly Performance Management Process across our 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 our supply chains, which include authorised response
and recovery strategies, key areas of responsibility and clear
communication routes. We regularly use business continuity
plans to manage potential supply disruptions. Our
manufacturing sites have crisis management plans in
place. These plans are tested at least annually to ensure
maintenance of core skills in crisis management.
Supply continuity
Proof 6 (e) 08.03.2023 at 1 pm
296
GSK Annual Report 2022
Details of our issued share capital and the number of shares
held in Treasury as at 31 December 2022 can be found in
Note 37 to the financial statements, ‘Share capital and share
premium account’.
Our Ordinary Shares are listed on the 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 30 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 FCA's
Disclosure Guidance and Transparency Rules (DTR 5) is
published on a Regulatory Information Service and on the
company’s website, 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 2022
3 March 2023
No. of
voting
rights
Percentage
of total
voting
rights
(1)
No. of
voting
rights
Percentage
of total
voting
rights
(1)
BlackRock, Inc
231,975,400
(2)
5.69%
231,975,400
(2)
5.69%
Dodge & Cox
253,464,108
(3)
5.04%
253,464,108
(3)
5.04%
(1)
Percentage of total voting rights at the date of notification to the
company.
(2)
Comprising an indirect interest in 229,134,683 Ordinary Shares and a
holding of 2,840,717 Qualifying Financial Instruments (Contracts for
Difference).
(3)
Comprising an indirect interest in 99,377,874 Ordinary Shares and
154,086,234 ADS.
The company has not acquired or disposed of any interests
in its own shares during the period under review.
Shareholder information
Share capital and control
On Monday 18 July 2022, the company completed the
demerger of the Consumer Healthcare business from the
Group to form the Haleon Group (Demerger). Under the terms
of the Demerger, shareholders received one Haleon plc share
for each GSK plc share held at the record time of 6.00 pm (UK)
on Friday 15 July 2022.
Following the Demerger, the company consolidated its
share capital (Share Consolidation). The Share Consolidation
took effect on Tuesday 19 July 2022 and resulted in
shareholders receiving four new GSK plc shares of nominal
value 31
1/4 pence each for every five GSK plc shares of nominal
value 25 pence each held at the record time of 8.00pm (UK)
on Monday 18 July 2022.
The circular in relation to the Demerger and the Share
Consolidation (Circular) and the prospectus regarding the
admission of Haleon’s ordinary shares to the premium listing
segment of the Official List of the Financial Conduct Authority
(FCA) and trading on the Main Market of the London Stock
Exchange (LSE) were published by the company and Haleon
plc respectively on Wednesday 1 June 2022.
Demerger and Share Consolidation
Proof 6 (e) 08.03.2023 at 1 pm
297
Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Shareholder information continued
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
March 2023*
14.42
14.22
34.66
34.26
February 2023
15.03
14.20
36.43
34.27
January 2023
14.51
13.87
35.61
34.48
December 2022
14.92
13.88
37.92
34.78
November 2022
14.48
13.24
34.59
31.58
October 2022
14.29
13.19
33.29
30.01
September 2022
13.78
12.96
32.47
28.67
Quarter ended 31 December 2022
14.92
13.20
37.92
30.00
Quarter ended 30 September 2022
18.23
12.96
44.53
28.67
Quarter ended 30 June 2022
18.31
16.72
47.70
41.98
Quarter ended 31 March 2022
17.27
15.01
47.66
40.17
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
Year ended 31 December 2021
16.19
13.80
44.44
38.13
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
* to 3 March 2023
Share capital and control
continued
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 2022,
when the company was authorised to purchase a maximum
of just over 508 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 37 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 Treasury shares have been purchased since 2014.
The company confirms that it does not currently intend to make
any market purchases in 2023. 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.
Market capitalisation
The market capitalisation, based on shares in issue excluding
Treasury shares, of GSK at 31 December 2022 was £58.9 billion.
At that date, GSK was the 10
th
largest company by market
capitalisation in the FTSE index.
Share price
2022
£
2021
£
2020
£
At 1 January
16.25
13.42
17.79
At 31 December
14.38
16.07
13.42
Increase/(decrease)
(12)%
20%
(24.6)%
High during the year
18.31
16.19
18.46
Low during the year
12.96
11.91
12.92
The table above sets out middle market closing prices.
The company’s share price decreased by 12% in 2022. This
compares with an increase in the FTSE 100 index of 1% during
the year. The middle market closing share price on 3 March
2023 was £14.42.
15
14
13
12
09
UK£
US$
UK share price (UK£)
US ADS price (US$)
31/12/19
31/12/20
31/12/21
31/12/22
11
16
17
18
30
35
40
45
50
55
60
65
70
75
19
80
10
08
29
07
28
Share price trend in the three years ended
31 December 2022
Proof 6 (e) 08.03.2023 at 1 pm
298
GSK Annual Report 2022
Shareholder information continued
Analysis of shareholdings at 31 December 2022
Number of
accounts
% of total
accounts
% of total
shares
Number of
shares
Holding of shares
Up to 1,000
48,487
75.32
0.34
14,478,112
1,001 to 5,000
11,929
18.53
0.58
25,184,737
5,001 to 100,000
2,944
4.57
1.24
53,490,777
100,001 to 1,000,000
682
1.06
5.52
237,893,148
Over 1,000,000
333
0.52
92.32
3,980,296,567
64,375
100.00
100.00
4,311,343,341
Held by
Institutional and Corporate holders
2,383
3.70
61.71
2,660,734,974
Individuals and other corporate bodies
61,990
96.30
13.46
580,447,710
Guaranty Nominees Limited (ADR Programme)
1
0.00
19.79
853,035,897
Held as Treasury shares by GSK
1
0.00
5.04
217,124,760
JP Morgan Chase Bank NA 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 3 March 2023, Guaranty Nominees Limited held 852,687,041
Ordinary Shares representing 20.82% of the issued share capital (excluding Treasury shares).
At 3 March 2023, the number of holders of Ordinary Shares in the US was 852 with holdings of 716,804 Ordinary Shares, and the
number of registered holders of ADS was 16,757 with holdings of 426,343,520 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.
On 23 June 2021, at the new GSK Investor Update, GSK
set out that from 2022 a progressive dividend policy will be
implemented guided by a 40 to 60 percent pay-out ratio
through the investment cycle. The dividend policy, the total
expected cash distribution, and the respective dividend
pay-out ratios for GSK remain unchanged.
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$
(1)
2022
61.25
(2)
–
(3)
2021
80
2.16
2020
80
2.12
2019
80
2.01
2018
80
2.08
(1)
An annual fee of $0.03 per ADS (or $0.0075 per ADS per quarter) will be charged
by the Depository. The amounts shown are the dividends paid per ADS before the
annual fee is charged.
(2)
Adjusted for the Share Consolidation (2022 only; prior years have not been
adjusted). Dividends declared and paid in respect of 2022 were 14p per share for
Q1 2022, 16.25p per share for Q2 2022 and 13.75p per share for Q3 2022. A
dividend of 13.75p per share has been declared for Q4 2022.
(3)
The Q4 2022 ordinary dividend receivable by ADS holders will be calculated
based on the exchange rate on 13 April 2023. The cumulative dividend receivable
by ADS holders for Q1, Q2 and Q3 2022 was $1.05.
GSK has previously stated that it expected to declare a 27p
per share dividend for the first half of 2022, a 22p per share
dividend for the second half of 2022 and a 45p per share
dividend for 2023 (before the Share Consolidation) but that
these targeted dividends per share would increase in step with
the Share Consolidation to maintain the same aggregate
dividend pay-out in absolute Pound Sterling terms. Accordingly,
using the consolidation ratio, GSK’s expected dividend for the
fourth quarter of 2022 converts to 13.75p per new Ordinary
Share, this results in an expected total dividend for the second
half of 2022 of 27.5p per new Ordinary Share. The expected
dividend for 2023 is now 56.5p per new Ordinary Share, in line
with the original expectation converted for the Share
Consolidation and rounded up.
Details of the dividends declared, the amounts and the
payment dates are given in Note 16 to the financial statements,
‘Dividends’.
2023 Dividend calendar
Quarter
Ex-dividend date
Record date
Payment date
Q4 2022
23 February 2023
24 February 2023
13 April 2023
Q1 2023
18 May 2023
19 May 2023
13 July 2023
Q2 2023
17 August 2023
18 August 2023
12 October 2023
Q3 2023
16 November 2023
17 November 2023
11 January 2024
Q4 2023
22 February 2024
23 February 2024
11 April 2024
Dividends
Proof 6 (e) 08.03.2023 at 1 pm
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Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Shareholder information continued
Event
Date
Quarter 1 Results announcement
26 April 2023
Annual General Meeting
3 May 2023
Quarter 2 Results announcement
26 July 2023
Quarter 3 Results announcement
1 November 2023
Preliminary/Quarter 4 Results announcement
31 January 2024
Annual Report publication
February/March 2024
Annual Report distribution
March 2024
Information about the company, including the share and ADS
price, is available on our website at 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 302 for the contact details).
Our Annual General Meeting (AGM) will be held at 2.30pm
(UK time) on Wednesday, 3 May 2023 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
and Chairs of the Board’s Committees 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 2023 (AGM Notice) which
is available on our website at gsk.com.
Investors holding shares through a nominee service should
arrange with that service for them to be appointed as a proxy
in respect of their shareholding 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, JP Morgan Chase
Bank NA. 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 2023
Financial calendar 2023
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.
Tax information for shareholders
Proof 6 (e) 08.03.2023 at 1 pm
300
GSK Annual Report 2022
Shareholder information continued
Tax information for shareholders
continued
UK shareholders
This summary only applies to a UK resident shareholder that
holds shares as capital assets.
Taxation of dividends
For the 2022/23 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
8.75% for basic rate taxpayers, 33.75% for higher rate
taxpayers and 39.35% for additional rate taxpayers. Note that
from 6 April 2023 the dividend allowance will be reduced to
£1,000, and that from 6 April 2024 the dividend allowance
will be reduced again to £500
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 2022/23 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.
Exposure to a UK Inheritance tax charge typically occurs on
death of the asset owner.
However, transfers of shares (other
than commercial sales) within 7 years of death remain relevant
to any inheritance tax exposure at death. Further, transfers to a
trust arrangement during lifetime can give rise to an immediate
inheritance tax charge.
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.
Where an exposure to UK inheritance tax and US estate or gift
tax exists careful planning must be undertaken to understand
the opportunity to utilise the US/UK Estate and Gift Double Tax
Convention to manage tax credits and avoid double taxation.
The overall exposure will be dependent on the specific
circumstances of each situation and it’s also important to note
that tax charges may arise in other jurisdictions. Bespoke advice
tailored to an individual’s personal circumstances should
therefore be obtained from a tax professional.
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. Where listed shares are transferred to a company
connected to the transferor the chargeable consideration will be
deemed to be not less than the market value of the shares
transferred. This market value override also applies where
non-listed shares are transferred to a company connected to the
transferor where the consideration includes an issue of shares.
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.
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.
Proof 6 (e) 08.03.2023 at 1 pm
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Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Shareholder information continued
Tax information for shareholders
continued
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 or on transfers
within the clearance service.
Notwithstanding the above,
where the clearance service operator has made an election
under s97A Finance Act 1986, broadly the 1.5% stamp duty/
SDRT charge should not arise on the transfer into the
clearance service, but transfers to, and within, the system
(where there is a change in beneficial ownership) would
attract a 0.5% charge.
Demerger and Share Consolidation
A summary of certain UK and US tax consequences in respect
of the Demerger and Share Consolidation relevant to the
company’s shareholders who are resident (or, in the case of
individuals, resident and domiciled) in the UK for UK tax
purposes or who are citizens of or resident in the US for US tax
purposes is set out in Part 6 of the Circular (pages 83 to 87).
The Circular, along with other information regarding the
Demerger and Share Consolidation can be found at gsk.com
in the demerger section.
Further information on the tax base cost allocation to assist UK
shareholders apportion their base cost between their GSK plc
shares and Haleon plc shares for UK capital gains tax
purposes following the Demerger, including a worked example,
can be found in the Tax section at gsk.com in the demerger
section.
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
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: +44 (0)371 384 2991*
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, Terms and Conditions
and information on fees 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
(Overseas Payment Service)
Equiniti can convert your dividend into your local currency and send
it direct to your local bank account. The Overseas Payment Service
is available in approximately 100 countries worldwide.
More information on the Overseas Payment
Service (including information on fees) can
be found at www.shareview.co.uk or by
contacting 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.
More information on the share dealing
service (including information on fees) can
be found at www.shareview.co.uk/dealing
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)345 603 7037 (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)
†
Equiniti Financial Services Limited provide the EQi Flexible ISA
to hold GSK shares.
Details (including information on fees) are
available from www.eqi.co.uk or can be
requested by calling the Equiniti Customer
Experience Team on 0345 0700 720. Lines
are open 8:00am to 5:30pm, UK time
Monday to Friday (excluding UK public
holidays).
*
Lines are open from 8.30am to 5.30pm, UK time Monday to Friday (excluding public holidays in England and Wales). Please use the country code when dialling from outside the UK.
†
The provision of share dealing details is not intended to be an invitation or inducement to engage in an investment activity. Advice on share dealing should be obtained from a
stockbroker or independent financial adviser.
Proof 6 (e) 08.03.2023 at 1 pm
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Shareholder information continued
ADS Depositary
The ADR programme is administered by JP Morgan
Chase Bank, NA:
Regular Correspondence:
EQ Shareowner Services
P.O. Box 64504
St. Paul, MN 55164-0504
Delivery of Stock Certificates and Overnight Mail:
EQ Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
shareowneronline.com/informational/contact-us/
From the US: +1 877 353 1154
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 finding innovative ways to reduce the number
of children dying from preventable diseases.
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 on behalf of 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.
†
The provision of share dealing details is not intended to be an invitation or
inducement 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 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
2929 Walnut Street
Philadelphia PA 19104
Tel: +1 888 825 5249 (US toll free)
Tel: +1 215 751 4000 (outside the US)
GSK Response Center
Tel: +1 888 825 5249 (US toll free)
Tel: +1 215 751 4600 (outside the US)
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: +44 207 066 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
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
Other statutory disclosures continued
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 an established
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.
Where appropriate, external legal counsel, the external
auditors, our sponsor bank, 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 2022, the Committee met 28 times,
including for the purpose of receiving relevant and appropriate
training.
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 109 and in his biography on page 98.
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 2022.
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
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Financial statements
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GSK Annual Report 2022
Other statutory disclosures continued
The CEO and CFO expect to complete these certifications
and report their conclusions on the effectiveness of disclosure
controls and procedures in March 2023, 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 2022 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 2022
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
2022, 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, including transactions or dealings with
government-owned or-controlled 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
(£8.7 million) and net profits (£3.7 million) from the Group's
sales to Iran in 2022.
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 (£6.3 million) and net losses
(£0.2 million) from the Group's sales to Lebanon in 2022.
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, the so-called Donetsk People's
Republic, Iran, the so-called 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
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GSK Annual Report 2022
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 2022,
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 2022, a total of
US$360,950 (2021: US$298,000) 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
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
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 2022 are
disclosed below. Unless otherwise stated the share capital disclosed comprises ordinary shares which are indirectly held by
GSK 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, Canada
Action Potential Venture Capital Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Adechsa GmbH (ii)
Ordinary
c/o PRV Provides Treuhandgesellschaft AG, Dorfstrasse 38, 6341, Baar,
Switzerland
Affinivax Securities Corporation
Common
c/o Affinivax, Inc., 301 Binney Street, Cambridge MA 02142, United
States
Affinivax, Inc.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Allen & Hanburys Limited (ii)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Allen & Hanburys Pharmaceutical Nigeria Limited
Ordinary
49, Town Planning Way, Ilupeju, Lagos, Nigeria
Allen Pharmazeutika Gesellschaft m.b.H.
Ordinary
Wienerbergstraße 7, Wien, 1100, Austria, Austria
BEECHAM GROUP p.l.c
5p Ordinary B;
20p Ordinary A
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Beecham Pharmaceuticals (Pte) Limited
Ordinary
38 Quality Road, Jurong Industrial Estate, Jurong, 618809, Singapore
Beecham Portuguesa-Produtos Farmaceuticos e Quimicos, Lda,
Quota
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131,
Alges, Portugal
Beecham S.A.
Ordinary
Avenue Fleming 20, 1300 Wavre, Belgium
Biovesta 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, 81675, Munich, Germany
Cellzome GmbH
Ordinary
Meyerhofstrasse 1, 69117, Heidelberg, Germany
Cellzome Limited (in liquidation)
Ordinary
c/o BDO LLP, 5 Temple Square, Temple Street, Liverpool, L2 5RH, United
Kingdom
Charles Midgley Limited (in liquidation)
Ordinary
c/o BDO LLP, 5 Temple Square, Temple Street, Liverpool, L2 5RH, United
Kingdom
Clarges Pharmaceuticals Limited (in liquidation)
Ordinary;
Preference
c/o BDO LLP, 5 Temple Square, Temple Street, Liverpool, L2 5RH, United
Kingdom
Clarges Pharmaceutical Trustees Limited (ii) (iv)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Colleen 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, England
Desarrollo Energia Solar Alternativa S.L.
Ordinary
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, 28760,
Madrid, Spain
Duncan 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
Av. Andrés Bello 2457, Costanera Center, Torre 2, Piso 20, Providencia,
Santiago, 7510689, 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, England
Glaxo Kabushiki Kaisha (ii)
Ordinary
1-8-1 Akasaka Minato-ku, Tokyo, Japan
Glaxo Laboratories (Nigeria) Limited (ii)
Ordinary
82 Marine Road, Apapa, Lagos, Nigeria
Glaxo Laboratories Limited (In Liquidation)
Ordinary
55 Baker Street, London, W1U 7EU, United Kingdom
Glaxo 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, England
Glaxo Properties BV
Ordinary
Van Asch van Wijckstraat 55h, 3811 LP, Amersfoort, Netherlands
Glaxo Trustees Limited (in liquidation)
Ordinary
55 Baker Street, London, W1U 7EU, United Kingdom
Glaxo Verwaltungs GmbH
Ordinary
Prinzregentenplatz 9, 81675, Munich, Germany
Glaxo Wellcome Farmaceutica, Limitada
Ordinary Quota
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131,
Alges, Portugal
Glaxo Wellcome Manufacturing Pte Ltd
Ordinary
1 Pioneer Sector 1, Jurong Industrial Estate, Jurong, 628413, Singapore
Glaxo Wellcome Production
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, France
Glaxo Wellcome Vidhyasom Limited (ii)
Ordinary
12th Floor Wave Place, 55 Wireless Road, Lumpini, Pathumwan,
Bangkok, 10330, Thailand
Other statutory disclosures continued
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
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, Nigeria
Glaxochem Pte Ltd (iii)
Ordinary
23 Rochester Park, 139234, Singapore
GlaxoSmithKline - Produtos Farmaceuticos, Limitada
Ordinary Quota
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131,
Alges, Portugal
GlaxoSmithKline (Cambodia) Co., Ltd.
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 (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, Ireland
GlaxoSmithKline (Israel) Ltd
Ordinary
25 Basel Street, PO Box 10283, Petach-Tikva, 49002, Israel
GlaxoSmithKline (Malta) Limited
Ordinary
1, First Floor, De La Cruz Avenue, Qormi, QRM2458, Malta
GlaxoSmithKline (Private) Limited (ii)
Ordinary
Unit 3, 20 Anthony Road, Msasa, Harare, Zimbabwe
GlaxoSmithKline (Thailand) Limited
Ordinary
12th Floor Wave Place, 55 Wireless Road, Lumpini, Pathumwan,
Bangkok, 10330, Thailand
GlaxoSmithKline AB
Ordinary
Hemvarnsg. 9, 171 54, Solna, Sweden
GlaxoSmithKline AG
Ordinary
Talstrasse 3-5, 3053 Muenchenbuchsee, Switzerland
GlaxoSmithKline Angola Unipessoal Limitada
Quota
Luanda, Bairro Petrangol, Estrada de Cacuaco n ° 288, Angola
GlaxoSmithKline Argentina S.A.
Ordinary
Tucumán 1, piso 4, Buenos Aires, C1049AAA, Argentina
GlaxoSmithKline AS
Ordinary
Drammensveien 288, Oslo, NO-0283, Norway
GlaxoSmithKline Australia Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, Australia
GlaxoSmithKline B.V.
Ordinary
Van Asch van, Wijckstraat 55h, 3811 LP Amersfoort, The Netherlands,
Netherlands
GlaxoSmithKline Beteiligungs GmbH
Ordinary
Prinzregentenplatz 9, 81675, Munchen, Germany
GlaxoSmithKline Biologicals Kft.
Ordinary
2100 Gödöllõ, Homoki Nagy István utca 1, Hungary
GlaxoSmithKline Biologicals S.A.S.
Ordinary
637 Rue des Aulnois, Saint-Amand Les Eaux, 59230, France
GlaxoSmithKline 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, Brazil
GlaxoSmithKline Capital Inc.
Common
Wilmington Trust SP Services, Inc., 1100 N. Market Street, 4th Floor,
Wilmington DE 19890, United States
GlaxoSmithKline Capital plc
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Caribbean Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Chile Farmaceutica Limitada
Social Capital
Av Andrés Bello 2457, Torre 2, piso 20, Providencia, Santiago, Región
Metropolitana, Chile
GlaxoSmithKline Colombia S.A.
Ordinary
Avenida El Dorado, #69B-45/Piso 9, Bogota, Colombia
GlaxoSmithKline Consumer Holding B.V. (ii)
Ordinary
Van Asch van Wijckstraat 55h, 3811 LP, Amersfoort, Netherlands
GlaxoSmithKline d.o.o Sarajevo – u likvidaciji (In Liquidation)
Quotas
Zmja od Bosne broj 7-7a, Sarajevo, 71000, Bosnia and Herzegovina
GlaxoSmithKline d.o.o.
Equity Capital
Ulica Damira Tomljanovica Gavrana 15, Zagreb, Croatia
GlaxoSmithKline doo Beograd-Novi Beograd – U LIKVIDACIJI
(In liquidation)
Ordinary
Milutin Milankovic, 1J, Novi Beograd, Belgrade, 11070, Serbia
GlaxoSmithKline Ecuador S.A.
Ordinary
Av 10 De Agosto N36-239, y Naciones Unidas, Edificio
Electroectuatoriana, 2do piso, Quito, Ecuador
GlaxoSmithKline El Salvador S.A. de C.V.
Ordinary
Municipio de San Salvador, Departamento de San Salvador,
El Salvador
GlaxoSmithKline EOOD
Ordinary
16 Nedelcho Bonchev str., Sofia, 1592, Bulgaria
GlaxoSmithKline Export Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Export Panama S.A.
Ordinary
Panama City, Republic of Panama, Panama
GlaxoSmithKline Far East B.V.
Ordinary
Van Asch van Wijckstraat 55h, 3811 LP, Amersfoort, Netherlands
GlaxoSmithKline Finance plc
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline 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
GlaxoSmithKline Holding AS
Ordinary
Drammensveien 288, Oslo, NO-0283, Norway
GlaxoSmithKline Holdings (Americas) Inc.
Common
Wilmington Trust SP Services Inc., 1100 North Market Street, 4th Floor,
Wilmington, Delaware, 19890
GlaxoSmithKline Holdings (One) Limited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Holdings Limited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Group companies
continued
Other statutory disclosures continued
Proof 6 (e) 08.03.2023 at 1 pm
309
Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Name
Security
Registered address
Wholly owned subsidiaries continued
GlaxoSmithKline Holdings Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, Australia
GlaxoSmithKline Honduras S.A.
Ordinary
Tegucigalpa, MDC, Honduras
GlaxoSmithKline IHC Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline 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
100 Milverton Drive, Suite 800 , Mississauga ON L5R 4H1, Canada
GlaxoSmithKline Insurance Ltd.
Ordinary
c/o Trinity Corporate Services Ltd., Trinity Hall, 43 Cedar Avenue,
Hamilton, Hamilton, HM12, Bermuda
GlaxoSmithKline Intellectual Property (No.2) Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Intellectual Property Development Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline 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, England
GlaxoSmithKline Investigación y Desarrollo, S.L.
Ordinary
Severo Ochoa 2 Parque Tecnológico de Madrid, Tres Cantos, 28760,
Madrid, Spain
GlaxoSmithKline Investments Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, Australia
GlaxoSmithKline K.K.
Ordinary
1-8-1 Akasaka Minato-ku, Tokyo, Japan
GlaxoSmithKline 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, Panama
GlaxoSmithKline Lietuva UAB
Ordinary
Ukmerges st. 120, Vilnius, LT-08105, Lithuania
GlaxoSmithKline Limited
Ordinary
23/F., Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, Kowloon,
Hong Kong
GlaxoSmithKline Limited (ii)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
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, Italy
GlaxoSmithKline Maroc S.A.
Ordinary
42-44 Angle Bd, Rachidi et Abou Hamed El Glaza, Casablanca,
Morocco
GlaxoSmithKline Medical and Healthcare Products Limited
Ordinary
H-1124, Csorsz utca 43, Budapest, Hungary
GlaxoSmithKline Mercury Limited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Mexico S.A. de C.V.
Ordinary A;
Ordinary B
Av. Real Mayorazgo 130 Piso 20, Colonia Xoco, Alcaldia Benito Juárez,
Ciudad de Mexico, 03330, 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, Finland
GlaxoSmithKline Peru S.A.
Ordinary
Av. Víctor Andrés Belaúnde N°147, Vía Principal N°133, Piso 7, Distrito de
San Isidro, Lima, Lima, Perú
GlaxoSmithKline Pharma A/S
Ordinary
Vallensbæk Company House III , Delta Park 37, DK-2665, Valle,
Denmark
GlaxoSmithKline Pharma GmbH
Ordinary
Wienerbergstraße 7, Wien, 1100, Austria, Austria
GlaxoSmithKline Pharmaceutical Kenya Limited
Ordinary
Likoni Road, Nairobi, 78392 - 00507, Kenya
GlaxoSmithKline Pharmaceutical Nigeria Limited
Ordinary
1 Industrial Avenue, Ilupeju, Ikeja, Lagos, PM B 21218, Nigeria
GlaxoSmithKline Pharmaceutical Sdn Bhd
Ordinary
HZ.01, Horizon Penthouse, 1 Powerhouse, 1, Persiaran Bandar Utama,
Bandar Utama, 47800 Petaling Jaya, Selangor, Malaysia
GlaxoSmithKline Pharmaceuticals (Pvt) Ltd
Ordinary
121 Galle Road, Kaldemulla, Moratuwa, Sri Lanka
GlaxoSmithKline 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 SA
Ordinary
Site Apollo, Avenue Pascal 2-4-6, Wavre, 1300, Belgium
GlaxoSmithKline 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, Singapore
GlaxoSmithKline Puerto Rico, Inc.
Common
Corporation Service Company Puerto Rico Inc., c/o RVM Professional
Services, LLC, A4 Reparto Mendoza, Humacao, 00791, Puerto Rico
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, England
GlaxoSmithKline S.A.
Ordinary
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, 28760,
Madrid, Spain
GlaxoSmithKline S.p.A.
Ordinary
Viale dell’Agricoltura 7, 37135, Verona, Italy
GlaxoSmithKline s.r.o.
Ordinary
Hvezdova 1734/2c, Prague, 4 140 00, Czech Republic
GlaxoSmithKline Services GmbH & Co. KG
Partnership Capital
Prinzregentenplatz 9, 81675, Munchen, Germany
Group companies
continued
Other statutory disclosures continued
Proof 6 (e) 08.03.2023 at 1 pm
310
GSK Annual Report 2022
Name
Security
Registered address
Wholly owned subsidiaries continued
GlaxoSmithKline Services Unlimited (i)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline Single Member A.E.B.E.
Ordinary
266 Kifissias Avenue, Halandri, Athens, 152 32, Greece
GlaxoSmithKline 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, England
GlaxoSmithKline Slovakia s.r.o., v likvidácii (In Liquidation)
Ordinary
KPMG Slovensko Advisory k.s., Dvořákovo nábrežie 10, 811 02 Bratislava,
Slovakia
GlaxoSmithKline 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, Ireland
GlaxoSmithKline Tunisia S.A.R.L.
Ordinary
Immeuble REGUS, Lot B17, Centre Urbain Nord, Tunis, Tunisia
GlaxoSmithKline UK Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GlaxoSmithKline 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, England
GlaxoSmithKline Venezuela C.A.
Ordinary
Calle Altagracia, edificio P&G, piso Mezzanina, torre Torre Sur,
Urbanizacion Sorokaima, La Trinidad, Caracas, 1080, Venezuela,
Bolivarian Republic of
GlaxoSmithKline Vietnam Limited Liability Company (ii)
Equity Capital
The Metropolitan, 235 Dong Khoi Street, District 1, 7th Floor Unit 701, Ho
Chi Minh City, Vietnam
GlycoVaxyn AG
Common;
Preferred A;
Preferred B;
Preferred C
Grabenstrasse 3, 8952 Schlieren, Switzerland
Groupe GlaxoSmithKline
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, France
GSK (No.3) Scottish Limited Partnership (x)
Partnership
50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ,
United Kingdom
GSK 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 K.K.
Ordinary
1-8-1 Akasaka Minato-ku, Tokyo, Japan
GSK Commercial Sp. z o.o.
Ordinary
ul. Rzymowskiego 53, 02-697, Warsaw, Poland
GSK d.o.o., Ljubljana
Ordinary
Ameriška ulica 8,, Ljubljana, 1000, Slovenia
GSK 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, England
GSK Finance (No 3) plc
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
GSK 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, Netherlands
GSK Kazakhstan LLP
Participation interest
273, Furmanov Street, Almaty, Medeu District, 050059, Kazakhstan
GSK Pharma India Private Limited
Equity
1, Battery House, Bhulabhai Desai Raod, Mumbai, Maharashtra,
400026, India
GSK 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)
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, Poland
GSK Vaccines BV
Ordinary
Hullenbergweg 85, 1101 CL, Amsterdam, Netherlands
GSK Vaccines GmbH
Ordinary
Emil-von-Behring-Str.76, 35041 Marburg, Germany
GSK Vaccines Institute for Global Health S.r.l.
Quotas
Via Fiorentina 1, 53100, Siena, Italy
GSK Vaccines S.r.l.
Quotas
Via Fiorentina 1, 53100, Siena, Italy
GSK Vaccines Vertriebs GmbH
Ordinary
Rudolf-Diesel-Ring 27, 83607, Holzkirchen, Germany
Human 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, Canada
Instituto Luso Farmaco, Limitada (ii)
Quotas
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131,
Alges, Portugal
InterPharma Dienstleistungen GmbH (ii)
Quotas
Wienerbergstraße 7, Wien, 1100, Austria, Austria
J&J Technologies, LC (ii)
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
Group companies
continued
Other statutory disclosures continued
Proof 6 (e) 08.03.2023 at 1 pm
311
Governance and remuneration
Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Name
Security
Registered address
Wholly owned subsidiaries continued
Laboratoire GlaxoSmithKline
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, France
Laboratoire Pharmaceutique Algérien LPA Production SPA
Ordinary
Zone Industrielle Est, Boudouaou, Boumerdes, Algeria
Laboratoire Pharmaceutique Algérien SPA
Ordinary
Zone Industrielle Est, Boudouaou, Boumerdes, Algeria
Laboratoires Paucourt (ii)
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, France
Laboratoires Saint-Germain (ii)
Ordinary
23 rue François Jacob, 92500, Rueil-Malmaison, France
Laboratorios Dermatologicos Darier, S.A de C.V.
Ordinary A;
Ordinary B
Av. Real Mayorazgo 130 Piso 20, Colonia Xoco, Alcaldia Benito Juárez,
Ciudad de Mexico, 03330, Mexico
Laboratorios Farmaceuticos Stiefel (Portugal) LTDA (ii)
Ordinary
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131,
Alges, Portugal
Laboratorios Stiefel de Venezuela SA
Ordinary
Calle Altagracia, Edificio P&G, Nivel Mezzanina, Piso Mezzanina,
local Torre Sur, Urbanizacion Sorokaima, La Trinidad, Caracas, 1080,
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)
Quotas
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131,
Alges, Portugal
Montrose Pharma Company Limited (ii)
Ordinary Quota
H-1124, Csorsz utca 43, Budapest, Hungary
PT Glaxo Wellcome Indonesia
Class A;
Class B
JL. Pulobuaran Raya Kav.III/DD 2,3,4 KWS. Industri, Pulogadung,
Jatinegara, Cakung, Jakarta Timur, Indonesia
Setfirst Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Sierra Oncology Australia Pty Ltd
Ordinary
c/o Maddocks Lawyers, Angel Place, Level 27, 123 Pitt Street Sydney
2000, Australia
Sierra Oncology Canada ULC
Common
355 Burrard Street, Suite 1000, Vancouver, British Columbia V6C 2G8,
Canada
Sierra Oncology Canada, LLC
LLC Interests
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Sierra Oncology, LLC
Common Stock
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Sitari 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, Bangladesh
SmithKline Beecham (Cork) Limited
Ordinary
12 Riverwalk, Citywest Business Campus, Dublin 24, Ireland
SmithKline Beecham (Manufacturing) Limited (In Liquidation)
Ordinary
12 Riverwalk, Citywest Business Campus, Dublin 24, Ireland
SmithKline Beecham Egypt L.L.C.
Quotas
Amoun Street, El Salam City, Cairo, Egypt
SmithKline 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, England
SmithKline Beecham Legacy H Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
SmithKline Beecham Pension Plan Trustee Limited (ii)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
SmithKline Beecham Pension Trustees Limited (In Liquidation)
Ordinary
55 Baker Street, London, W1U 7EU, United Kingdom
SmithKline Beecham Pharma GmbH & Co KG
Partnership Capital
Prinzregentenplatz 9, 81675, Munchen, Germany
SmithKline Beecham Pharma Verwaltungs GmbH
Ordinary
Prinzregentenplatz 9, 81675, Munchen, Germany
SmithKline Beecham Pharmaceuticals (Pty) Limited (ii)
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 Senior Executive Pension Plan Trustee
Limited (ii)
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Stiefel GmbH & Co. KG
Partnership Capital
Prinzregentenplatz 9, 81675, Munchen, Germany
Stiefel Laboratories Legacy (Ireland) Limited
Ordinary
Unit 2 Building 2500, Avenue 2000 Cork Airport Business Park, Cork,
Ireland
Stiefel Laboratories Limited (In liquidation)
Ordinary
c/o BDO LLP, 5 Temple Square, Temple Street, Liverpool, L2 5RH,
United Kingdom
Stiefel Laboratories Pte Limited
Ordinary
1 Pioneer Sector, 628413, Singapore
Stiefel Laboratories, Inc.
Common
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Stiefel Maroc SARL
Ordinary
275 Boulevard Zerktouni, Casablanca, Morocco
Stiefel Research (Australia) Holdings Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, Australia
Stiefel Research Australia Pty Ltd
Ordinary
1061 Mountain Highway, Boronia Victoria VIC 3155, Australia
Stiefel 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
Group companies
continued
Other statutory disclosures continued
Proof 6 (e) 08.03.2023 at 1 pm
312
GSK Annual Report 2022
Name
Security
Registered address
Wholly owned subsidiaries continued
Tesaro Bio GmbH (In Liquidation)
Ordinary
Poststrasse 6, 6300 Zug, Switzerland
Tesaro Bio Netherlands B.V
Ordinary
Joop Geesinkweg 901, 1114 AB, Amsterdam-Duivendrecht, Netherlands
Tesaro Development, Ltd.
Ordinary
Clarendon House, 2 Church Street, Hamilton HM11, Bermuda
Tesaro, 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, England
Wellcome Consumer Products Limited (In Liquidation)
Ordinary
c/o BDO LLP, 5 Temple Square, Temple Street, Liverpool, L2 5RH,
United Kingdom
Wellcome Limited
Ordinary
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Group companies
continued
Name
Security
Effective %
Ownership
Registered address
Subsidiaries where the effective interest is less than 100%
Amoun Pharmaceutical Industries Co. S.A.E.
New Monetary Shares
(99.5%)
90.71%
El Salam City 11491, PO Box 3001, Cairo, Egypt
Biddle Sawyer Limited
Equity
75.00%
252 Dr Annie Besant Road, Mumbai, 400030, India
British Pharma Group Limited
Capital (50%)
50.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Galvani Bioelectronics Inc.
Common
55.00%
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Galvani Bioelectronics Limited
A Ordinary;
B Ordinary (0%)
55.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
Glaxo Saudi Arabia Limited
Ordinary
75.00%
PO Box 22617, Area No 56 to 73, Warehouse City, First Stage Al
Khomrah, Jeddah 21416, Saudi Arabia
GlaxoSmithKline (Tianjin) Co. Ltd
Ordinary
90.00%
No. 65, the Fifth Avenue, Tai Feng Industrial Park, Tianjin Economic and
Technolog, Tianjin, 300457, China
GlaxoSmithKline Algérie S.P.A.
Ordinary
99.99%
Zone Industrielle Est, Boudouaou, Wilaya de Boumerdes, Algeria
GlaxoSmithKline Consumer Nigeria plc
Ordinary
46.42%
1 Industrial Avenue, Ilupeju, Ikeja, Lagos, PM B 21218, Nigeria
GlaxoSmithKline Pakistan Limited
Ordinary
82.59%
The Sykes Building, 35 Dockyard Road, West Wharf, Karachi, 74000,
Pakistan
GlaxoSmithKline Pharmaceuticals Limited
Equity
75.00%
252 Dr Annie Besant Road, Mumbai,, 400030, India
GlaxoSmithKline S.A.E.
Ordinary
91.20%
Boomerang Office Building - Land No. 46, Zone (J) - 1st District, Town
Center - 5th Tagammoe, New Cairo City, Egypt
GSK (No.1) Scottish Limited Partnership (ix)
Partnership
–
50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ,
United Kingdom
GSK (No. 2) Scottish Limited Partnership (ix)
Partnership
–
50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ,
United Kingdom
Laboratorios ViiV Healthcare, S.L.
Ordinary
78.30%
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, 28760,
Madrid, Spain
Modern Pharma Trading Company L.L.C.
Quotas
91.20%
Amoun Street, PO Box 3001, El Salam City, Cairo, 11491, Egypt
PHIVCO-1 LLC
LLC Interests
78.30%
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
PHIVCO-2 LLC
LLC Interests
78.30%
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Shionogi-ViiV Healthcare LLC (ii)
Common Interests
78.30%
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
SmithKline Beecham-Biomed O.O.O.
Participation Interest
97.00%
Leningradskiy Prospect 37A, Building 4, Floor 2, Premises XIV, Room 42,
125167, Moscow, Russian Federation
Stiefel Egypt LLC (ii)
Quotas
99.00%
Amoun Street, PO Box 3001, El Salam City, Cairo, 11491, Egypt
ViiV Healthcare (South Africa) (Proprietary) Limited
Ordinary
78.30%
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston
2021, South Africa
ViiV HealthCare BV
Ordinary
78.30%
Van Asch van, Wijckstraat 55h, 3811 LP Amersfoort, The Netherlands,
Netherlands
ViiV Healthcare Company
Common
78.30%
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
ViiV Healthcare Finance 1 Limited (In liquidation)
Ordinary
78.30%
c/o BDO LLP, 5 Temple Square, Temple Street, Liverpool, L2 5RH, United
Kingdom
ViiV Healthcare Finance 2 Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare Finance Limited
Ordinary;
Redeemable Preference
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare GmbH
Ordinary
78.30%
Prinzregentenplatz 9, 81675, Munchen, Germany
ViiV Healthcare GmbH
Ordinary
78.30%
Talstrasse 3-5, 3053 Muenchenbuchsee, Switzerland
Other statutory disclosures continued
Proof 6 (e) 08.03.2023 at 1 pm
313
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
Name
Security
Effective %
Ownership
Registered address
Subsidiaries where the effective interest is less than 100% continued
ViiV Healthcare Hong Kong Limited
Ordinary
78.30%
23/F Tower 6, The Gateway, 9 Canton Road, Harbour City, Tsimshatsui,
Kowloon, Hong Kong
ViiV Healthcare K.K.
Ordinary
78.30%
1-8-1 Akasaka Minato-ku, Tokyo, Japan
ViiV Healthcare Limited
A Ordinary;
B Ordinary;
C Ordinary;
D1 Preference;
D2 Ordinary;
Deferred;
E 5% Cumulative Preference
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare Pty Ltd
Ordinary
78.30%
1061 Mountain Highway, Boronia Victoria VIC 3155, Australia
ViiV Healthcare Puerto Rico, LLC
LLC Interests
78.30%
Corporation Service Company Puerto Rico Inc., c/o RVM Professional
Services, LLC, A4 Reparto Mendoza, Humacao, Puerto Rico, 00791
ViiV Healthcare S.r.l.
Quotas
78.30%
Viale dell’Agricoltura 7, 37135, Verona, Italy
ViiV Healthcare SAS
Ordinary
78.30%
23 rue François Jacob, 92500, Rueil-Malmaison, France
ViiV Healthcare sprl
Ordinary
78.30%
Site Apollo, Avenue Pascal 2-4-6, Wavre, 1300, Belgium
ViiV Healthcare Trading LLC (ii)
Participation Interest
78.30%
Leningradskiy Prospect 37A, Building 4, Floor 2, Premises XIV, Room 28,
125167, Moscow, Russian Federation
ViiV Healthcare Trading Services UK Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.3) Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.4) Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.5) Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.6) Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK (No.7) Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare UK Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
ViiV Healthcare ULC
Common
78.30%
3500 855-2nd Street SW, Calgary AB T2P 4J8, Canada
ViiV Healthcare Venture LLC
LLC Interest
78.30%
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
ViiVHIV Healthcare Unipessoal Lda
Quota
78.30%
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, 1495-131,
Alges, Portugal
Winster Pharmaceuticals Limited
Ordinary
46.42%
2A Association Avenue, Ilupeju Industrial Estate, Lagos, PO Box 3199,
Nigeria
Group companies
continued
Other statutory disclosures continued
Name
Security
Effective %
Ownership
Registered address
Associates
GlaxoSmithKline Landholding Company, Inc
Common
39.93%
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%)
25.00%
44 Esplanade, St Helier, Jersey, JE4 9WG, Channel Islands
Kurma Biofund II FCPR
Partnership Interest (32.06%)
32.06%
24 rue Royale, 5th Floor,
75008, Paris, France
Longwood Fund I, LP
Partnership Interest (35%)
35.00%
The Prudential Tower, Suite 1555, 800 Boylston Street, Boston, MA 02199
Medicxi Ventures I LP
Partnership Interest (26.19%)
26.19%
44 Esplanade, St Helier, Jersey, JE4 9WG, Channel Islands
Joint Ventures
Chiron Panacea Vaccines Private Limited
Equity Shares
50.00%
708/718, 7th Floor, A Wing, Sagar Tech Plaza, Saki Naka, Andheri East,
Mumbai, Maharashtra, 400072, India
Qualivax Pte. Limited
Ordinary
50.00%
80 Robinson Road, #02-00, 068898, Singapore
Qura Therapeutics, LLC
Units
39.15%
Corporation Service Company, 251 Little Falls Drive, Wilmington DE
19808, United States
Other significant holdings
Axon Therapies, Inc
Common (3.39%);
Series A Preference (16.10%)
20.03%
315 west 36th street, New York 10018, USA
Alpheus Medical, Inc.
Series A Preference (13.8%)
Series A-1 Preference (7.29%)
21.09%
3510 Hopkins Place, North Oakdale,
 Minnesota 55128, USA
Global Farm S.A.
A Shares (0%)
B Shares (0%)
C Shares (100%)
20.00%
Mendoza 1259, Ciudad Autónoma de Buenos Aires, Argentina
Longwood Fund II, LP
Partnership Interest (20.03%)
20.03%
The Prudential Tower, Suite 1555, 800 Boylston Street, Boston, MA 02199
Sanderling Ventures VII, L.P. A63
Partnership Interest (25.25%)
25.25%
400 S. El Camino Real, Suite 1200, San Mateo, CA 94402
SR One Capital Fund I-B, LP
Partnership Interest (44%)
44.00%
Corporation service company, 251 Little Falls Drive, City of Wilmington,
County of New Castle, Delaware 19808
Proof 6 (e) 08.03.2023 at 1 pm
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GSK Annual Report 2022
Group companies
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 2022. Unless otherwise stated, the undertakings listed below are owned, either directly or
indirectly, by GSK plc.
Name
Security
Effective %
Ownership
Registered address
Company
Number
UK registered subsidiaries exempted from audit
Burroughs Wellcome International Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
543757
Domantis Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
3907643
Edinburgh Pharmaceutical Industries Limited (ii)
Ordinary;
Preference;
100.00%
Shewalton Road, Irvine, Ayrshire, KA11 5AP, United Kingdom
SC005534
Eskaylab Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
99025
Glaxo Wellcome UK Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
480080
Glaxo Wellcome International B.V. (iii)
Ordinary
100.00%
Huis ter Heideweg 62, 3705 LZ, Zeist, Netherlands
30150600
Glaxochem (UK) Unlimited
Ordinary;
Ordinary B;
Ordinary C
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
4299472
GlaxoSmithKline Intellectual Property (No.3)
Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
11480952
GlaxoSmithKline Intellectual Property (No.4)
Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
11721880
GlaxoSmithKline Intellectual Property (No.5)
Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
11959399
GlaxoSmithKline International Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
2298366
GSK Capital B.V. (iii) (v)
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
81761198
GSK GP 1 Limited (iv)
A Shares;
B Shares (0%)
99.00%
50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ,
United Kingdom
SC721605
GSK GP 2 Limited (iv)
Ordinary
100.00%
50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ,
United Kingdom
SC721606
GSK LP Limited (iv)
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
13879411
Montrose Fine Chemical Company Ltd.
Ordinary
100.00%
Shewalton Road, Irvine, Ayrshire, KA11 5AP, United Kingdom
SC190635
PHIVCO UK II Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
6944229
PHIVCO UK Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
6944223
Smith Kline & French Laboratories Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
52207
SmithKline Beecham (Export) Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
2860752
SmithKline Beecham (H) Limited
Non-cumulative
Non-redeemable;
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
3296131
SmithKline Beecham (Investments) Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
302065
SmithKline Beecham Marketing and Technical
Services Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
494385
SmithKline Beecham Nominees Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
503868
SmithKline Beecham Overseas Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
2552828
Stiefel Laboratories (U.K.) Ltd
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
831160
Tesaro UK Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
7890847
The Wellcome Foundation Limited
Ordinary
100.00%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
194814
ViiV Healthcare Overseas Limited
Ordinary
78.30%
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
7027385
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 2022
the total sum of these debts and liabilities is £1,266 million (2021 – £876 million)
Key
(i)
Directly owned by GSK plc.
(ii)
Dormant entity.
(iii)
Tax resident in the UK.
(iv)
Exempt under Regulation 7 of the Partnership (Accounts) Regulations 2008 from the requirement to deliver to the registrar financial statements of the qualifying
partnership(s) of which the entity is a member in accordance with the Companies Act.
(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.
(ix)
GSK GP 1 Limited is a subsidiary undertaking of GSK plc and Berkeley Square Pension Trustee Company Limited and is the general partner of GSK (No.1) Scottish Limited
Partnership and GSK (No.2) Scottish Limited Partnership. GSK GP 1 Limited’s share capital is 99% indirectly owned by GSK plc and 1% owned by Berkeley Square Pension
Trustee Company Limited.
(x)
GSK GP 2 Limited is a subsidiary undertaking of GSK plc and is the general partner of GSK (No.3) Scottish Limited Partnership. GSK GP 2 Limited’s share capital is 100%
indirectly owned by GSK plc.
Other statutory disclosures continued
Proof 6 (e) 08.03.2023 at 1 pm
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Strategic report
Financial statements
Investor information
GSK Annual Report 2022
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
GSK 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
GSK plc and its subsidiary undertakings.
GSK
GSK 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
Proof 6 (e) 08.03.2023 at 1 pm
316
GSK Annual Report 2022
Shareholder information continued
2022 Remuneration policy summary
133
Access
43
Accounting principles and policies
186
Acquisitions and disposals
237
Adjustments reconciling Total profit after tax to operating
cash flows
242
Annual General Meeting 2023
299
Approach to tax
92
Assets held for sale
216
Associates and joint ventures
203
Audit & Risk Committee Report
124
Business model
08
Cash and cash equivalents
216
Cash generation and conversion
86
CEO’s statement
06
Chair’s statement
04
Chair’s Governance statement
103
Chair’s Remuneration annual statement
133
Climate-related financial disclosure
55
Commitments
232
Consolidated balance sheet
183
Consolidated cash flow statement
185
Consolidated income statement
182
Consolidated statement of changes in equity
184
Consolidated statement of comprehensive income
182
Contingent consideration liabilities
231
Contingent liabilities
232
Corporate governance
96
Corporate Responsibility Committee Report
117
Critical accounting judgements and key sources
of estimation uncertainty
192
Critical accounting policies
94
Data and engagement
49
Demerger of Consumer Healthcare business
238
Directors and senior management
156
Directors’ interests in shares
154
Directors’ report
130
Directors’ statement of responsibilities
166
Dividends
207
Donations to political organisations and
political expenditure
306
Earnings per share
207
Employee costs
200
Employee share schemes
262
Environment
45
Ethical standards
48
Exchange rates
194
Finance expense
202
Finance income
202
Financial calendar 2023
299
Financial instruments and related disclosures
245
Financial performance
68
Financial position and resources
87
Financial statements of GSK plc, prepared
under UK GAAP
268
General Medicines
38,75
Glossary of terms
215
Goodwill
210
Group companies
307
Group financial review
65
GSK Leadership Team
101
Independent Auditor’s report
168
Innovation
09
Inventories
215
Investments in associates and joint ventures
213
Investor relations
303
Key performance indicators
02
Legal proceedings
265
Major restructuring costs
201
Movements in equity
233
Net debt
218
New accounting requirements
194
Nominations Committee Report
120
Non-controlling interests
235
Non-controlling interests in ViiV Healthcare
71
Non-Executive Directors’ fees
152
Non-financial information statement
63
Notes to the financial statements
186
Operating profit
199
Other intangible assets
211
Other investments
214
Other non-current assets
215
Other non-current liabilities
232
Other operating income/(expense)
198
Other provisions
229
Our culture
10
Our external environment
12
Our long-term priorities
09
Pensions and other post-employment benefits
220
Performance
02
Pharmaceutical products, competition and
intellectual property
281
Pipeline
278
Post balance sheet events
267
Presentation of the financial statements
269
Principal Group companies
264
Principal risks and uncertainties
285
Property, plant and equipment
208
Reconciliation of net cash flow to movement in net debt
243
Registrar
302
Related party transactions
236
Reliable supply
17
Remuneration governance
150
Remuneration report
132
Reporting framework
69
Responsible business
42
Right of use assets
209
Risk management
51
Science and technology
16
Science Committee report
118
Section 172 statement
112
Share capital and control
296
Share capital and share premium account
233
Share Consolidation
233
Shareholder information
296
Shareholder services and contacts
302
Specialty Medicines
33,73
Stakeholder engagement
112
Task Force on Climate-related Financial Disclosures
55
Taxation
204
Tax information for shareholders
299
Three-year selected financial data
276
The Board
97
Trade and other payables
217
Trade and other receivables
215
Treasury policies
93
Trust
09
Turnover and segment information
195
US law and regulation
304
Vaccines
29,74
Vaccine products, competition and intellectual property
284
Viability statement
64
Index
Proof 6 (e) 08.03.2023 at 1 pm
317
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 285 to 295 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 69 to 70 and a reconciliation of
Adjusted results to Total results is set out on pages
81 to 85.
The information in this document does not constitute
an offer to sell or an invitation to buy shares in GSK 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 2023 guidance
In outlining the guidance for 2023, 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. Due to the phasing of quarterly results in
2022 and the resulting comparators, GSK expects
turnover and Adjusted operating profit growth to be
slightly lower in the first half of 2023 including a
challenging comparator in Q1 2022 and somewhat
higher in the second half, relative to full-year
expectations. Despite the recovery of healthcare
systems, uncertain economic conditions prevail across
many markets in which GSK operates and we continue
to expect to see variability in performance between
quarters.
We expect sales of Specialty Medicines to increase mid
to high single-digit per cent, sales of Vaccines to
increase mid-teens per cent and sales of General
Medicines to decrease slightly.
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 2023 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.
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.
All outlooks, ambitions and expectations should be
read together with pages 5-7 of the Stock Exchange
announcement relating to an update to investors
dated 23 June 2021, paragraph 19 of Part 7 of the
Circular to shareholders relating to the demerger of
Haleon dated 1 June 2022 and the Guidance,
assumptions and cautionary statements in the Group’s
Q4 2022 earnings release.
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 97, 131, 166 to 167, and 285 to 314
inclusive comprise the Directors’ Report, pages 1 to 95
inclusive comprise the Strategic report and pages 133
to 164 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.
About GSK
GlaxoSmithKline plc was incorporated as an English
public limited company on 6 December 1999. We were
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. Effective 15 May 2022
GlaxoSmithKline plc changed its name to GSK plc.
On 18 July 2022, GSK plc, separated its Consumer
Healthcare business from the GSK Group to form
Haleon, an independent listed company.
Our shares are listed on the London Stock Exchange
and the New York Stock Exchange.
www.gsk.com
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.
Printed sustainably in the UK by Pureprint,
a CarbonNeutral
®
company with FSC
®
chain of custody and an ISO 14001 certified
environmental management system recycling
over 99% of all dry waste.
Printed on Arena ECO 50 EW Smooth, a wood
free uncoated paper, ECF with FSC certification
and made from 50% recycled fibre.
Download PDFs:
– Annual Report 2022
– Form 20-F
– ESG Performance Report 2022
Proof 6 (e) 08.03.2023 at 1 pm
We unite science, technology
and talent to get ahead
of disease together.
Head Office and Registered Office
GSK plc
980 Great West Road
Brentford, Middlesex TW8 9GS
United Kingdom
Tel: +44 (0)20 8047 5000
Registered number: 3888792
Proof 6 (e) 08.03.2023 at 1 pm
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