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GlaxoSmithKline PLC (GSK)
Q3 2018 Results Earnings Conference Call
October 31, 2018 10:30 AM ET
Sarah Elton-Farr - Head of Investor Relations
Emma Walmsley - Chief Executive Officer
Luke Miels - President of Global Pharmaceuticals
David Redfern - Chief Strategy Officer and Chairman of ViiV
Simon Dingemans - Chief Financial Officer.
Michael Leuchten - UBS
Kerry Holford - Exane BNP Paribas
Graham Parry - Bank of America Merrill Lynch
Tim Anderson - Wolf Research
Andrew Baum - Citi
Steve Scala - Cowen
James Gordon - JPMorgan
Jo Walton - Credit Suisse
Good afternoon, ladies and gentlemen, and welcome to the GSK Quarter Three 2018 Results call.
I'll now hand you over to Sarah Elton-Farr, Head of Investor Relations, who will introduce today's session. Please proceed.
Previous Statements by GSK
» GlaxoSmithKline's (GSK) CEO Emma Walmsley on Q2 2018 Results - Earnings Call Transcript
» GlaxoSmithKline Plc (GSK) Q1 2018 Results - Earnings Call Transcript
» GlaxoSmithKline's (GSK) CEO, Emma Walmsley on Q4 2017 Results - Earnings Call Transcript
» GlaxoSmithKline Plc (GSK) Q3 2017 Results - Earnings Call Transcript
Our speakers today are Chief Executive Officer, Emma Walmsley; Luke Miels, President of Global Pharmaceuticals; David Redfern, Chief Strategy Officer and Chairman of ViiV; and Simon Dingemans, Chief Financial Officer.
Following our presentation, we will open the call to questions and answers. We request that you ask only a maximum of two questions so that everyone has a chance to participate. Joining us for Q&A are Dr. Hal Barron, Chief Scientific Officer and President of R&D; and Brian McNamara, CEO of our Consumer Healthcare Business.
And with that, I'll hand the call over to Emma.
Thank you, Seth. So overall, Q3 was another good quarter of progress for GSK with improvements in sales, the group operating margin, earnings per share and cash flow. Group's sales growth of 6% in CER terms, reflected sales growth in all three of our global businesses. Our Pharma business grew at 3% CER during the quarter, driven by HIV, and growth of new respiratory products. Our new respiratory portfolio grew at 40% CER, including a GBP 42 million contribution from Trelegy, which continues to see good traction.
In HIV, we also continued to deliver double-digit growth, driven by sales of our dolutegravir portfolio, including Juluca, the first of our new two drug regiments. Benlysta has also become a contributor to growth and grew at 31% CER. Vaccine sales were up 17% CER with continued strong demand for Shingrix, and for which sales are now expected to be GBP 700 million to GBP 750 million for the full year, as well as growth of the meningitis vaccine, Bexsero.
And in Consumer Healthcare, we delivered 3% growth with growth in wellness oral health and nutrition. We’re making very good progress on margin improvements within our Consumer Healthcare business, and this quarter, operating margins reached 22%, an increase of 250 basis points in CER terms compared to this quarter last year, reflecting continued manufacturing, restructuring and integration benefits and improved product mix as well as strong cost control.
Group operating margin this quarter were up 20 basis points on a CER basis, reflecting a more favorable mix of business and continued tight control of ongoing costs, which offset the investments we’re making in the business.
Adjusted earnings were up 14% CER, ahead of operating profit growth, primarily as a result of low minority charges due to our acquisition of Novartis stake in consumer health JV, as well as the reduced adjusted tax rate. On a total reported basis, EPS were up 23% CER to 28.8 pence.
Our free cash flow position also continued to improve. And for the year-to-date, was almost GBP 2.4 billion, up 42% versus the same period last year. We continue to expect to pay a dividend of 80 pence for the full year 2018.
And based on the results we've achieved to date, we are now tightening our guidance towards the upper end of the range for the full year, expecting adjusted EPS growth of 8% to 10% at constant exchange rate. And we expect to maintain this guidance range in the event that the generic version of Advair is introduced before year end.
As you know, I set out three long-term priorities for the business when I became CEO, innovation, performance and trust, all to be underpinned with a necessary shift in our culture. And we’ve made some progress on each priority this quarter. On innovation, Howard laid out that his new approach to R&D at our Q2 results, and he has made some really important changes to his organization with the new governance framework in place, a new head of development, a dedicated head of research and end-to-end oncology and global health R&D units.
We’ve also had some positive development in our pipeline this quarter. We continued to progress our two drug regimens in HIV, making regulatory filings in the U.S and Europe on the back of the positive GEMINI data for the combination of dolutegravir and lamivudine, and now also have had positive results from the pivotal ATLAS and FLAIR studies for a long-acting injectable HIV therapy. We started the first study of BCMA and second-line treatment of multiple myeloma. We've presented some encouraging Phase II data on our anti-GM-CSF compound at the ACR conference last week. And we've seen the first results from an ICOS study which will there earlier we need to see more evidence, showed some initial indications of activity.
We have clearly said we will be more decisive with our pipeline. And this quarter we've also decided to terminate five development programs. These decisions were data driven, primarily based on interim analysis, will allow us to focus our assets on other assets with greater chance of becoming important medicines. Strengthening the pipeline remains a clear priority for the group.
Moving to performance, we continue to make good progress across the business. Investments in prioritization to improve our commercial performance are being reflected in new product sales growth, and we’re moving ahead with the restructuring program we announced at Q2. In addition to the recently announced changes to our supply chain, we've already made some significant changes to our U.S. operations.