GSK Abbas Hussain President, Emerging Markets 13th May 2010
Bank of America Merrill Lynch HealthCare Conference
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GSK 1Q 2010 Turnover £7.4bn +13% (£6.6bn +4% excluding pandemic sales)
+9%
GSK 1Q 2010 +4%
+13% Turnover +16% EPS growth
+45%
Rest of Pharma £0.2bn
Consumer £1.2bn
-1%
Asia Pac/ Japan Pharma £0.89bn
US Pharma £1.9bn
Emerging Markets Pharma £0.87bn
+43%
CER growth rates; Business performance Beginning in 2010, Stiefel sales allocated to regions and all ViiV Healthcare sales shown separately .
Europe Pharma £1.9bn
+16%
ViiV (HIV) £0.4bn
-7%
2
GSK “Emerging Markets” business 85 countries
>12,000 sales reps CIS China MENA
India
Mexico
Latin America
SSA
Emerging Markets 1Q10 £866m (+43%)* = 12% of GSK Group Turnover Source: GSK 1Q10 reported turnover including pandemic. Excluding pandemic, turnover was £713m (+17%)
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GSK’s pharma presence in Emerging Markets
CIS
Eastern & Central Europe
China MENA
India
Mexico
Latin America
SSA
Asia Pac (excl Japan, Aus, NZ)
+ Asia Pac (excl Japan, Australia, NZ), Eastern and Central Europe = £1.3bn (+40%) 1Q10 Source: GSK 1Q10 reported turnover including pandemic. Excluding pandemic, turnover was £1.1bn (+19%)
4
GSK’s total presence in Emerging Markets
Rx
Cx
+ £1.3bn 1Q10 (+40%)
£0.4bn 1Q10 (+13%)
£1.7bn (+32%) 1Q10 24% of GSK Group Turnover Source: GSK 1Q10 reported turnover including pandemic. Excluding pandemic, total turnover was £1.6m (+17%)
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GSK Emerging Markets 2009 turnover 2009 £3.0bn (+20%) 500
SSA
450
£204m
1
1
50
GSK ranking #
11
5
3
*China includes HK Source: Turnover and growth is GSK 2009 as reported. Growth rates are CER. Rankings are IMS MAT Dec 09
13
7
1
Russia
Latina
Saudi Arabia
0 Mexico
South Asia
Turkey
£604m
100
China*
Mexico
(+22%)
£271m
£214m
Pakistan
150
(+56%)
200
Egypt
CIS
(+28%)
£231m
(+36%)
250
(+6%)
(+10%)
300
Brazil
£m
£983m
(+6%)
350
£461m
India
400
China*
(+16%)
MENA
Top markets
(+24%)
By region
16
6
History of EM sales growth GSK is catching up with EM market growth
25%
20% 20%
15%
10%
EM (IMS data) 5%
GSK (IMS data) GSK (reported)
0% 2003
2004
2005
2006
2007
2008
Source: IMS data (Dec MAT) and GSK reported. Note: IMS audits currently do not capture all activities e.g. vaccines, and therefore undervalues sales in EM, particularly for GSK.
2009
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Emerging market characteristics
Large markets
Pay out of pocket
Need for greater access
Smaller products
Untapped potential
Longevity of brands
Fast growing
Evolving healthcare programmes
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Growth in ‘Pharmerging Markets’ IMS Tier 1, 2, 3 Pharmerging Markets Incremental Growth 2009-2013
GDP PPP
China
Russia
+$40bn Growth +$5-15bn Growth
Brazil
India Turkey
Pakistan
Egypt
Ukraine
Venezuela
S. Africa
Mexico
Argentina
Thailand
Vietnam
Indonesia
+$1-5bn Growth
9
Need for greater access Total population
Brazil
India
S. Africa
Egypt
180m
1.2bn
49m
82m
33%
1%
4%
2%
42%
45%
51%
38%
26%
51%
32%
58%
A B C+ CD E A/B: No problem paying for any prescription medicine – can afford premium priced branded products (A: Senior managers in business or commerce, top civil servants; B Middle managers in large organisations, owners of small businesses) C+: Have some problems paying for Rx medicines – can usually afford some moderately priced brands or generics but run into cost difficulties if repeat medication is prescribed (Junior managers, owners of small establishments and all others in non-manual positions) C-: Have major problems paying for prescription medicines – can only afford the least expensive medications and only shorter courses of treatment (Skilled manual workers, manual workers with responsibility for others) D/E: Cannot afford prescription medicines – have major difficulties to afford medication of any kind (D: Semi-skilled and unskilled manual workers, apprentices and trainees; E: Unemployed, casual workers without regular income, those dependent on the state)
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GSK’s contribution to EM healthcare
Pre Clinical R&D
Clinical R&D
New Business Models
Post Launch
Health Systems
• R&D PPPs
• R&D PPPs
• Tiered pricing
• Knowledge Pool
• Knowledge Pool
• Price caps
• Open lab
• EM-focused R&D
• MIC Pricing
• Malaria screen
• Malaria vaccine
• Branded generics
• TB, malaria
• HIV
• ViiV Healthcare
• African malaria Partnership
• Brazil JV
• PHASE1
• Advance Market Commitment
• Positive Action and PAFC
• Continuing Medical Education • Voluntary licencing
• 20% reinvestment • Lymphatic Filariasis elimination
• Humanitarian relief
1 PHASE
= Personal Hygiene And Sanitation Education
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LDCs: Price reductions end Q1 2009 lead to more patients affording IP products by end 2009 Francophone Sub Saharan Africa Sales Volume Average Price
Q1
Q2
Q3
Q4
Average of Prices Vs Sum of sales volume of AVANDIA, FLIXONASE, FLIXOTIDE & SERETIDE across 4 quarters
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Emerging Markets strategy Scale up our Classic brands business £1.3m +18%
Build and capture the Vaccines market £669m +30% Pandemic
Drive our Innovative brands £967m +17% Source: GSK 09 reported sales; CER growth rates
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13
Bolt-on acquisitions and partnerships 13 deals completed across the business will contribute to the Emerging Markets business Classic business
Pakistan
Near East
Innovative business
EM/AP
Algeria
Vaccines business
Korea
Consumer
Walvax
Dr Reddy’s (ex-India); Laboratoire Pharmaceutique Algérien (LPA Algeria); Walvax (Priorix in China); Neptunus (flu in China); Intercell (needle-free vaccine technology). Note: Lucozade China with Uni-President China Holdings, and Dong-A Pharmaceuticals are outside of GSK’s “Emerging Markets” business.
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Scale up our Classic brands business Our own portfolio
2007 +12%
Growth
2009 +20%
Bolt-on acquisitions
Egypt
Oct 08
Pakistan
Dec 08
Near East
July 09
Portfolio deals
June 09
Licensing - July 08
£45m sales 2009 >350 dossiers to be filed by end 2010
Growth 2007 2009 +5% +11%
EM/AP Mar 09 £46m sales 2009
July 09
Total Classic Business Growth 2007 +5%
2009 +18%
Local Acquisitions Russia Brazil
Dec 09
Mexico
Algeria 15
Ventolin HFA in China: Increasing patient access drives expansion
Chinese government prioritized EDL as a key driver of new healthcare reform in April 2009 Salbutamol has been listed in NEDL since Oct 2009 GSK has been winning tenders in EDL market with Ventolin HFA since early 2010 Plans to expand Ventolin HFA penetration to low tier market Reach 234 cities and over 10,000 hospitals vs current 100 cities & 6,473 hospitals 16
Strategic Collaboration with Aspen
Aspen is Africa’s largest pharmaceutical manufacturer GSK acquired 19% stake (market value of £0.6bn) Establishes “GSK Aspen Healthcare for Africa” brand Brings affordable medicines to sub-Saharan Africa (SSA) Leverages GSK’s infrastructure in SSA and Aspen’s local leadership South Africa Disposal of manufacturing site and tail brands simplify GSK’s operating model Share of after tax profits of associates and joint ventures £21m in 1Q10
Transaction closed 30 November 2009; Market value as at 31 March 2010.
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Drive our Innovative business
Core portfolio
New portfolio
Future portfolio
2009 Turnover
New products: £276m (+21%) £115m (+7%)
£76m
(0%)
£76m (+8%) £51m (+11%)
Votrient Arzerra denosumab Benlysta Horizon darapladib
Targeted R&D developing EMspecific portfolio Tykerb for gastric and H&N cancers Liver cancer Market-specific FDCs 18
Stiefel opportunity is greatest in EM
Stiefel acquisition provides access to ~80% of the EM derms market
Total Stiefel + GSK EM derms sales by market 110
Stiefel Brands ($135m)
100
GSK Brands ($238m)
90 80 70 60 50 40 30 20 10
GSK revenues are for Calendar Year 2008, while Stiefel revenues are for Financial Year 2008.
Other EM
Saudi
Venezuela
Turkey
Pakistan
Mexico
Brazil
Source: IMS
India
0
19
Build and capture the Vaccines market
GSK has 33% of the market and is growing faster
Significant market growth potential Growing government attention to public health agenda
Total EM vaccines market 2009 £2.0bn (+22%)
Large birth cohorts for paediatric vaccines
£669m (+30%) GSK vaccines
Significant GSK growth potential New geographies Broad portfolio, well-positioned to provide for spectrum of needs Local partnership is critical 20 Source: GSK estimates for market; GSK reported sales. (2009 EM vaccines data)
GSK has the broadest vaccine portfolio in EM GSK
HPV
9 9 9 9 9 9 9 9 9
Malaria
d
Dengue
d
DTPw combos DTPa combos MMR / Varicella Hepatitis A Rotavirus Meningococcal Pneumococcal Influenza
9 = available in EM; d = Ph III / registration in EM
Merck
9 9 9
Sanofi
Pfizer
Novartis
9 9 9 9
9
9
d
9 9
9
9 d 21
Strong launches are building the vaccines business
Launched mid 2009 and already £26m in 1Q10 Brazil Fiocruz 10+ year contract Mexico 3 year contract Turkey 70% market share Hong Kong 70% market share AMC 10 year contract for GAVI countries ($1.3bn)
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GSK Emerging Markets in 2015 Outgrow the market IMS projects EM market growth of 13-15%1 Our objective is to grow faster than the market2
Evolve our business Vaccines Classic Innovative
2009 Classic
Vaccines
Innovative
2015 ambition 1 Source: IMS Prognosis through 2013, redefined for GSK EM region. 2 including organic growth and bolt-on acquisition strategy.
23
Operating profit margin
2009 Operating Profit Margin1(%)
1
US
66.2
Europe
58.7
EM
35.3
AP/J
52.7
GSK’s reported regional margins exclude R&D and legal expenses which are heavily weighted towards Europe and US EM has been in “investment mode” EM margin expected to remain in mid-30s range
Operating margin excluding R&D, legal and other unallocated pharmaceuticals costs, as well as profit from asset sales, and including pandemic.
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