Emma Walmsley - Chief Executive Officer Simon Dingemans - Chief Financial Officer Eric Dube - Senior Vice President & Head Global Respiratory Franchise Patrick Vallance - President, Pharmaceuticals R&D David Redfern - Chairman, HIV Business and Chief Strategy Officer Brian McNamara - Chief Executive Officer, GSK Consumer Healthcare Luke Miels - President, Global Pharmaceuticals Jack Bailey - President U.S.

Pharma and Vaccines Business John Pottage - Senior Vice President, Chief Scientific and Medical Officer at ViiV Healthcare Joe Touey - Senior Vice President, Global ERP Deborah Waterhouse - Chief Executive Office ViiV Healthcare.

Andrew Baum - Citi Vincent Meunier - Morgan Stanley Keyur Parekh - Goldman Sachs Mike Weston - Credit Suisse Graham Parry - Bank of America Merrill Lynch Sam Fazel - Bloomberg Intelligence Kerry Holford - Exane BNP Paribas Richard Parkes - Deutsche Bank Timothy Minton Anderson - Sanford C. Bernstein & Co.

LLC Michael Leuchten - UBS James Gordon - JPMorgan Steve Scala - Cowen.

So welcome and good afternoon to everybody here, and good morning to those of you who either watching or listening in from the U.S. Today we have announced our Q2 results. And I am setting out the priorities that we will drive to improve our performance and our returns for the long term with the first phase focus on the next three years.

Of course for the whole presentation, we start off with our cautionary statement as usual. And in terms of the agenda this afternoon, Simon and I are going to share our priorities and financial implication for the next hour a half and we'll have a short break followed by an extended one and half hour Q&A with a broader group.

Of course today we have a fantastic team GSK from here, Patrick of course who leads R&D; David Redfern, Chairman of our HIV Business and also Chief Strategy Officer and Leader of the strategic fiber work; Brian and Luke are here the relatively new heads of our Consumer and Vaccines business. I also have with make Jack Bailey, President our U.S.

Pharma and Vaccines business; Eric Dube, who leads our Global Respiratory business; Deb Waterhouse, the new leader in our HIV business and Head of R&D, John Pottage just landed here today directly from attending the IAS Meeting in Paris; and then to stay with our R&D team and so on some more specific questions you may have either in the later session of within the reception this evening with also another eight key R&D leaders here in the room.

So I'm going to spend most of this presentation talking about our halfway to better return. So I'm going to start standing in front of you for the first time as a new CEO by sharing with you my view on the process of GSK. This company does important work our purpose matters. To help millions of people every day do more, feel better and live longer.

We prevent and cure disease in more than 150 countries around the world. We keep hundreds of millions of people well from the newborn babies through to the elderly. Now this is the reason that most people join GSK it's certainly true for me.

And it's what drives the discretionary efforts of our employees and partners all over the world, so this purpose will remain our ultimate priority under my leadership. We have a long history traceable back maybe 300 years in a variety of company configurations a history of helping change the burden and impact of disease through innovation.

And as we strengthen and modernize this company, this business to set a platform for its future success, we must make sure that we drive performance first and foremost through applying great science to impact human health.

The demand for healthcare and innovation is more intense than ever as life expectancy of course continues to improve, but we are no doubt in a challenging and false changing industry and environment.

The good news, of course, is this is a market full of opportunity, first and foremost with fundamental advances in science perhaps most notably and genomics, but also exciting new frontiers such as our own bio electronics.

And in fact with this acceleration of science and technology we should all expect some material shift in the way our industry operates, in who our competitors and partners are as we use digital data and analytics to fundamentally transform the way we discover and develop medicines the way we interact with patients and consumers and healthcare professionals.

Now as life expectancy expand of course demographics drive demand, but equally they put pressure on budget, pricing pressure is absolutely not new in this industry it's long been a concern in Europe, but it is now a major factor in the U.S. is both public and privately funded bodies look at ways to tackle the affordability of medicines.

And for us this pressure is most obvious now, and as we look into next year in the inhaled respiratory markets. And finally it's hard to believe that the industry is not poised for more change. Potential tax reformed in the U.S.

pressures on performance in R&D output could all be drivers the sector consolidation over the next few years, and this could have in turn significant implications, so it's important that we agile and have flexibility if these changes should materialize.

So in this kind of healthcare world GSK offers the opportunity to capture value and withstand the pressures across all three businesses.

We participate in a broad spectrum of the healthcare market if you think about it chronologically from prevention with the vaccine, self-medication and wellness in consumer health to high end therapeutic treatment with strong lifecycle management and pharma. So we are not reliant or over dominated by one therapy area or products.

Portfolios in each of these businesses have innovative and established products with leading positions in major therapy areas of the categories whether it meningitis in vaccine respiratory, pain relief and oral health and consumer or organic respiratory and HIV in pharma.

Our recent transaction in 2015 created new scale for us in vaccines and consumer. And all three businesses now benefit from a global footprint capable of accessing growth in established and emerging markets. This includes significant scientific or scientific, technical and regulatory expertise for the manufacture of high quality products.

And earnings and cash flows of the three businesses provide balance and a level of sustainability to the Group's performance and visibility to invest in future growth and in return to shareholders.

Recent performance has demonstrated the benefits of our 2015 transaction and in the last 18 months new product growth in all three businesses has been stronger.

Good delivery of our new and held Ellipta portfolio and Nucala our new biologic asthma treatment is driving an affective transition in our Respiratory business, and the success of Tivicay and Triumeq has we reestablished GSK of the world leader in HIV. Both are showing strong and encouraging Q2 performance.

In Vaccines, new meningitis vaccines Bexsero and Menveo are both growing strongly and this business will continue to see volatility based on the tender agreements our supply position is stabilizing providing good further opportunities for growth.

In Consumer Healthcare growth in our seven power brands is ahead of the market driven particularly by well-loved brands like Sensodyne and Voltaren. We are seeing a mark slowdown in consumer market growth and that's clear in our own Q2 numbers.

But while growth has slowed we still very much believe we have a portfolio capable of responding to this challenge and we definitely have the profitability leaders to continue to deliver our target margin improvement of at least 20% by 2020 as around double the pro-forma margin of 2014.

Sales growth and cost saving measures together with exchange rate movements having cash flow and margin improvements for all three businesses in the last 18 months. And the adjusted operating margin has improved by 400 basis points since 2015.

However, while this recent delivery is encouraging it has to be set against the longer term context for GSK's performance. The reality is longer term performance has been weaker than we all would have like.

Although recent at new product momentum has been better sales growth on a longer term basis has been limited due to some slow start or missed launches the reducing contributions of profit and cash flows from our largest products Seretide/Advair and insufficient R&D output to compensate and supply issues have also been a clear factor.

All of this it's clearly reflected in our long term TSR performance, which has been uncompetitive when viewed against our peers. Our R&D performance is an important part of what we need to change and improve upon.

In fact in output we have had a significant number of launches, especially in the last three years and we've been among the industry leaders on volume metric and have had some undoubted successes. However peak year sales per assets the charts on the right here have been among the lowest of our sector peer group.

So we have not consistently translated the output into commercial success arguably this is a combination of asset choices made if use with the competitiveness of our labels and the competitiveness of our commercial execution. In all cases this requires a much more integrated partnership between commercial and R&D.

But is also clear is the comparatively we've allocated capital in R&D to a much broader range of projects versus our peers and as an average spend per project was also low we arguably didn't back some key assets with sufficient resources to strong enough data packages.

And development cycle time for GSK also appeared to be longer than the average for the industry, notably in Phase II clinical development, and we know that phase is critical in such a competitive environment.

So all of these points to the need for a significant overhaul and reevaluation of how we develop our clinical assets and most importantly our commercial and R&D in space. So long side this challenge of addressing R&D development there are several other key things we have to get right over the next three years.

All businesses, all three businesses need to perform, but our priority is clearly pharma. We will start with some keep changes to our operating model and portfolio. We must maximize value from recent and new product launches.

We must address the pricing exposure in our portfolio this is acute and the inhaled respiratory market we have to ensure our pricing strategies and our cost base reflect the reality of the therapy areas and geographic markets we're operating in.

We must make the right choices to invest and develop early clinical stage pharma pipeline for our next wave of innovation, which will come in the early 2020. This pipeline appears promising, but it is early and much of it is still unproven.

So over the next three years we will start see clinical data on many assets, and how we get best decisions on investing behind them is of course of critical importance. Beyond pharma we must realize the benefits of our newly scaled consumer and vaccines and across all three businesses, but more discipline into our capital allocation processes.

Our distribution of returns to shareholders has also been ahead of cash flows in the past few years. So improving our cash generation for more flexibility to invest in future growth is also key. As R&D data read out we have to make sure we comeback our winners.

At the same time we need to be ready for inorganic solutions to strengthen our pipeline or take advantage of other opportunities to strengthen our company such as the consumer put option. Today we are repeating and updating the 2020 outlooks for the group, which was set out for investors in 2015.

And to deliver this outlook we have a lot of work to do. All of these objectives need to be met. And as a reminder our outlook for sales to grow at a compound annual growth rate of low to mid-single digits over the five year period to 2020 and for adjusted EPS to grow mid-to-high single digit.

And these outlooks were all given using constant exchange rate with 2015 as the base year and they do anticipate the launch of at least one generic adding to an already strong market pricing pressure in the near term.

But another very important points I want to make today, is that these outlooks are also given the potential development options in our pipeline subjects to data driven R&D investment opportunities. Of course, we've already made some assessments of the R&D investment that will be required going forward and built this into our plans.

But I want to be clear and transparent with all of our investors that if additional investment is required to maximize full value of a particular asset we will act with the long term interest of the Group's performance in mind. So let me start the outline some of the changes we are and will be making to achieve these important goals.

First, we're going to have fewer and more focused priorities for GSK. The environmental trends I already outlined at the beginning of this presentation are going to lead to fundamental changes in our industry. Responses to them require agility and our own change at pace.

But they also need to be set alongside the long term nature of R&D and responsible use of our capital. So under my leadership all three businesses will be tough to be focused on three long term priorities; innovation, performance and trust. Our innovation is important to all three of our businesses, but again the top priority is pharma.

We are very focused on maximizing commercial opportunities for our recent and near term launches. We've made mention of the three important launches to come.

The close triple, we know around a quarter of COPD patients end up on triple therapy, and this will provide a simple single inhalation the way of delivering it in a device that allows the move from single to dual to triple as needed.

The first of our HIV II drug regimen potentially reducing the burden of drug treatment with a well-tolerated and highly efficacious combination.

And lastly Shingrix, we believe a step change in efficacy for the prevention of shingles a debilitating disease that is going to impact one in three of us in this room, one in two of us once we reach the age of 85. We on the near term launches the big priority is to strengthen the pipeline.

And as I said earlier our performance here has been hampered by allocation of resources and suboptimal commercial R&D interface.

A combined commercial and R&D team have reviewed the full asset portfolio and investment priorities, and as a result we have developed a priority list of access to invest behind and develop, but of course this list will continue to evolve as the data reach out.

We will continue to invest behind areas where we already have strong leadership positions Respiratory and HIV expanding potentially from HIV into broader infectious diseases with our ongoing work in antibiotics. But these two are our core therapy areas.

And we will also focus on near term investment into very specific assets in two potential specialty therapy areas. Depending on data of course Oncology and Immuno-inflammation, and we have a number of programs in both these areas, but is clinically successful to provide us with options to generate value ourselves or with others.

We're targeting 80 pence of our R&D capital to be allocated behind these four areas over time and we intend to pursue disciplined business development to strengthen the early stage pipeline in these priority areas.

We will also continue investing in our core capability differentiators, our expertise in developing targets through genetics modern medicinal chemistry approaches and advanced manufacturing.

We believe for example our cell and gene therapy technology platform could be a key manufacturing asset for GSK and we intend to do focus on deploying it behind our oncology portfolio. We will be parts funding this reinvestment and more focused priorities by stopping investments in areas and assets where we see less opportunity for GSK.

And we've already made the decision to terminate partner or divest 13 clinical programs in around 20 additional preclinical programs.

We've completed a strategic review of our rare disease business and for the assets currently in our pipeline intend to secure opportunities to further development and generation of financial returns outside of GSK to give them the very best possible chance of successful clinical development.

We've also recognized that we need to improve the governance of our pipeline decision making and the starts with changes in processes and people Luke Miels is going to be starting with us in September as President of our Global Pharma business and his experience of Roche and Sanofi and AstraZeneca will be invaluable in helping to build commercial riga into the way which we prioritize our pipeline programs and define competitive targets and profiles.

We've also appointed Tony Hood who is joining us from Pfizer and he will be responsible for leading platform technology and science. We're undertaking a deep review of the efficiency and effectiveness of our drug development function.

And we set up a new development advisory board alongside and as well as the new board Scientific Committee, which I know recently appointed board member Dr. Laurie Glimcher, CEO of the Dana-Farber Cancer Institute will be a fantastic addition. So let me just get a few more details on the priority asset selected at this stage.

Our clear aim here is to develop the next wave of innovation, and new pharma portfolio for the early 2020 and beyond. This slide lays out on the right hand side the assets we are currently prioritizing for development in the two core and two potential areas.

And clearly again we are very data dependent on progressing development on many of these earlier stage assets here, but in all cases, we believe they have the exciting potential to offer new differentiated innovation to patients and payers and sizable PQS sales contributions to the group.

In some cases we already have encouraging early efficacy signals fit with [indiscernible] when given by monthly injection maybe even eight weeks as you would have seen in our data presented IAS or the exhaustipation reductions in specific COPD populations for PI3K delta or danirixin and good example what we've just recently accelerated our trial times by more than a year with real time data analytics.

In our two potential therapy areas, we've also had some encouraging recent news whether that positive Phase IIb safety data on the new topical agents of psoriasis and Atopic dermatitis tapinarof or in the strong early efficacy read out in multiple myeloma for BCMA.

About 20% of our discovery and development spend will be allocated to areas outside these two core and two potential areas. So you can see that there are still too late stage development assets in other therapeutic areas, which we believe with sufficient differentiation could still offer good commercial returns.

And of course, we continue to invest in discovery across a broad range of therapeutic areas we believe retaining this broad reach at the earliest stages of R&D is important for our longer term success. And Patrick and John and the team can answer with your specific questions on why these assets are priorities for us later on.

The successful commercialization will of course be critical. With an improved R&D and commercial interface, I expect us to be making better decisions going forward. We will not be closed at tool to exploring and achieving different roots to market for these assets, particularly with our potential new specialty medicines.

As we develop this next pipeline there was the final critical point I would like to emphasize, this portfolio will have the advantage of being developed at a time when the Group's patent exposure is relatively low once we've digested adverse with nothing material until the mid 2020s something we believe is attractive when considering GSK's risk profile.

So, as I've said, we are reinvesting behind priorities and partly funding that by terminating partnering or divesting assets for the better progress by someone else, where our new data perhaps show they have a lower likelihood of success, but we do not see them to be a sufficient scale for us.

The thirteen decisions that have already been made are listed here, and there are more of course to come.

We've also made the decision to terminate partner or divest around 20 preclinical programs as I've said and this is going to free up immediately some R&D spend and up to be appropriate 500 people to put behind this priority programs, we've identified.

And just as the priority list will continue to evolve as new data comes through, we should expect this list to evolve too with an ongoing reduction in the cost and time to stop.

And lastly on the pipeline we provide the timeline on data visibility although clearly not visible in the room, but it's published and these data will inform development choices and our investment strategies both organically and in business development should it be appropriate.

As they become available, we will be updating investors and presenting them to the scientific community where appropriate and obviously levels of capital we deploy in R&D will depend on these data. Our second priority is the new company wide focus on performance.

And it must be sustainable, ethical and over time as near time pressures that adjusted more competitive. We need to drive growth with competitive products and competitive commercial execution and more clearly internally aligned objectives across our businesses and fueled that growth by managing our costs and improving our cash generation.

A key change will be a stronger focus on execution driven first by much better internal alignment, including of incentives with integrated strategies for each of our three businesses including across R&D, commercial, supply chain and the corporate support.

We will implement one P&L of one strategy with innovation performance and trust priorities for each business. We will be much more disciplined in our focus on priority markets and make operating model changes where it will improve results.

And Simon is going talk much more on our improved capital allocation later, but essentially we are prioritizing resources to the strongest assets and geographies in our portfolios - and our portfolio and moving capital resources away from those, but offer more limited opportunities for the company.

As you saw last week, we've initiated a strategic review of our Cephalosporin antibiotics business with an option to sell and announce the divestment of some smaller nutrition brands and consumer.

We've also decided to exit Tanzeum we will progressively withdraw support to allow us to complete necessary clinical studies and allow prescribe us to transfer patients onto alternative treatments. We have decided to terminate our rights to sirukumab as part of our efforts to focus our portfolio and reshape our Pharma business.

Across the whole company we need to fuel our growth with a renewed cost discipline. Overall we believe, we can generate a further billion pounds in annual cost savings from existing and new programs, and a key part of this will be driven by improved efficiency in our supply chain.

We've already announced plans to reduce offsite network across the group by nine sites and we're continuing to review and look for further opportunities to simplify the network in coming years where it makes sense. Simplifying our portfolio is a key enabler of improving our network efficiency.

In the next 12 months, we expect to divest more than 130 non-core tail brands within pharma alone brands that could create complexity for our supply chain. And these brands just in pharma account for around £400 million in annual sales a plan where ready for 90 brand exists.

Overall, we're looking for 22% reduction in the number of pharma brands we have. We're also looking to reduce our overheads in manufacturing across the whole group with a simpler network and improves productivity, and we will reduce our supply base in manufacturing by 25% by 2020.

And we're going to also generate greater year-on-year savings through better procurement, which we're going to unify for the first time in a single company wide procurement organization across all three businesses. At the same time, we want to invest in our performance.

We intend to put commercial support behind our upcoming critical launches and we're deploying capital in our supply chain behind our core growth areas. As we have announced last week for example, we expect to invest more than £140 million just here in the UK at five supporting production of HIV and Respiratory medicines.

And performance is of course driven by people. You will be ready saying that we've made a number of new leadership appointments, and I expect more to come across the top 200 leaders as we look to strengthen capabilities across the group. One of the key capabilities, I'm going to be my focused on is digital, data and analytics.

Our priorities here to improve clinical outcomes and reduce time and cost to discover develop drugs. We've invested in several partnerships and large scale genetic data and so for the lung study many possibilities in real world evidence and also investing in enabled clinical trials.

We want to develop values real world data at scale and of course step change our customer and consumer engagement across all of our businesses.

This would be the starting point for a much wider intervention across the group, as we look to harness technology to improve our performance, and I was very excited yesterday to announce the appointment of Karenann Terrell as part of my team as our new Chief Digital and Technology Officer, she comes to us off the being CIO of Wal-Mart will be a key partner to accelerate and modernize our capabilities here.

I'm bit stuck on slide, can you move it forward. Thank you. So it's true to say. The biggest change in our company is going to be felt across our Pharma business, which didn't benefit from a catalyst for change that Vaccines and Consumer had with a 2015 deal.

And of course Luke when he arrives will layer on to this on the change and due course as he appointed our new leadership team. We're focusing our commercial efforts on driving and improved performance in the U.S., which is without doubt the priority market.

But the biggest change geographically in fact is going to be about being more competitive in our emerging markets business. This has been a historic strength for GSK given our footprints, our strong brands and a very talented people we have working in these countries.

However global and local competition has impacted our turns and we need structure more effectively and efficiently for long term profitable growth.

We need a model that can competitively drive what is today a largely classic branded product business with brands like augmented, but also one that can successfully launch more new innovations such as the Ellipta portfolio or Nucala to do this we're going to create a new single dedicated end to end operating model for emerging markets spending commercial supply and R&D for lifecycle management.

The group will have its own dedicated governance model and the right commercial structures to each market whether that's a standalone business, a cluster of similar markets or distributor led model. Each market will be resourced accordingly and we remain very committed to the access of our medicines.

Successful delivery of our performance priority also requires an improvement in our cost base. The £1 billion of annual cost savings by 2020 will be used to support investments in strengthening the pipeline and commercial execution.

The savings will also help protect our margins, which we expect to face sustained pressure as a result of pricing pressure of the particular inhaled Respiratory business. And our third and final priority is trust. We have to acknowledge there is a trust deficit in the world in that and government or in business.

And in our industry where trust matters more than most if we don't close that gap it will impact long term value creation and it have to start by getting our fundamentals right. The most important thing we can do for trust is to discover and make great medicines, but people need.

Now we must get on medicines to the people that need them which mean improving reliability of supply and our customer service levels. Commitment to quality and safety across GSK is critical and we will continue to invest in people and capabilities to deliver competitive and top levels of performance here.

And after some difficult compliance issues in recent times we're also committed across the company to doing our best to prevent breaches and should they occur to respond to them swiftly and transparently.

With the build trust beyond the basics of the fundamentals, we have very focused on the way we engage with stakeholders and our contribution and responsibilities to access to medicines is absolutely critical that our partners, customers and society trust our science and our intentions.

The way we engage with healthcare professionals is something we're both proud of and believe in, we evolved it already several times since the introduction and we will continue to do so to make sure our engagement is competitive and trusted.

We also want to keep improving transparency with our other key stakeholders, now of course includes our investors. I much appreciated your transparency with me, as I begin this job and the team and I look forward to building a constructive and transparent dialogue over the years ahead.

I've already referenced the tough pricing environment and it's clear we have to deliver differentiated innovation to deliver to achieve value and returns in this context. When it comes to setting our prices, we have consistently taken a balanced approach with the recent launches of our new products and this will continue.

We will look to support access where we can and generate sufficient returns. We are very proud of our reputation and our long term commitment to global health, but we will focus our resources to drive more global impact, especially in need such as malaria and HIV.

And for our people, who are our greatest ambassadors, and on whose talents and teamwork it all depends to support every day engagement. We intend absolutely to increase access to adult modern progressive employer practices focused on improving diversity and inclusion supporting that personal wellbeing and being a flexible life friendly workplace.

Everyone in the room, who listening or watching know the power and important of company culture. There are many special elements of GSK's culture, which includes very deep attachment to our values and our purpose. But there also some dynamics we have to change.

To be successful, we need to have a culture that is driven in equal measure by competitive performance and strong values. A culture where we always bring the outside in and we learn from the very best wherever they are in the world and a culture that is focused on better decision making and cost and cash discipline.

So there are some key changes who will be making this will include new appointments some of which we've already announced with more to come over the next 12 months. But also highlighted some of the operating structure changes we're making, we're changing how we set objectives internally and how we manage and measure performance.

We will be introducing new company wide incentives next year better aligned to our IPT priorities and our overall business performance and for example including cash flow measures across the company.

And while we will be keeping our values, we are going to be changing the company expectations of employees with four new expectations for everybody working at GSK.

We would expect courage of decision making, accountability for results prioritizing of people development and effective teamwork expectations of course that have to start at the top of the house. Before I conclude, I want to outline our capital allocation framework.

These choices will be key and again start with the IPT focus driving improved cash generation, and our priorities for use of cash are laid out here. First will be to invest in the business in three key areas; the pharma pipeline organic so early stage inorganic.

Realization of the consumer put options should it come, which as I said earlier would strengthen opposition and consumer healthcare. And further investments to expand capacity in our Vaccines business. Our second priority will be to deliver returns to our shareholders through payment of dividends.

We continue to expect to pay a dividend of 80 pence at 2017 and we've also announced our intention to pay 80 pence in 2018, as part of a new dividend policy established for 2018 and beyond.

Where regular dividend payments will be determined primarily with reference to keep free cash flow generated off the meeting our requirements for investment in the business. And lastly, we will use cash for business development purposes with M&A obviously dependent on the right kind of return profile.

So in conclusion, we're setting out a clear path forward over the next three years. Across the whole company, we will prioritize focus on innovation, performance and trust and by striving to get the right balance of change and strong commercial execution.

We expect to deliver the outlook set out for 2020 with adjustments to the pharma margin target and the consumer sales growth rates. This will reflect good execution of the plans we have laid out today combined with investments we expect to make in R&D and the divestments and exit we've also outlined.

We will navigate some near term pressures under structural portfolio changes through the next couple of years especially under the same time build a new platform for future growth for the decade beyond that. Our aim is to have all three of GSK's businesses delivering competitive performance with clear pathways for delivery of long sustainable growth.

Improved R&D and strengthened innovation will be at the core of this. Using our science, technical knowhow and our talented people to produce differentiated and much needed medicines, vaccines and brands that will make meaningful differences to patients and consumers and achieve good returns for our shareholders.

With my colleagues here today, and in behalf of everybody else working at GSK, I want to say to our investors, that we are committed to achieving this. And with that, I'm going to hand over to Simon, who's going to take you through the detail of our Q2 performance and the financial implications of the longer term outlets.

Thank you, Simon over to you..

Thank you, Emma. So before moving to the outlook for 2017 and 2020, I'm going to comment briefly on our Q2 results. As a reminder, I covered these results in detail in the video issued alongside a press release earlier today both of which you can find on our website.

So I keep my Q2 commentary over the next few minutes at a relatively high level in order that we can focus time on the future and the implications of the announcements we've made today on our financial outlook.

So first on our total results, these include some significant charges that reflect better prospects for the group and the implementation of our new business priorities.

Specifically we have again increased the estimated valuations of our Consumer and HIV businesses as well as the level of contingent consideration we expect to pay to Shionogi and relation to the HIV business and to Novartis at the next vaccines milestone becomes more life. This is the reminder that relates to non-U.S.

sales of Bexera which is clearly growing strongly. Total results this quarter also includes charges of approximately £450 million relating to our decision to withdraw support for Tanzeum over the next 12 months or so. The rest of my comments will be on our adjusted results.

The results we reported today reflect another quarter of strong operational delivery as well as continued investment behind key future growth drivers in each of our businesses particularly new product support and R&D investment in pharmaceuticals. Over the last several quarters, we've stepped up pharma R&D spending as we advance our pipeline.

As Emma has highlighted HIV is one of our core therapy areas. And during the second quarter, we took the decision to invest for the first time in a Priority Review Voucher to accelerate the FDA's review of a key asset our first two drug regimen in HIV.

The £106 million cost of the PRV was charged to R&D expenses in Q2, and with an impact of 5% on adjusted earnings per share in the quarter with the key driver of the reported decline in adjusted earnings per share of 2%.

Turning to sales growth, in Q2 sales for new products continue to drive good growth in Pharma and Vaccines more than offsetting the decline from older products including AER and despite a 2% drag from divestments to reported pharma growth in the quarter.

Consumer had a more disappointing quarter with sales flat overall after an estimated 2% impact from divestments and de-stocking in India ahead of the introduction of GST. The flat result was despite some strong performances from our power brands.

However, this was not enough to offset a broader slowdown in consumption in key categories particularly in international, but also the U.S. Our U.S. consumer performance was also impacted by tougher competition in our allergy business, which particularly affected flonase.

While we are taking steps to address these change market conditions and improve our competitiveness over the balance of the year. We also expect to face additional pressure in the second half from the introduction of generic competition to one of our legacy Novartis products.

The impact of this on second half sales is expected to be up to about £40 million on a full year impact in 2018 would be around up £80 million.

Given these various factors we're not now expecting much growth of the top line from the Consumer business this year, also and unless the market backdrop improves we would not expect more than low single-digit growth in sales next year especially when you factor in the drag from divestments GST and the ex-Novartis generic.

The slower growth with same this year and the impact on 2018, a key drivers of the updated outlook for the Consumer business up to 2020, where we now expect the top line percentage CAGR over the five year of low to mid single-digits. We're controlling cost tightly while ensuring we continue to invest in our power brands.

We still expect to make significant progress this year towards our operating margin target for consumer a 20% plus by 2020.

On to operating margin more broadly for the Group, as I mentioned before the PRV investment is a big one-off impact in the quarter taking 1.6 percentage points of our adjusted operating margin for the Group in Q2 at constant exchange rates.

Across the rest of the cost base, we're driving operating leverage in the P&L with a 90 basis point - at 90 basis points CR improvement excluding the PRV, by driving sales growth in Pharma and Vaccines in particular as well as the benefit in mix and continued tight cost management in all three businesses even while we invest behind our new product launches and priority assets in R&D.

In the quarter, royalties were up and we continue to expect around £300 million for the full year. From a free cash flow perspective, we've driven an improvement of over £300 million compared to the first half last year even after investing in the PRV.

This has been through a stronger operating performance, tight management to CapEx, lower payments for restructuring and continued currency gains, offset by some catch up in dividend payments to minorities.

As we saw last year, the first half to seen a significant build in inventory as we prepare for seasonal sales, but also this year an additional impact as we get ready for our upcoming launches particularly Shingrix and the Closed Triple.

We're continuing to improve the efficiency of inventory utilization with working capital balances 10 days lower than they were this time last year. At the inventory build on winds, we expect free cash flow to be significantly higher in the second half of last year - sorry second half of this year as we saw last year.

This was very much the patent and reflects the changing mix of the business post in the Novartis transaction.

So where is that leave us for the year, we did not want to form the PRV by cutting back on other key priorities and drives of future growth and as a result the PRV and other accelerated launch spend for the two drug regimen will impact our previous expectations for growth in adjusted earnings per share this year by around 2% and we're updating our 2017 guidance range accordingly.

With no Advair generic expected this year, we now anticipate adjusted earnings per share to grow by 3% to 5% in 2017 on a constant currency basis. At exchange rates remain at current levels then we would expect a full year FX tailwind of around 8% to adjusted EPS.

Looking further ahead, the commercial environment remains highly competitive especially in our Respiratory business, but we're also seeing continued pricing pressures.

We're in the middle of the contracting ramp for 2018 and every indication suggests, but as we move into next year there's going to be no letup in the pricing pressures we've been seeing for Advair, but also the new Ellipta respiratory products as payers anticipates and Advair generic sometime in 2018.

Against this market backdrop, it is critical we continue to invest to grow the market share of our recent launches, as well as prepare for those that we expect to launch shortly if regulatory approval is given on the timelines expected. It is also important that we continue to invest in the newly prioritized pipeline.

We're going to use our financial architecture to ensure that the delivery of our strategic priorities of innovation, performance and trust translates into clear financial goals that we can embed across the company.

The goals of our financial architecture have to drive stronger growth in sales through improved innovation across all three businesses to drive earnings per share faster than sales through better performance, driving operating leverage through the business from time to cost control and continued financial efficiencies.

And to convert more of those earnings into cash which can be either been reinvested in the business or return to shareholders. All of this achieved the right way consistent with all values and our objective of building trust in GSK.

We'll use the architecture and its common goals to help create a step change in the alignment of our operations around three fully integrated businesses. This will enable new end-to-end emphasis on cost discipline and cash consciousness.

It will also allow us to be clear both strategically and operationally on how we invest and allocate our capital between on different businesses. And now like to run through each of these goals in a bit more detail. We've already driven annual cost savings of more than £3 billion from our combined integration of restructuring program.

This is helped offset major headwind over the past few years from pricing and the decline of profitable all the products such as Seretide/Advair, Avodart.

It's also allowed us to restructure our cost base to create significantly greater flexibility to reallocate our resources to where we see the greatest returns before we have to add additional funding.

The continued stability in SG&A expenses in the leverage that this produces despite significant promotional investment going in behind our new products is evidence of the effectiveness of these efforts, but there is clearly more we can do.

We anticipated at the time of the Novartis transaction that we would have been to invest approximately 20% of the savings. On our tracking since that time suggests we've invested slightly more at around one third of the benefits. This has gone mainly to promotional support and supply chain improvements and then more recently to R&D.

Two thirds has been used to offset the margin pressures we've been experiencing from pricing and the decline of the older products.

We've now identified another billion pounds of annual savings from the same program primarily in the Pharma business through supply chain efficiencies, simplifying our operations improve procurement savings and a more streamlined functional model aligned to the new business priorities that Emma has outlined today.

We again intend to reinvest approximately one third of these savings into supporting are already launched new products, key near-term launches and the R&D portfolio. Similarly, the rest will be applied to protecting our margin by offsetting some of the pricing and competitive pressures we continue to face in the Pharma business.

While those pressures will remain a meaningful drag on operating margin over the next several years particularly in the year in which an average generic in the U.S. does arrive, we expect to begin to see a better balance going forward, but the operating margin benefits from stronger sales growth from new products and the drag from Advair reduces.

Remember though that we've always said we would manage the margins to deliver more sustainable earnings per share growth for the longer term and so margins may move around quarter-to-quarter we invest to drive that growth.

Important to delivering a sustainably better margin is that the tailwinds also go beyond restructuring benefits even though there has been a significant contribution.

Across our three businesses, as well as at the center, we plan to ratchet up cost to supply them with a particular focused on improved supply chain efficiency to drive a more competitive cost of goods. Tighter control of G&A including capping growth in functional of other support capacity and strengthening our procurement capabilities.

And our supply chains, we're reducing complexity by divesting some of the tail, cutting the number of manufacturing sites and lowering the number of skews.

Beyond our internal manufacturing network we're also focused on simplifying the number of contract manufacturers we use, which will improve these utilization and contracting terms as we leverage better scale with the contractors that remain. Generating additional savings from procurement will be a significant focus for us.

And we've announced today that will consolidate all of procurement activities into one unified organization to leverage scale and best practices and we're targeting this organization to deliver mid single-digit percentage savings in material and indirect costs as well as non-production spend to improve our cost of goods and allow us greater investment flexibility across the P&L.

In establishing our new business priorities, we've also identified opportunities to reduce non-working SG&A further simplifying and having the back office elements of support functions including medical and regulatory and to reinvest this behind customer or patient facing SG&A.

We expect this will enable us to cap the growth of our non-working spend behind sales growth improving operating leverage and moves into a more competitive position relative to our peers and other relevant benchmarks.

To underpin this additional cost discipline we will govern the performance of each of our three businesses through a fully integrated P&L.

Plus we've had this in place for consumer healthcare for the last couple of years this is a very new for Pharma and Vaccines, and it's driven a step change in decision making for the consumer and should do the same for Pharma and Vaccines mainly by aligning supply chain, commercial R&D and functional teams to a single set of objectives at allowing clearer trade-offs improving performance and profitability as a result.

We also need to improve our cash generation and to do so we will build cash metrics more directly into employee incentives. But also implement end to end cash flow accountabilities within each of the businesses to allow us to drive cash consciousness much deeper into the organization.

We will ensure the three businesses have specific cash targets and are accountable to managing that cash flow directly, we'll focus particularly on driving further working capital efficiency, managing our CapEx in a more integrated way, more closely aligned the priorities of the three businesses and reducing restructuring spend.

As an example, we plan to reduce our holdings of inbound raw material by more than 30% by shifting to a much more vendor managed or consignment stock model. On CapEx, we are now prioritizing pipeline investments and capacity expansions the new products much more directly and turning off other investments around older products.

We've also recently established new ways of working our procurement to capital to ensure not only competitive purchase costs, but also more standard equipment and infrastructure.

For example, we previously announced increased investments behind the Ellipta and have leveraged our strong and strategic relationships with preferred suppliers for the manufacturing equipment across all of our Ellipta producing sites.

This drives better capital efficiency, ease of technical transfers, and an improved capability with this equipment internally. As the equipment is now identical across all of our respiratory sites, we know how it performs better resulting in less deviations and waste and reductions in unit cost for each Ellipta device.

We have a specific program for Ellipta is targeting a 20% reduction in the unit cost for Ellipta device by 2020.

To strengthen our allocation of capital across the group and ensure that it is allocated to where the best returns are available where implementing a clearer set of priorities per our capital and creating a new board to govern the allocation of capital between our businesses.

To support this new approach, we have for the first time allocated all of our investor capital between the three businesses. So that we can track the overall returns each of them make and be able to allocate between the three much more deliberately.

The priorities for the new border firstly to invest in the business and drive growth by strengthening the pharma pipeline and backing winners as data readout, taking opportunities to strengthen the companies that the consumer put should it come, and then thirdly expanding capacity and vaccines particularly in support of our new meningitis and Shingrix products.

Secondly, to improve shareholder returns, which are returns to later; and thirdly your targeted business development focused on bolt-ons and partnering. Managing these capital allocation priorities were all be down with the parallel objective of continuing to strengthen our credit profile and protect our top and short term ratings of A1/P1.

We will expand the use of cash flow based return metrics beyond individual projects assessments, which is how we've used them previously, and we've now introduced a consistent cash return on invested capital methodology to prioritize investment across the group as a whole so that we can compare the returns from each of the three integrated businesses as we allocate capital between them.

We will regularly benchmark ourselves to our peers. R&D spend will be subject to the same allocation process to ensure we are looking R&D returns in the context of the three integrated businesses. As a result, we will no longer publish a separate measure of R&D returns.

So turning to the 2020 outlook, to start with at a group level where maintaining the overall outlook for sales and earnings that we gave you back in May 2015, this reflects the overall and gets a factors that we've seen since then including high new product sales earlier delivery of the original integration and restructuring benefits and the extension of that program offset by greater pricing pressures in the Pharma business particularly in the respiratory, lower consumer sales growth as well as upward pressure on the tax rate.

The benefits to the upside are also partly offset by the minority interest in the additional growth we have seen in HIV. In this outlook, it is important to understand, we kept the same goal posts.

The 2020 outlook, we're giving you today is exactly the same methodology we used in May of 2015 and that includes assuming that the sales and earnings compound growth rates are a constant exchange rates over the five year period and the exchange rates we've used to estimate the 2020 position including the 2020 margins as of 2015 rates.

And if sterling stays at current levels we estimate a positive tailwind to the five year EPS CAGR outlook we've given you at around 5%. We're also continuing to assume Advair will encounter generic competition between now and 2020 and we only have 200 million to 300 million of residual sales in the U.S. by then.

Hopefully, that gives you a clear idea of what has and what hasn't changed, but you should also know that this on changed outlook is despite an impact on Group sales at around £900 million from divestments and the period including the withdrawal of Tanzeum.

Looking each of the businesses brief, firstly in Pharma, we've made good progress with new products more than offsetting the decline in Seretide adverse so far.

We continue to expect this shift to continue over the five years with a low single-digit CAGR for sales despite higher headwinds from divestments and exits over the period than we originally expected. We also originally expected 2020 margins to be flat just under 30% at constant exchange rates.

We leverage from sales being effecting offset by other factors. We now expect we can do better on margin to deliver low 30s at 2015 exchange rates, thanks to the additional cost efficiencies that I've already talked about as well as additional leverage from new products performing ahead of expectations.

Next Vaccines continues to be on track with our original expectations both the sales growth and margin, you see in the strong results Vaccines is driven by the first part of this five year period and looking forward we have high expectations Vaccines particular as we move through 2018, this key launch will clearly require significant investments in both supply chain and the necessary sales support, which may impact margin in the short term, but we still expect our 2020 margins will be 30% plus.

So an improvement of at least 5% compared to vaccines pro forma margin was in 2015. The Consumer business continues to be an attractive business with clear synergies within the group.

However, given the expected impact from the market slowdown I've already discussed as well as the impact of shorter term competitive challenges divestments and GST, we now expect the five year CAGR in sales to be low to mid single-digits.

Importantly, our margin we are still targeting to get the operating margin of 20% plus that we previously indicated by 2020. In the bottom of the P&L we'll continue to drive financial efficiencies on tax.

We now expect moderate upward pressure over the next few years and we've already seen some of that this year given the Group's changing mix particularly geographical mix and a more challenging tax environment. Overall, we continue to expect adjusted EPS to grow mid to high single-digits over the five years to 2020 in constant currency terms.

We understand how important regular dividends offer many of our shareholders. As a result returns to shareholders are a key priority for capital allocation, but after first meeting the investment requirements of the business necessary to support long term future growth. We continue to expect to return an 80 pence dividend for 2017.

We've also announced today, an expectation that subject to any material change in external environmental or performance expectations will pay a dividend of 80 pence per share in 2018, as part of a new dividend policy for 2018 and beyond.

This new policy set out our objective to distribute regular dividend payments that will be determined primarily with reference to free cash flow generated of funding reinvestment necessary to support growth.

Over time the Group intends to build free cash flow of the dividend to a target range of 1.25 to 1.5 times before returning the dividend to growth. Starting in 2019 we will return to our previous approach of setting dividends on a quarterly basis rather than continuing to provide a medium term outlook.

And so back to our overall vision out 2020 and beyond. We will focus our efforts around new priorities to strengthen, innovation improved performance and build trust for all three businesses, and Emma has set out some of the specific actions we're taking to do this.

Based on these plans we continue to expect deliver our 2020 financial target sort of group level reflecting the balance of upsides and downsides that we've covered.

Importantly we're also form for growth beyond 2020 including continue cost discipline at deeper cash consciousness across the company and a clearer capital allocation framework to enable investment behind the continued success of our new products and the development of a stronger pipeline. With that thank you for your attention.

We're now going to take a short break for about fifteen minutes after, which we will return to take your questions and there are refreshments outside. Thank you very much..

[Operator Instructions].

We're now moving into the Q&A session up to an hour and half or longer if you got more questions.

As you can say, I'm joined by my team here on the stage and just to remind you in case that recognized them from right to left we got Simon, our SP; Patrick Vallance, Head of R&D; Dave Redfern, is Chair of our HIV Business and the Chief Strategy Officer; Deb and John who lead our HIV Business; Luke and Brian, Luke runs our global Vaccines business and Brian, Global Consumer and we have Jack who is President of our U.S.

both Vaccines and Pharma business and last but not least Eric Dube who runs our Global Respiratory business. So I will be sharing the Q&A session, but obviously sharing out - the answer to your questions with them and then in the front row on both sides we have many of our R&D leaders as well.

So just in terms of the basis of this session you're probably all extremely familiar with them, but for those of you that are in the room could you please raise your hands and then switch on the red button in front of you when I signal to you and ask your question and then please do switches off, so that we can and answer and then move on to the next person.

And I also be taking questions that are going to come in either online and on the telephone line and via the webcast. Last request please do as usual try to restrict your questions to two to three at the time so you can get run as many people as possible. Okay, who would like to kick start? That's an encouraging sign..

Thank you. Andrew Baum, Citi. Two areas; first of all you've highlighted oncology as the potential platform attending the readout of the status.

Does that preclude any significant transactions within the oncology space ahead of that time? And then the same vein could you give some further color on the divestments of the established products business in terms of the consideration you may expect to get financial consideration from the sale of those revenues, just thinking in terms of financing a bolt on transaction and strengthening what you can do with your balance sheet? And then a question for John and apologies for the predictability, in the IS data on the resistance mutation that were shown particularly the integrates resistance mutation particularly from a competitive perspective with Gilead being able to leverage that data and to shy people away from adopting it, how do you deal with that, especially in the U.S.

where you attraction with KOLs with the two drug regimen is somewhat less than is not the territories in the world? Thank you..

So thank you very much. And we will come back to John and maybe Deborah also talking as in terms of commercial competitiveness question in terms of our HIV business.

And Simon do you want to comment on the divestment considerations one?.

That's a pretty wide range of businesses within that mix, but typically for that profile you'd expect one to two time sales something like that..

And in terms of your question on oncology, I mean you're right, we have very clearly high so that as a potential area dependent on data, and we do want to see whether we have an anchor assets for ourselves whether or not we should go move out with any of the partners and there are several other but we're already in partnership from certain clinical whether we can consider or indeed as you are aware Novartis as the right view on the asset from an asset by asset basis.

So I don't think we'll be looking at any material transactions ourselves until we see more data there.

So if you could get around the expected and important HIV question, John would you like to respond to that one?.

Sure I will try to give a little perspective, so you're asking about the ACTG 53, 53 study that was presented yesterday.

And this is a pilot study if actually followed the first pilot study that went forward for the two drug regimen of Dolutegravir plus 3TC, 3D treatment naïve patients that was the paddle study and actually at the meeting we saw the 96 week data and of those 20 initial patients really the durability has really stood up over the 96 week period.

Following the first report of that the ACTG went forward with a larger study of 120 patients being treated with Dolutegravir 3TC and they reported on 24 week data at this meeting, and actually the meeting or the data that was presented was pretty spectacular because you had 90% of patients at 24 weeks with the two drug regimen being fully suppressed.

Now as you know there were three patients that did have urologic failures, one of whom who the investigator described as chaotically non-adherent to paraphrasing did develop resistance or emergence of resistance and mutations to both the 3TC and also to the integrate drug - the integrates drug with kind of what we describe as a minor resistance mutation.

Now I think it's notable for all the previous treatment naïve that is with Dolutegravir we have not had a patient development. We have had reports of patients who are treatment naïve develop integrates resistance mutation, but that's been a very rare event, and as I said not been association with clinical trials.

This is a pilot study and I think the real telling of a tale here will be looking at the results of that GEMINI study which will be over 1200 patients being studied with this, if obviously always disappointing to us to see patient develop that, but clearly someone who's not adherence is not that unexpected, and it's something we take.

And really look to see the larger body of evidence as develops going forward.

I do think you really have to come back to the overall performance of the regimen compared to that really before you really can assess at how it stacks up against other regimens along the line, because development of resistance that occurs with all regimens and so I think that we'll just have to see the data as it plays out, but I think that the overall the data there is really encouraging and pretty exciting to us..

Okay John comment on the competitiveness. You know that the failure that John just talked about will be kind of that graft by our competitors.

But I also believe that GEMINI is a very, very important study and that is where you will really see the strength of Dolutegravir 3TC from my perspective we've got a pipeline of two drug regimen projects with Dolutegravir coming out first followed on Dolutegravir 3TC and then move into the long acting area with cabotegravir.

So I think we got a very strong proposition GEMINI will be key with obviously already got sold one and two which we shared it at CROI. For me we have a very competitive offering in the U.S.

and globally and I think we have very much prepared to match our competitor share voice wise with our sales force in the marketing space with our medical sales forces which are the same size if not and if the places even larger than our competitors. So I think with repository very, very competitive both in the U.S.

and beyond see the CROI yesterday both from Europe and the U.S. is that very excited about the two drug regimen portfolio. We've got, but that very much waiting for GEMINI, and I think GEMINI now becomes a much more important milestone from a data perspective for us to judge you know just how successful we will be with Dolutegravir 3TC..

Yeah, thank you, Vincent Meunier from Morgan Stanley. So the first question is follow up on oncology, I mean how do you think you can become a top oncology company in the context of you restarting investing in that area after the divestments quite recently to Novartis.

And quite very competitive landscape with many big companies investing in new technologies for several years, so how - what is your value proposition here? The second question is on the dividend, can you explain us how does it work I mean should we consider that 80 pence for 2018 is the days maybe a floor should we expect at some point maybe a dividend cuts at the end of the decade if you do not cover the dividend or if you for instance make it big acquisition, and then the free cash flow is impacted? Thank you..

Okay thank you very for the questions. I'll respond on the dividend, we also have a question on line from Mark, I'll give you an outlook on the dividend of 2018, so I should combine in those two together. And I'll give a quick read oncology and I ask Patrick as well to pick up on that.

So on the dividend we know it matches, we're expecting 80 pence in 2017 and we expected in 2018, because we know that was a key question, so today we wanted to give visibility on it.

We also wants to give visibility by announcing a policy we based with - where distribution we based of free cash with a target cover of 1.25 to 1.5, so we get clarity that we're working towards rebuilding that cover before increasing the dividend.

So it's really a very important message that we want to have understood but if you want to keep investing in the business first future growth.

And our intention is to be rebuilding that cover off an 2018 based, that says I'm not going to understand here and say the dividend will never be cut as some circumstances have decided that is required and appropriate, but that would be a bold decision at the time and our intense is absolutely to be rebuilding the coverage as I said from that basis, and we are not going to be pronouncing on the dividend in the medium term, I mean said this we will move back 2019 into quarterly declarations, so I hope that is crystal clear for everybody.

And then on oncology question, I just - we in the deal with Novartis which we all feel was a fantastic way to get value for the commercialized oncology assets that we had and build up to really world leading scale business in vaccines and consumer is important to say and was perhaps not sufficiently understood at the time that we absolutely retain our R&D capability in oncology with some great R&D talent and some exciting early stage assets that we think do have potentials bring real value for GSK.

That said already and how we get that value is still to be concerns depending on the data set, and Patrick would you like to comment a bit more on specifically on the asset obviously Luke Miels will also have a meaningful role to play here in terms of thoughtfulness around what is possible and what is right in terms of all right to when and have the commercialization and especially area which is bit different in terms of building commercial capability.

Patrick if you want to add to that?.

When Novartis took place we kept our discovery effort in oncology in a very focused place which is where we thought we had deep expertise, one in epigenetics where we were early in the field and remain very deep in the science we have.

And the second in immuno oncology based on a very strong immunology presence for GSK and the immuno oncology expertise as leader of that area.

So those two areas we're not trying to be an all-encompassing oncology play we're pursuing largely those two areas and we want to comment on any of the recent things, because our pipeline is now beginning to declare itself in terms of where we are in our clinical readouts and indeed in terms of the combinations that we have, which are unique or the forefront of the next where you go some of these areas do you want to comment and making specific..

That our pipeline is entirely based on innovation. We have delivered a lot of value in a relatively short period of time if you think about the way this deal was structured with Novartis there was only discovery asset left in the oncology pipeline, post Novartis.

We now two and half years later, we have 11 assets in the clinic, we have seven of those that carry a lot of promise and the lead asset is actually just revealing itself to have a level of efficacy that you could call potentially blockbuster efficacy, so with a 60% approximately 60% response rate in refractory multiple myeloma without BCMA antibody drug you get.

We already double what there are two more map that shown at the same stage of development and there are two map has become a blockbuster asset. And if you compared with other combination work pomalidomide, dexametasona and tumomab together achieve about the same level of response rate that we have as the monotherapy.

So if this continues which is what we're expecting then once we enter combinations, I think we will have a strong stance for multiple myeloma patients.

So having said that that's the leader asset in the portfolio, where we clearly have efficacy data now that is meaningful and the other assets pushing to produce additional value where as Emma says, we still have to wait more leaders..

Thank you. In the phone line Tim from Bernstein. Can you ask your question please? Maybe not.

Okay, there's one question on line that Simon I'm going to walk you to pick up question and whether the slowdown and consumer makes us things that probability that Novartis will put to us next year was about probabilities increased, probably a question for Joe, but if so how we comfortable we can fund this as well as returning flexibilities for other M&A in consumer?.

Thanks Emma, I've been clearly the first part of the question is the question for Novartis and they've made that position pretty clear in their own recent earnings call, but they will have to decide when they want to exercise that puts it in there, put or not our call.

We've been very clear we would like to acquire the rest of the business as and when they decide to exercise, and we're very comfortable we can fund it exactly how we choose to fund it I mean it's very premature to get into that discussion as clearly that put could be some way and way..

Question from the room..

It's Keyur Parekh from Goldman. I had a follow up, congratulations and thank you for Frank on assessment of GSK's execution over the last few years, well done on that.

Useful two questions, the first when you spoke a lot about what you're were changing, my question is in on what you're not changing and that is your financial target for 2020 kind of a lot has gone in your favor since you force issued those targets, you're now in billion dollar incremental cost savings program today, and yet what we are seeing is unchanged EPS expectations.

So just something are you running faster just to standstill or is that in heading conservatism and what you're laying down today? That's question number one. And then question number two, apologies the dividend thing is to not crystal clear do lot of bust so I'm going to come back to that.

The press release says over building dividend cover overtime, I would like to understand what overtime actually means in kind of your mind and inherently there has given on the fact that it want looks that you define free cash flow for 2016 the dividend cover was 0.8 times free cash flow.

To take it to 1.25 times on consensus number just unlikely to get there by 2020, so is that an appropriate context to think about overtime or should we be thinking about a longer term cycle than that? Thank you..

Thank you very much Keyur, and again I reiterate part of an assessment of where we are came to listening to a lot of very transparent shareholders and lead analysts, so I should thank you for that and request that from an ongoing basis. [indiscernible] is new I'm confident that for the long term.

So I'm going to ask Simon has come back on the definition of overtime, but just to give me my headlines on the 2020 guidance, I think it's very important and he did have in his slide on the puts and takes that make up landing on the same outlet, just remind us since 2015 we will be taken out £900 million of turnover and divestment versus what the base was in 2015 of which £500 million is still to come I think £400 million which is within fall in terms to go.

We are talking about investing more in R&D with the big focus agenda in R&D, but whether you look at Q2 and you know the assets and we've taken that into account the assets we think we want to bet on that will be continuously invested in slight pressure on the tax rate and some slowdowns and pressures whether that's an adjustments in consumer both for environmental and one off or also the pricing pressure, which is near term still very real particularly and held respiratory.

So we are making some important and quite aggressive changes to make sure that we can still provide a reasonably competitive outlook for 2022 when we look at it through our three individual business units not move forward on margin expectations within pharma and most importantly investing in where we create the strongest value for the long term which is delivering a pipeline that is valued and only by patients by the market.

So Simon do you want to comment on the dividend overtime question?.

Yeah, I think just to pick up the point that we had earlier also about the 2019 position.

What we're saying in terms of how we're trying to indicate to guide people on the dividend going forward is that from 2019 we will go back to what is normal of declaring and telling people about our dividends each quarter as we go forward that's what we used to do.

We created this bridge across the Novartis transaction and now today we've announced a new policy to set the framework for declaring dividends going forward against the baseline that as Emma described were establishing for 2018 and the intent is then that we will grow into cover overtime, and I think that's probably several years rather than one year.

And I'm not going to get into specific to actually how many years. But it's important to get the other priorities we've got as we said our first and foremost priorities to make sure we're investing behind future growth of the business, so that we secure that cycle of growing into the cover going forward.

So I think that against that expectation you should not expect dividend to grow in the short term. Clearly none of us can say that will never ever consider a reduction in the dividend of some reason dictates that we should think that.

But what we're not saying is that that is sort of in some back year in 2019 is very clear framework to guide how we go forward here on hopefully that's clear, but if not then we should go through it again just to make sure everyone is clear..

Okay, question for Patrick that come up on line with regard to our target to reduce drug development times relative to peers and looking to adjacent to be more competitive fit, can you talk about balancing these reductions with our third long term priority of trust? Patrick?.

Yeah, I'm not quite sure what this question is getting at, whether the implication is that we're going to cut corners to do it or whether it's about our trust priority to actually deliver medicines, I mean clearly we're not going to cut corners.

And I will talk about what we are going to try to do to reduce our development time, so we know that we do very well in Respiratory and HIV and we know a lot of the reasons we have longer time lines in other areas how to do the things like how we got our R&D commercial interface, which is being addressed head on and decision making, try and reduce the whitespace between trials.

So point number one is that we're going to address the R&D commercial interface particularly when we thinking about areas where we haven't traditionally have that strong interface that we need to get right.

We've got processes coming into trials which are reducing trial time, so Emma has alluded to one which is in the danarikson [ph] study we had real time data capture, which allowed us to make a decision about a year earlier than we otherwise would have done on what we thought the result was and therefore trigger the next phase of study.

So expect to see more in the way of real time data capture, real time information from multiple outputs from patients and the use of digital also to do things like site selection, and the ability to time delivery of drugs substance where in one study we produce trial and times by six months.

So I think when we look forward is the combination of decision making R&D accounts, R&D partnership with commercial in order to make sure we don't circle particularly in Phase II and some strong digital approaches to try and improve performance of trial delivery and times that liberates absolutely not support to reduce the stand the data we generate in the evidence we're putting together quite the opposite in fact we want to increase time..

Okay, back to room please..

Thank you, it's Mike Weston from Credit Suisse. Two quick U.S. commercial questions if I can, and then one bigger picture on R&D. A couple of the points Emma that you've made around U.S. commercial where I think an increase in investment and support and also you've talked about changing incentives.

So your predecessor clearly went out on a limb with a new commercial structure in the U.S. and was confident that the industry would follow it didn't seem that they did. So could you let us know whether or not we're now seeing a change back at GSK to a more traditional incentive led sales force model in the U.S.

or whether or not you're just tweaking the existing one? And then also I was surprised to hear about the Ellipta pressure across the board in 2018 one of the arguments previously on Ellipta was that doctors loved it, better for payers because you could switch patients much more efficiently and you could save cost.

So I wonder Jack whether there's any real change in sense of it really just out wear and Ellipta story still holding up or is something changing? And then finally just on R&B, Emma, again you referred to a lot of focus - a lot of focus on improving output and you've talked about leadership changes in the top 200 of the business, but are you sure that you've got the right people on the ground in R&D to actually deliver all these changes or we're actually going to see some quite significant turnover of employees to really get the maximum efficiency and output out of the GSK R&D organization?.

So I'll make a couple of comments and then I'm going to ask Jack to comment on the competitiveness both of the Ellipta and also our commercial policy. So quickly in terms of R&D as I said, people thought performance we all know that we've made some changes I think more will come, you wouldn't expect that those we announced ahead of time.

So but where we absolutely know that we have got some fantastic scientists in the company and we undoubtedly we'll see some renewal as across many of the areas of leadership.

In terms of the incentives, the incentives I was talking about actually was much more broadly across the whole company as opposed to specifically sales rep incentives, and we do plan to announce internally for net for 2018 some fairly significant adjustments to help align behind both the strategic priorities and the performance objectives that really make sure we're all pulling much more strongly to be competitive both at the market place and those definitely a big opportunity on that.

What you allude to in terms of our sales force policies, and as I've said GSK has been quite proud of its patient principles to try and remove any perceived conflicts of interest.

At the same time we've already evolved both policies not least under Jack's leadership to make them more competitive front simpler and easy to execute against, particularly in line behind critical launches and we will continue to do that, but the fundamental principle of divesting a value based trust based company where people can trust our science and our intention and having a very productive relationship so that absolutely critical to who GSK is and we'll continue to do.

So Jack do you want to comment?.

You just underscore the patient first we continue to be very values or we're going to balance it with competitive performance and so we monitor and we continued with just as we have the last two and half years on that.

Speaking specifically to be Ellipta portfolio it has performed well, I think when you look at the overall portfolio over the past year nearly doubling products like Breo more than doubling.

Breo was now the number one prescribed ICS/LABA with pulmonologists we had our best semester ever in Q1 and Q2 of this with Breo on our second best with our containing products.

So performance is very good, the reality years both driven by market pressures, potential regulatory changes and potential legislative changes both at the federal and state level, I think that's what the industry is exposed to.

We know what is exercise on a class-by-class basis and those classes that tend to be more retail oriented and tend to have multiple products in it tend to be under the most pressure.

So I think that's what you've heard from Emma and Simon in his recognition of that isn't going away, but in the meantime we will drive continue to drive strong share of market performance across the entire Ellipta portfolio. Thanks.

Thanks, Jack. Back to the room.

Please?.

Thanks. This is Graham Parry from Bank of America Merrill Lynch. Just first question on the guidance, you've qualified your reiteration of the mid-term guidance and with the potential need to invest in R&D and which implies that should the right opportunities come along that guidance could potentially come down.

So how should we handle the capital potential for that need and do you think current R&D spending are sufficient to achieve long term objectives if you bought an external assets with that mean the after lower guidance and how much of the £1 billion of savings you think would be allocated to offset that.

And secondly and then question on R&D, GSK has made much noise in the past about R&D structures processes we had said that DPUs we've R&D investment boards, and so in your analysis of what haven't worked in R&D.

Why didn't they work and can you just help us understand what's changed this time, because for those who followed the stock for a long time it feels like we're hearing some of the same messages again that we've heard on previous new key areas as they started.

And then thirdly, you said you're interested in earning all of the Consumer Health including the Novartis stake and that's previously been viewed from the lens in the Novartis putting that stake to you and their latest communication seemed to be filtered more towards let GSK come to us.

So could in the context of that could you help us understand your desire to see Novartis transaction rather than the other way around and give us some kind of reassurance of the value that you would get for GSK shareholders in such a transaction? Thanks.

Okay. So just I think already said that's going to be rare decision.

I think Patrick - he will be very best place to say about what you think is going to be meaningfully different in terms of operating changes, because we are quite deliberately not choosing to major structural reset, which we think will just cause more delays as the post improve output, and then I'll go Simon to comment on your first question, please..

I think we're actually not changing the DPU model, and we believe the output from a DPUs is being extremely good, so the discovery organization I think continue to innovate and produce really high quality output, and we've got some of the DPU has you can speak to that jump outs and for example I think is an absolutely recognized world leader in his field.

I think where we haven't done as well and it was clear from some of the statistics shown, is in some of the areas of development where I think we failed to focus enough and as a result of that we had too many things progressing too slowly in the development organization, and not only have they developed too slowly, but I don't think we've had the partnership right with R&D and commercial which meant they landed in a prepared partner organization could drive them to full value.

So by focusing down and it's a very significant focus down on the two areas plus two emergent I think it gives us a vertical integration all away from target selection through to commercial ability to deliver on it and which we can drive things through in a way where we've got a recipient and partner organizations.

So I do think the R&D commercial interface is very much tighter in this new design. And I think obviously the arrival of Luke is going to help further with that.

I think in development we also absolutely need to not to make sure that we do things off which we've talked about, but we make sure the evidence generation is aligned with what's really required.

And I think by spreading more thinly and going across too many therapy areas, I think we often had quite good molecules we didn't end up getting the right evidence generation to be commercially successful, I think at narrowing of commercialization and development is a very key change that we think about things..

Thank you, Simon..

Graham, I think the answer to your question starts point earlier that in terms of looking at the outlook to 2020 keep offs of the trade obviously described as making sure we've got flexibility to provide to invest behind the newly prioritized R&D pipeline.

So there is a reasonable amount of allowance in that R&D spending you've seen R&D spending coming up quite quickly over the last several quarters clearly we're going to start analyzing some of that.

And so I think the way you should think about is, is that we will make specific investment decisions if the data justifies it and there's a clear evidence point to bring in front of me, and we'll just accordingly with an obvious opportunity sitting in front of us, so that I wouldn't build another adjustments at this point.

I think it's all within the outlook 2020 that we've given you..

Okay. More questions from the room. Could youput your mike or some of things need to turn off maybe..

So first could you elaborate the reason why you kind of divested sirukumab, which seemed reasonably a solid asset. And now you're more dependent on a few late stage assets after the choices.

So do include some buying in licensing of late stage assets in addition to the effort you're making internally in R&D?.

And so I think we very brief on that. I will focus on R&D is really going to be on early stage stuff, but should through what we are planning to revitalize the R&D fairly meaningfully and should the scans that we did just early stage assets as well as looking at then we will, but our priorities on early stage strengthening.

And in terms of sirukumab is simply a question of with our allocation of resources what do we think, we are the best commercial leaders in terms of being most competitive think that we are capable of executing against and our judgment was that was not to be the case and we're still supporting very strong partners Janssen in terms of what that lives ahead we think that's the right decision so others do want to add anything, Patrick on that?.

Right. And it's just about off putting bringing our resources where we can make the most successful..

Okay. Next question, please..

[indiscernible]. Thanks for taking the questions. I'm sorry to go back to the dividend as I'm sure you were very important to the current valuation, and if it's going to take a number of years to go into the dividend and free cash flow is going to have to grow by that 50% to get within the dividend target range.

Is it fair to - and would you agree that you're over distributing and do you think that current situation sustainable for a number of years to come? And then secondly on R&D would be fair to assume that your return on R&D is full and since you last updated us on the IRR, I know you're going to update this on the IRR, but you have the same direction where that's gone.

And obviously we had sales performance being somewhat disappointing and some late stage failures offset by better the performance. And if so can you help us understand how you came to the capital allocation since you got to with vaccines and from R&D obviously your choice that you face it? Thanks..

Okay. So Simon I'd like to comment on IRR in the capital allocation choices.

Just on the halfway distributed ahead, yes, I think I said that in my opening comments we did distribute ahead, but we are really focused as Simon said several times on rebuilding our cash flow and I'll cover, and I'm going to reiterate again the principles that we're working towards, but some we do want to get a balance sheet back into a stronger position and we are quite focused on the A1/P1 rating as the same time concurrently, so Simon do you want to discuss?.

I think just to be clear. We're not saying there's no cover for several years.

We're saying we don't get to comfortably into the range that we set out and that now is going to take some time and then clearly we have to move so along the way make sure, we're funding the investments we were just talking about in terms of R&D pipeline, managing our balance sheet, strengthening our credit profile as we have flexibility by those things come along.

And I think trying to balance those follows are maintaining something that shareholders have said to us is very important, I think is why you get the picture that you get, but there's no cover for the next several years.

And I think in that context when you look at the capital allocation framework, we want to look at the R&D for each of the businesses within an integrated return for each of Vaccines, Consumer and Pharma because they will look quite different.

The relative returns on Pharma and Vaccines R&D compared to the numbers we previously published are not coming down as new products came into that mix clearly as we go through the next set of way posts the upcoming launch as we've got of dual Shingrix and the Closed Triple and you might expect to see it there, but that again is why we want to look at it in the context of the business as how and Vaccines and Pharma from a return point of view over the medium term got relatively similar.

Clearly today, vaccines is still dealing with some quite big investments behind relatively new products which we're putting a lot of capacity behind and we inherited a significantly loss making business from the losses, so it didn't stop in 2015 in a very good place, but it's moving pretty quickly through that and that's why we think it's right to allocate capital because fundamental as we can sell pretty much every day as we can make..

Yeah.

Please?.

Thank you very much. It's Sam Fazel from Bloomberg Intelligence. I have three questions if I may, knowing that you said two. First one from Consumer, in terms of what drives the put value, we've had it quarter - you've had a quarter which wasn't particularly strong.

And you've got this generic that's come along where I don't know, but you were aware of it before or not, but is it going to the growth profile.

How does this lead to still and up valuation for the production? Second one is would your guidance be different if there was a second and third generic Advair, because I think you've said you're assuming a generic Advair launch in the guidance or maybe at least a generic of the launch but just?.

Yeah. That will be a better correction on that one..

Okay.

And thirdly, on Tanzeum, what do you think was done wrongly or whatever what happened there in terms of the process of developing it and taking it to market, where I think most observers were probably viewing the product not as the strongest product in this class?.

Correct..

Which has been something that you've learnt from taking forward? Thank you..

Okay.

So I will take that on two key questions, just on the put and some can also about in more detail, the revaluation is related FX from the smaller occurrences and also the kind of valuations of consumer companies have moved up a little bit, and I don't know if Simon whether you would add anything more in terms of that?.

It's the valuations based on forecast of the business, not just for the next 12 months, but kind of medium term forecasts.

And we've seen obviously a big swing in the main trading currencies last year are saying more benefit than we previously planned for from a lot of the smaller currencies that we done a bit of catch up in this quarter as well as a big shift actually in the comparable multiples. So that's what we've seen a significant move this quarter..

And on your question Sam, I'm going to ask Patrick to pick that up, because it's a really important one and to the earlier point about what's going to be different now, we actually did quite a detailed review of where we haven't necessarily got this right.

And Tanzeum would be a good one in terms of having a truly competitive asset where the right kind of full alignment of what winning looks like between the developers and the commercial executers and so we just spend some time looking into those, so would you want to comment a bit more or less in Tanzeum..

Yeah, I mean Tanzeum went through rather interesting different development path in GSK, which is set up with a different vehicle, which I think we won't do again, so I think that was a specific way of doing it which was outside lots of the normal governance process.

But I think the simple answer to your question Sam is that, it wasn't cold early enough when the data told us that it wasn't going to be commercially successful in our hands, and I think we should have called it much earlier, I think that it was evident after some of the early trail readouts and I think at that point we should have called and stop them..

Okay. Back to room, from the back..

Thanks. It's Kerry Holford from Exane BNP Paribas.

And three questions please, first can we just go back to the incremental price pressure, so this has been a reason to trend the guidance for 2017, but I'm keen to better understand what's got incrementally more difficult since the beginning of the year you've referenced visibility a number of times that generic Advair coming through next year now, so what's called more tough this year and in context of that could you just talk to little bit about debating in HIV specifically today and how that looks out into 2018? Secondly, the question for Simon on pharma margins, the mid sale margins guidance is that now been around the low 30s and now is based on 2015 FX rates if I understand correctly, so your reference to growth the earnings grades over that period if you're just currency on few models with same for your expectations on the margins on today's currency in 2020? And then early a question for Patrick on the pipeline we focus, I guess it makes sense given your historical strength HIV and visibility to continue to focus here.

But I might argue those two to these categories are relatively well so, by medicines on the market today.

So where is the room for disruptive therapies in the 2018?.

Okay. We'll come back to Simon and Patrick in your second and third questions. And just on the updates to this year's guidance just a slight correction, the adjustments for this year's guidance is related to the investments in the PRV and the associated costs with launching that for pulling forward a better launch behind the dual therapy.

We have referred the pricing pressures several times that are very real, and we now have a bit more visibility on 2018 contracting as well, but I'll let Jack and then Deb will comment on the first of all involvement..

In terms of the pricing pressures we talked about earlier it's really multi-factorial, I think the environment is this dynamic as we were perceiving it 25 years in this industry to see the competitive landscape in the market driven pricing pressures with ongoing peer consolidation et cetera, as I said regulatory just as recently as the last few days obviously CMS is put out its own proposed rule as it relates to 340 and then legislatively we've got over 30 states that have are trying to enact legislation on drug price either transparency of procurement loss.

So it really is multi-factorial it will continue to be intense given everything from state budgets to the federal deficit to the ongoing market structure in terms of consolidated payers and some of the actions of competitors.

So that's what we're continuing to see going forward especially in some of the classes as Emma mentioned like retail, inhaled respiratory..

Deb?.

In the different marketplace a therapy area where what medicine each patient received is extremely individualized? In terms of how the market is split trust so you've got 6% patients in government funded schemes and then 40% sticking with the commercial insurers.

So contracting pressure is completely different and the commercial insurance and the government funded space at the moment we're obviously watching what's happening in the emerging American healthcare environment, potentially it could be pressure on Medicaid.

But I'm sure many of you know if there is a pressure on Medicaid expansion of Medicaid in some States is robust. People don't fall out of care, they get into the right safety net program.

So what you see is a commercial space which is that currently not contracted, and then you will say government space where there is some uncertainty due to the healthcare environment within the U.S.

and maybe some pressure in Medicaid, but due to the safety net system that we have patients will still say to medicine, and I think it's very important that we understand the difference in this particular disease area not only about the individualized choices that positions need to make for patient, but also had a very active patient groups that we say who are very active in not being across well particularly in the U.S.

and not something that payers have been reluctant to U.S. In terms of a paradigm shift in HIV from a treatment perspective, John what I'll let you handle that one..

Yeah, I would just comment on you might say yes that the market HIV patients well served. But there's actually two dynamics that one really worries down so as an infectious disease physician I'm always worried we're up against a very tough replicates very rapidly, very sloppily and develops resistance.

So we're always worried that there's emergence of resistance and we don't want to be behind the part so to speak with have. So we're always worrying about that so the need for developing new drugs to treat that development of resistance that comes forward.

The second thing though is that we've turned this disease going from debt no one was being able to be treated and survive to one where people live many, many decades, 60 years as often talked about now if someone gets infected say and there are late teens or early 20's.

So it's a different population if they live longer you're now having to deal with all the co-morbidities of aging, diabetes, hypertension and other diseases that actually require other medicines, and so we also have a real need to develop medicines that have no interactions or don't have facts going forward with that.

So I think it's really - it's a dynamic disease and I really and I'm always worry that people go large into yeah everything we've done here let's go look at something else because this is something that will move forward, and I think that's really what drives us as we try to produce better and better medicine..

Patrick do you have anything in terms of paradigm shift?.

Well, I mean first of all it precisely why discovery is broader than development, because new areas come from discovery for 15 years' time, so that we retain that order discovery. In terms of respiratory I think it's true that there are many areas of COPD where it needs are met there are many areas that are still on.

So subcategories like severe asthma not driven by eosinophil remains an unmet need such as the need for oral treatments to simplify treatment regimens in that met.

So I think there all categories of both asthma and COPD whether still quite significant need and particularly in smaller patient groups, where I think there's an opportunity for areas where there won't be the same pricing pressure. And in respiratory, we're looking very carefully outside those two areas as well.

So we recognize that there is an increasing number of medicines coming through in asthma and COPD and pulmonary fibrosis is an area that we've very interested in same growing in the respiratory field as well as keep lung injury.

Just to add on HIV, I mean long acting is clearly making a difference, there's clearly the possibility of things like broadly neutralizing antibodies coming along and ultimately people are working on something which may be very, very difficult to change which is obviously whether you can get a very long term remission cures so there are still areas to go after and as Emma said we're including in HIV also the broadening into other infectious disease areas and hepatitis B is one of them like that..

And Simon?.

Okay. On the margin it's slightly depends on how the mix of the business plays our between now and 2020, but if you assume similar mix to what we have today and you take the quarter end rates at the end of Q2 you'll back to 2.5% on top of the margin guidance that I gave somewhere between 2 and 3..

Okay. More questions..

I'm Richard Parkes from Deutsche Bank.

First I just have to push a little bit more on the capital allocation dividend policy and if you look at the framework that you gave a fair to consumer option came that was prioritized ahead of dividends obviously that all set a known potential cost you said that you can fund that through your current balance sheet, but what it be your intention to fund that for your current balance sheet and maintain the dividends? That's the first question.

And the second question just on R&D productivity maybe for Patrick, there's been a lot of kind of discussion about streamlining your focus and improving decision making, but maybe the bigger challenges in improving the scientific leadership and fall leadership within R&D in pharma would then cut back, so is that just improving that just a function of increasing the investment beyond your core areas of focus or is that something that you can also improve through business development and then licensing acquisitions..

So Patrick and Simon?.

So on the consumer put, it's clearly on the chart of the capital priority when it's going to arrive, but we've anticipated it might arrive from the spring of next year and so we've anticipated it also in terms of thinking about funding structure going forward and the outlook for the dividend that we've described.

So I think while it's a little early to say precisely how we're going to fund it we wouldn't expected to have any impact on the dividend profile that we've just already described you. Now, we have over time an expectation of building balancing capacity to fund the different things that we talked about today.

So when it happened when it arrives is obviously a key part of exactly how we choose to implement it..

I think that's true, that scientific leadership is a key part of R&D, I think we've got some outstanding scientists and some of them area you can speak to them afterwards, where we've got real world leadership positions, you've got some other areas where we need to bring in new scientists and what we've already indicated one such high Tony Wood is coming in, I think he's an outstanding medicinal chemist and leader in his field in the area of product development in terms of CMC and so on.

And we know that we've got very broad connectivity across certain areas in academia that we're going to build on in terms of accessing new science accessing new science whether it's through BD which we've already alluded to we're going to revamp our BD organization in terms of connectivity whether it's through the sort of deals we've got with venture capital firms where we're limited partners and saying access to new things started the academic links we've got and models we've got which are leading to I think significant inflow of new ideas, all the leaders in our own DPUs, I think continually refreshing all science is an absolutely key thing.

And I think we've got strong leadership positions in some places I've said, and some areas where we do need to look and make sure that we've got cutting edge science and that's always going to be the case and we will refresh and continue to refresh the leadership..

Thank you. And so we've got Tim I think back on the phone unmated, Tim would you like to ask your questions please..

Yeah. Thank you. You talked about ongoing price pressure at various points some companies give us price volume foreign exchange information may report results like Luis did yesterday.

Can you say or quantify what pricing was for Glaxo across your whole book of business in Q2 and in first half? Second question is on late stage pipeline opportunities with Closed Triple and Zoster vaccine it would be great at Glaxo look at kind of put a stake in the ground give us a rough indication of how big you think those product opportunities could be it seems especially tricky with the Closed Triple given the pricing pressures and generic entrants coming in respiratory.

And then last question, on Slide 20 in your deck has one mention about new emerging market operations I'm not sure what that means, when I think about for level of the disclosure like Glaxo on emerging markets it's gone down I think some at the start of 2016, and I'm wondering kind of what's going on in that part of the business, what's going to change going forward you can start to disclose more granularity so we can track performance? Thank you..

Okay. So I'm going to ask Eric in a minute to comment on the Closed Triple sort of competitiveness and probably also and Luke on Shingrix, but just to say that we don't forecast the value sales for our assets.

We have said that Shigrix will be a contributor around the third of our growth and we do believe that could be a big effect thing right by that we'll hear from both of them on those assets.

Simon could maybe give you the net price and volume numbers?.

Across the phone the modest one in terms of net price, we have indicated that in the most recent quarters, Tim so we expect us to keep giving you some guidance on that, but obviously it's an aggregate level..

And as I coming back on the emerging market point, and as I said and in my opening words just continues to be an important business for us, but it is and it has contributed to growth although in certain countries as you well know, we've had some difficult times in recent years.

But we expect it to continue to contribute to growth for the company it's around the quarter of the business.

But we needed to do so more profitably without removing in any sense the access to medicines that you we know it's part of our responsibility and purpose we just need to have a much more fit for purpose, but particularly from a cost structure point of view operation that because 90% of the business is still in branded generics.

That we haven't been as good as we should have been at launching some of our innovations, so I want to be rolling out innovation.

But have cost structures and topology and all the types markets with appropriate structures around them, so we are going to be making some meaningful shift there as well as running on that basically an integrated P&L with supply chain.

This is an area where frankly our supply chain both in terms of service levels and probably flow a number a factor has not been worse where it should be, so we're going to be doing a lot of work on that and as Luke appoints his leadership, we should see ongoing contributions that more profitable growth from that part of the world.

And say maybe I can ask Eric to comment on flows..

Thank you for the question. We're very excited about the close triple opportunity. If we look at a lot of the emerging evidence within COPD it addresses one of the major challenges that we have which is these patients continue to progress and remain symptomatic continue to have a high rate of exacerbations.

We believe that the future just as many experts reiterate the future treatment of COPD is dual therapy the LAMA/LABA class as well as the triple therapy.

And we have seen an incredible profile begin to emerge with our close triple from our FULFIL study and we eagerly await a landmark study the impact study later this year to be able to further reinforce that profile.

If we just look at how patients are treated today about a third of patients are on triple therapy now, and so we believe that that is a strong base of business to be able to shift to close triple however when we look more broadly at patients that are on ICS/LABA, which we now has been demonstrated inferior to close triple as well as LAMA/LABA that's a base of business in a big segment of the market that is still symptomatic and can benefit from either LAMA/LABAs or the close triples.

So with the efficacy profile as well as the challenge of complexity that these patients face, many patients that are on open triple today are on two different devices oftentimes one once a day one twice a day, it's a real challenge and we believe that this meet a very significant need that both physicians and patients have expressed for us.

I don't know Jack if you want to talk a bit about the pressures on pricing that you would expect and how we can address..

Actually I'd like to just build on the close triple in our excitement in the U.S. affiliate for it, this is the last piece if you will in terms of our inhaled portfolio.

We will be the only company to be able to run the breadth and gambit in terms these products all on the same Ellipta platform certainly when we look back at Breo launch versus this launch, first of all will be first to market with this one versus the fourth ICS to market.

Second we will experience on much stronger installed base of a Ellipta users one in four patients in this country is now started who needs an ICS/LABA is started on Breo.

As I said Breo is not the number one pulmonologist prescribed ICS/LABA one in three patients who need in a dual is started on a GSK Ellipta products, so you've got this very much more installed base of Ellipta users which makes the jump up to close triple in the same device on the same device platform much easier and much more attractive.

So certainly from a logistics standpoint we won't get into the details, but we will be fully resourced to make sure we are highly competitive from a share of voice standpoint and the last thing is because of the FDA changing guidance we have engaged payers much earlier than we did with our earlier Ellipta products, because of the new guidance, and so that's enabled us to really get a good beat from a payer perspective, and there's a lot of excitement there just like the physicians number one term we hear from physicians and market research is finally, finally they have a close triple option..

Thank you.

And Luke if you want to comment?.

As you said we not share any specific forecast, but let's give you a bit of a perspective of the potential here. We've said that we'll deliver a one third of our growth from 2015 to 2020 and we well on track on delivering this mid to high single digit growth with the Vaccines business overall.

If you know that today with the current used products vaccine in the U.S. only they make $780 million a year and only 30% of the potential population is covered with that. And as I said 80% of that is U.S. only whereas we will do a first in the U.S.

launch, but then a global launch of Shingrix, and it's really response to Emma laid out as the criteria for the real innovation, it's a highly efficacious, sustained efficacy of 90% across all ages, and highly differentiated for us what it is today.

So it really has the potential to set a new standard and if you have seen old press release around to June ASIP where we shared our revaccination data and telling you that we're on track actually on every single milestone has to work towards launch that should give you the confidence that gives us the confidence that this is indeed a potential of a big vaccine..

Thank you.

Please?.

Thank you. It's Michael Leuchten from UBS.

Just going back to your cost consciousness slide, you've mentioned at the moment only consumer has its own P&L, does that means these does not and then for the businesses that don't have their own P&L at the moment, what systems are required to make that happen and how long will it take?.

Good question indeed.

Simon, do you want to answer that?.

You're absolutely right, that we does have our own P&L not least as to other shareholders sitting in there.

So it was more question about thinking that think about the integrated Pharma and Vaccines businesses which we have not pulled together in that way before, we don't need any systems upgrades to do that we are using the model that we developed for consumer now to have that capability in place and will have implement at the end of year.

So you know we're ready to go..

Please..

[inaudible] so enthusiastic about the asset that you would wanted early as possible and the reason for the question is really about the CEO of Novartis have stated publicly that the company is no hurry to put as long as the business is going well.

So presumably for a small fee you could actually move back the first time that they can put by quite a bit and thereby a lot of flexibility for that period when you might not have idea dividend cover and that would then enable you to actually commit to a progressive dividend, which is very much the norm in the industry and actually the reason why a lot of investors invest in this industry as oppose to just having to live with that risk of a potential dividend cut.

And second question just quickly on cost cutting, I mean it does sound like you're finally getting to the stage where you might be taking some risks with regards to the business, so for example cuts to regulatory or on cuts to you on sort of changes to the manufacturing of commercial drugs to reduce the cogs.

So is that the correct perception that you feel that you need to take some risks to prop up the margin or is that a misperception and how do you generally mitigate that risk.

And if I could just a very quick follow up on R&D where really, really appreciate your candor, I just want to make sure they understand correctly you don't think there's any issues with the science itself, so all of the problems were upstream and you think that the R&D engines actually broad enough to deliver a continuing flow into the pipeline.

I'm just asking because listening to some of your competitors speak it does sound like they have a lot more technologies, the lot more internal databases whereas listening to GSK it always sounds very focused around specific areas of expertise like epigenetics, but maybe that's just a communication issue, so any clarity there would be great? Thank you..

Okay, sorry perhaps, someone respond on the third question..

It's a great question on Novartis, but you might imagine if we want something then they're going to react, okay so we have to make it clear that it's an important capital allocation priority for us that we would like to own the whole business.

So you set up then a public dynamic, which probably not very helpful to trying to resolve it sensibly for both sides to continue to debate in the open. At the right point they will be ready to sell and we will be ready to buy, and we need to buy at the most effective price for all shareholders and vice versa.

So I'm not sure we can really go backwards and forwards very much more on this and make it clear that we're very happy with how it sits today that very good partners, we don't need to do something tomorrow, but if they want to exit we're very happy to buy it..

So I would like to correct with undertaking risk with regulatory or quality and manufacturing that is absolutely not our intent.

In fact, when you look back over the last few years of history where we've had some thoughts on other than and history have suffered as a major supply issues which frankly are extremely expensive much more than any benefit you get by kind of cutting short sight delay and often being because it was under invested in these fundamentals, so please do not walk away with just the thought of us taking risk on quality or safety or regulated.

But we are trying to do is get more competitive around our cost around working capital and around the productivity of our factories and around an end to end view of our supply chain and that's not for me about risk taking that's about understanding what good looks like and holding that bar in the right place for us and we have very mobilized supply chain organization looking in a lot of detail in that.

That said I have alluded few times that I'd like us to be a bit more of a courageous company and some of the placing some of the bad fully and most of this area in that it's going to be in R&D.

So coming back to your question R&D I'll ask Patrick to overlay, we have been and we are really focused on other development prices, because the reality is the area that until 2020 I would like you to be able to have a renewed confidence and valuation of our pipeline for the next ways so as a reminder that doesn't need to come through until the mid 20s great if it does and we would like to advance things as much as much as possible not be part of the work.

So we're all very focused on development, Patrick has mentioned the renewal and ongoing crash for renewal of scientific expertise whether it's internally or not connectivity externally.

We've also alluded to a few areas just in terms of platform technologies in a more fundamental level that we think we are competitive, and you might like to comment on those whether that going after targeting much more efficiently in terms of genetic evidence or whether that's in our additional chemistry or in fact in some of our more advanced manufacturing technologies.

So you want to comment a bit on the expertise some of discovery point as well..

Yeah, I do and I think - I think you're right, we haven't spoken about as much as we should have done. And I want to pick up on a few things there, so for pick up on chemistry with the first company to get encoded live technology working for screening, which I think has made a big difference to screening.

We have very advanced in terms of the pro type technology which allows you to pull out pro teams in sell chemically which is a hot area in medicinal chemistry.

We have I think the world leading mix organization in our cell zone part of the organization in Heidelberg, which I think is well recognized as being able to do things in terms of looking at pretty interactions with molecules that isn't available elsewhere, and they had as many other part of GSK have multiple publications in nature covering that.

In terms of genetics and genomics we've got undoubtedly the biggest collaboration, which we stimulated with the European born dramatic sanga [ph] center around genetics which is led together with what we're doing with UK buyer bank to deal where we general joined us to do the screening thing. And I think the general now seen as leaders in that.

So I think in terms of the science infrastructure, we've got actually very leading platforms across chemistry in particular, less good in some of the antibody technologies, but we're definitely competitive, we just I wouldn't claim we're absolutely out front on those cell and gene therapy I think we're at the cutting edge of what's being done there with the first product approved in some quite interesting approaches to make them.

And I would bring that through also to some of the approaches in big data from things like the start but more importantly two years ago we appointed a lead for data across R&D from another industrial sector completely who has moved us from being able to access 20% roughly a lot internal data to now over 95% of our internal structured data in a way that scientists can access it through one place.

I think if you ask around I don't think anyone of managed to achieve that yet that's a huge data resource in terms of scientific input. So we are very focused we clearly haven't spoken about that in terms of the discovery platforms we have with I think some really cutting edge science..

Please?.

Thanks. James Gordon from JPMorgan. Three short questions please.

First of all with commercial just about China cannot return to being a big growth driver, and if so what's the plan there? The second question with our tablets we've got the first table approval coming up quite soon, but what does that do to the profitability within pharma and I see is it fair to assume they're going be significantly lower priced and then you're going to have a significant pay away to change as well, and the more the growth is going to come from x-U.S.

from Europe.

So how we're going to see significant margin pressure there and other ways you can offset that? And then just the third question is about the divestment today you talked about roughly every in terms of revenues that would be very high probability, so does that created a free cash flow gap and is this that the - this is the streamlining done or could it be an ongoing part of GSK for the next few years or more streamlining?.

Okay, thanks very much James for the brief questions. Simon could you pick up the divestment please and then I'll come over to Deb on the doublet..

Generally below average profitability, and also in the disposal we're making we are divesting more capital intensive businesses than the average. So we're saving also on CapEx going forward so there should be net-net material contributions to cash generation..

You want to pick on that?.

I think the asset that we've got coming through the pipeline, so there is an impacts on the margin overall.

But actually what we will be doing is driving a great volume of doing business that we're really focused on our top line sales member and really driving that from a share perspective we can and what I would say is versus where we are today in terms of dolutegravir share when you add in dolutegravir plus rilpivirine and then you add in dolutegravir plus 3TC we aim to have a higher overall share the dolutegravir after those three - those two assets launch on top of Tivicay and Triumeq where we will still have significant business.

So is a real share volume sales play which ultimately will drop positively to the bottom line with the margin that take a little bit of a hit..

And just in terms with your question on China obviously we took a big hit in China absolutely we delighted the board continue to support investments in the market for obvious reasons it's important that we participate not just commercially but from a manufacturing point of view and also some of that R&D point of view in China with China, for China I think we have to be patient in terms of saying materiality of the contribution, but we're still very much supporting our progress there.

Back to them for any more questions, anyone back online. Okay so online we have a couple and so first one for Simon repeat question from Asset Management. And what is your view on large M&A and the rating commitment more focused on both fronts I think..

So I think as we made clear in the presentation the focus is very much on bolt on partnership type deals, and we think we can accommodate the larky flow within the current balance sheet capacity.

You have big scale, you would never rule out, but you know we've talked before about the disruptive nature of those and so the bar is very high for those and that's something that's on the immediate agenda..

Okay and then Steve Scala from Cowen, can we get question from you please..

Sure, yeah thank you very much.

In this first quarterly release in July of 2008 Andrew laid out a strategy of growing a diversified global business delivering more products of value and simplifying GSKs operating model you also focused on improving shareholder value and focusing on new strategic priorities to adjust the changing healthcare environment.

Today you mentioned the DPU strategy is not changing, how is the big picture strategy you are providing today different than that it nearly a decade ago or are you saying that the strategy is the same, but execution needs to improve? And then the second question is what initiatives would GSK put in place to blunt in Advair generic such as multi-year contracting and or authorized generic? Thank you..

Okay. So I'll come back your very important first question and I'll ask Jack to pick up on the Advair generic question please who is leading the U.S. business..

I appreciate the question.

Simon have referenced in multiple meetings right there's still uncertainty around when the generic Advair will come with certainly especially with the Mylan complete response orders both the acceptance of the Sandoz ANDA so at some point it will arrive we do have a whole array of different tactics that we will employ leading up to in through the presence of any generic Advair when and if it does come, so feel like we've got the whole tool kit at our disposal..

Okay. And so on your first question, I think you're right there's a key part of that that is execution based and particularly near term we need to be very competitive in our execution focus with the three launches that we've talked about and an ongoing shifting environment.

But I think I would probably highlight the two most important shift, the first one is putting innovation first and innovation within pharma first.

And never right coming up with the leaders structures, but when we talk about more products of value there was quite a strong push around the volume agenda across the full diversified business and we want to make sure that we're really focusing on what building growth to volume and value that is driven through innovation.

We want to put R&D and science absolutely front and center of GSK for its next period and that is going to be visible in our capital allocation and focus on going that business to competitive performance, and that's the second big shift I think which is bringing more edge to the culture and the performance focus of the company through more focus choices particularly in the portfolio through the people that we put in place and the changes that we want to make with the cultures.

So the portfolio of therapy areas set and market, and ashamedly putting the U.S. front and center was putting in a fit for purpose operating model for the emerging markets to drive the access that we have the responsibility to deliver. Any more questions in the room? Thank you..

Thanks. Follow up from Graham Parry from Bank of America.

And just a couple of product questions and probably stand and that fits in the new strategy does it fit in any of your core areas if you do get a positive outcomes data readouts on that, is that something you'd be looking to partner out on that data would you look to rebuild a new franchise around that product? And secondly in Bexsero you previously is firm alluded to that as the potential multi-billion dollar vaccine it was on your list of key products? And then thirdly just going back to IAS data and the Tivicay, Triumeq competitive from Gilead bictegravir and the physician fee that was very much focused on softer issues that may be harder to detail against in the commercial markets so patient reported CNS symptoms the tolerability of backbone CV concerns which have been I guess disproved overtime.

So can you just run us through your commercial strategy for pushing back against that perception issue that's out there in the market? Thanks..

So I'm sure if any degree to which we want to run through our commercial strategy for competitive reasons that's but I'll ask Pat to come around in that moment, and but let me start - sorry on those areas it wasn't list on the product because that was just a development product, not the assets that were lifted on that chart not the assets that are currently in market absolutely key for us, and actually our meningitis portfolio we expect to contribute we set further on Shingrix we expect to come from a meningitis portfolio which is a performing extremely well and may by Luke like to add a comment on that.

But let's start with Patrick on that just a great question, buy explain why we've decided that that was potentially still an asset that could bring real value to GSK?.

I think we've got a very, very good molecule there, but if you look at dose it's about five milligrams most patients going to end up almost substantially lower than compared to the molecules. We know it works.

We know we can dial up and down hemoglobin we in the Phase III trial, those Phase III trials recruiting faster than expected, so we're ahead of time on that. And we believe we've got a very clean molecule in terms of its own target and off target effects.

For example nothing on the [indiscernible] so I think we think we've got a good molecule and readout in due course in terms of how we best commercialize that that's an ongoing discussion as to how we would best achieve that whether we do it alone or partnership..

Thank you. Luke do you want to comment on bictegravir and then we'll finish with that..

How it contribute to this one third of growth to the future, so it is the meningitis portfolio, so it's ACWY and meningitis B Bexsero so it's growing 30% year-to-date versus last year, and if you know that before the acquisition of Novartis we were actually only selling less than 900,000 doses year-to-date with supply already bought at 15 million doses, so every dose we make.

And as Simon laid out we are investing in capacity here to make sure we can support that demand in the R&D space we are also working on the lifecycle management of providing a combination product ABCWI the full alphabet of meningitis so which is depend of avail in vaccines, so it is really a key priority for vaccines to the one third..

Thank you and then that will maybe John actually on the HIV questions..

Let me just give a couple of principles and then we can work the arguments through that.

So when we talk about CNS adverse events it's really mixture symptoms whether it's insomnia, sleep disorder, depression, headaches and there's a whole list of things that often go to that list and you'll find that different companies different groups define that differently.

In terms of the integrate inhibitors which we're talking about dolutegravir and bictegravir it is a class effect and you do see with all of them at around the same percentage, so what we saw at IAS were the first two of four Phase III studies for bictegravir and so the data base that we see is a fairly small for bictegravir, now the two studies they presented were in treatment naïve patients, I think the interesting one is a more of a direct comparison of dolutegravir and bictegravir both with the same backbone which was TEF and FTC.

And so when you look at the CNS adverse events and then look at the long list of them actually the two drugs were fairly similar, but it's interesting in terms of patient discontinuing therapy there was one patient in the bictegravir group who left therapy because of sleep and none in the dolutegravir group.

The one that's a little more difficult to really get a handle on was the comparison of bictegravir tap and FTC against crime and so in this study they presented a patient reported outcome instrument.

Now the investigator who is presenting the study didn't go into great detail, I do believe then listed a whole host of symptoms where they looked at on particular days and it almost looks like you could be cherry picking a little bit of what was going on with the patient, I think we really have to get a better handle on that and take a look at the data there to see if there's any real differences.

But I think at the end of the day my opinion is I don't think you will once we see additional data coming with bictegravir we do have this huge database that we have with dolutegravir were it's really well established and again we need a see a much more detailed approach there. So I'll turn it over to Debra..

Why don't you comment on the bictegravir data generally?.

Yeah, I think that obviously statistically it was not inferior to dolutegravir, but you look at these two studies and in the first one I commented on which was the more direct comparison in terms of treatment effect, dolutegravir was numerically better than what you saw with bictegravir for both the studies.

And so I think it really showed really what we know very well with the dolutegravir with it being a very substantial drug for patients..

We have three minute non-competitiveness could have come up a couple of times this afternoon.

So with dolutegravir we have delivered a very strong data packages in a therapy area where data is really the key driver along with guidelines as to have physicians choose to treat their patients so dolutegravir whereas got a significant Phase IIIb program which we've almost completed, five studies where we demonstrate superior to say best is competitive within the integrate class but also versus the other kind of sedation that are used so really strong data that ultimately driven to the HIV physician behavior.

However if we talk about on top of that competitiveness he's now saying that the cash versus bictegravir versus dolutegravir and actually they look fairly comparable, but we're moving the market on again with the two drug regimen pipeline that we have starting with rilpivirine dolutegravir moving into dolutegravir 3TC and then moving into long acting injectables with cabotegravir and rilpivirine.

So we feel that we are moving forward with our pipeline that we will move the market full well stock competitive selling the three drug regimen paradigm, now let's see how that plays out and then obviously you know in the future we've got other strong molecules in our discovery portfolio, which again we believe will continue to move things further on and we do believe it and actually is going to be phenomenally important and on that basis, I think that play a very strong performance commercially you know it's going to lead us to be winning from a market share perspective..

That's really these innovative options that we're developing more rather than more of just little incremental changes..

Thank you very much. So I'm going to take one more question from online last question coming to Simon, but of course we are all available pick up on any other further questions that you may have. So the last question is from forecast, can you please provide some color behind the revised outlook for upward pressure on the group tax rate overtime.

Most changed..

So I think it is highlighted in the presentation as the mix of the business changes and particularly given the prioritization to the U.S. that Emma commented on, we are putting more of the revenues and profits streams into a higher tax jurisdiction and that obviously puts to one side whether that might be tax reform in the U.S.

or not, but on the current tax rates that is creating this upward pressure.

Plus in a post specs world we are seeing much more activity from tax authorities and challenges and disputes which ultimately we will seek to resolve in an appropriate way on a balanced way, but they were quite often require provisions and anticipation of quite long periods of disputes, so I think that will also be part of the track going forward is mainly about the shift the U.S..

So thank you to you all for coming here today or listening and watching. Thank you for your questions. We can obviously continue some more discussions now. But I just wanted to say a couple of very brief words on how you should expect us to be updating you on our performance going forward.

You're obviously going to have but also consistently members of the leadership team at our quarterly earnings calls and we will be holding more regular meet the management sessions, so that you have the opportunity to me and get to know the board of team from different parts of the business.

And lastly, obviously critically we'll be updating you as of our pipeline progress particularly around the assets that we've highlighted today, sharing any important data as it comes through and making specifically our R&D leaders available to you to for questions. So thank you very much and please do join us for some more refreshment..