Emma Walmsley - Chief Executive Officer Luke Miels - President, Global Pharmaceuticals Simon Dingemans - Chief Financial Officer David Redfern - Chief Strategy Officer Brian McNamara - CEO, Consumer Healthcare Hal Barron - Chief Scientific Officer.

James Gordon - JPMorgan Graham Parry - Bank of America/Merrill Lynch Michael Leuchten - UBS Emmanuel Papadakis - Barclays Steve Scala - Cowen Keyur Parekh - Goldman Andrew Baum - Citi Kerry Holford - Exane BNP Laura Sutcliffe - Berenberg Jo Walton - Credit Suisse.

Good morning, and good afternoon, everyone. Thank you for joining us today for our Q2 2018 Results which were issued earlier today. You should have received our press release on both results and the 23 announcement and can download our presentations from GSK's website. The presentations today are also being webcast.

Before we begin, please refer to Slide 2 of our presentation for our cautionary statements. And with that, I'll now hand you over to our Chief Executive Officer, Emma Walmsley..

So, thanks very much, Seth and let me reiterate a very warm welcome to everybody. We're going to be splitting this afternoon into two sections. Firstly, Simon and I are going to be covering our Q2 results, and then after a break we'll hear from on new Chief Scientific Officer, Dr. Hal Barron for the first of his updates on R&D and our pipeline.

For both sessions we have a full Q&A team in the room and I know they’re also very much looking forward to talking with you all at our reception at the end of the meeting. So this time last year, I laid out my three long-term priorities for GSK, innovation, performance and trust, all to be powered by a necessary change in culture.

When I first laid this out, of course it was simply a framework but I do hope you now have a better understanding of the changes we're starting to make.

Innovation was our first priority and is the very heart of GSK's purpose which is to use our science, to develop better medicines, vaccines and Consumer Healthcare products for patients so they can do more, feel better, and live longer.

Now Hal is going to talk to you later about how we’re taking our approach to innovation forward but on this first priority, we've already made some great progress over the past 12 months. First, we've seen three major approvals in Shingrix, Trelegy and Juluca and the launches are going well.

We’ve also taken some significant steps in advancing our early stage pipeline and have started our first pivotal study for BCMA in multiple myeloma. On performance, I’ve said very clearly that GSK has to deliver better results.

We've taken a series of actions to do this such as reallocating resources to keep products in geographic areas, but it can best deliver profitable growth. The U.S. and new product launches being at the very top of this priority list.

Now it's obviously people that drive performance and building the right teams has been key to the changes that we’re making. Half of our top 125 leaders are new enrolled with 75% of these being internal appointments.

And we are all very focused on building a culture that’s underpinned by purpose and values but with great performance edge, which means more focus, agility, accountability and we’re appropriate the courage to take smart risks.

Now culture change of course takes time and energy, and as well as having aligned leadership we're also supporting the change we need with new metrics and incentives.

Trust is built first and foremost by the quality, differentiated innovation we bring and the impact we have on millions of people's health and well-being, be it through our latest innovative launches or the access we provide globally to needed vaccines, medicines and Consumer Healthcare product.

Now I want us to build trust in a long-term by being a responsible company and a modern employer. And our new six monthly check-ins and our global workforce engagement is showing good progress. We’ve also developed a new approach to global health. This is going to be one that’s more science led and more sustainably funded.

And our priority focus for global health is accelerating access to those in extreme need to prevent and treat infectious diseases which effect children and adolescence in a developing world that's particularly HIV, TB and malaria.

And we were really thrilled last week with the FDA approval of Krintafel the brand name for tafenoquine the very first new medicine for the radical cure of P. vivax malaria in more than 60 years.

So overall I’m pleased with our progress over the last year on these three long-term priorities, but of course today our first general item is the immediate topic of our performance over the last three months the Q2 results. So let me turn to them. We delivered group sales growth of 4% in constant exchange rate terms in the second quarter.

Our pharma business grew at 1% CER during the quarter driven primarily by the performance of our HIV business. Our new respiratory portfolio grew at 37% including a £26 million contribution from Trelegy.

In HIV, we also continued to deliver double-digit growth driven by sales of dolutegravir portfolio including Juluca, the first of our new two drug regimens. Vaccines sales were up 16% with the continued strong demand for Shingrix and a good performance in our U.S. business.

Sales of our meningitis vaccines declines primarily due to prior vaccination catch ups in Europe but we do continue to see meningitis growth demand over the longer term. In Consumer Healthcare we delivered 3% growth with good performances in oral health and skin health partly offset by slower growth in wellness and nutrition.

Group operating margin this quarter were up 80 basis points with lower spend in R&D reflecting the priority review voucher last year, as well as the benefits of prioritization of R&D expenditure.

Earnings were up 10% CER reflecting a 7% increase in operating profits, as well as a reduced noncontrolling interest allocation of Consumer Healthcare as a result of the Novartis buyout and the reduced adjusted tax rate. The improvement in operating profit was reflected in our free cash flow of £492.

So we have today upgraded our guidance to 7% to 10% growth and adjusted earnings at constant exchange rate if no generic Advair is approved this year.

The upgrade reflects the positive momentum we’re seeing from our new launches the vaccine Shingrix and the buyout of the Novartis stake in our consumer health business offset by the pricing pressure we continue to see our inhaled respiratory portfolio.

Now in the event of a generic Advair being available from October the 1st, we would expect the adjusted earnings growth to be between 4% and 7%. So turning to our respiratory business in a bit more detail, we continue to see good update for once daily closed triple therapy for COPD Trelegy.

This quarter, we had the landmark data from the IMPACT study presented at the ATS conference and we received approval for broad label for the product and we’re now able to prompt it to this broader patient group beyond simply conversion from Ellipta. And we prioritized our sales and marketing resources behind the product.

Nucala is continuing to building momentum to with sales growth of over 100% and we’ve increased our frontline investment in this growing market. Uptake in Europe is particularly strong and we see further opportunity as we continue the launch rollout.

We presented the long-term safety data from the Columbus study at ATS which demonstrated consistent reductions in exacerbations and improvements in asthma control in patients over an average treatment period of three and a half years. The consistency and durability of the responses seen with Nucala are gaining good tractions with physicians.

And of course we have the potential for some further upside and additional indications. So overall the performance of our new respiratory portfolio remain strong despite the continued pricing pressure we are seeing within the ICS/LABA category and we are very focused on delivering competitive commercial execution. So moving now to HIV, our U.S.

market share for our leading products Tivicay and Triumeq is holding steady despite the increased level of competition in the market. The first of our new two drug regimens Juluca which now has a 3.7% share of new-to-brand prescription, generated sales of £24 million pounds in the quarter. Juluca weekly TRx in the U.S.

is now over thousand prescriptions with approximately 1,400 physicians having prescribed so far. And yesterday, we presented data to a packed venue at the IAS conference from our pivotal GEMINI studies. This is for the second of our important two drug regimens both naïve and switch patients.

And study showed that the two drug regimen dolutegravir plus lamivudine led to noninferior virologic outcome compared to a triple regimen of dolutegravir plus two NRTIs at 48 weeks. And the success rates we saw were high regardless of baseline viral low count.

And very importantly, we did not see any treatment emergent resistance in either arm of the study. So with this data we are confident in the potency and safety of the dolutegravir plus lamivudine combination. And we expect to make regulatory submissions before the end of the year.

With more patients with HIV living normal life expectancies, we believe it is very important that they have the opportunity to reduce the number of medicines they’re taking to stay well while reducing the risk of side effects and drug-drug interactions. So, moving to our new vaccine Shingrix which was launched towards the end of 2017 in the U.S.

and Canada. Last year we received a preferential recommendation from ACIP, giving a target universe of over 100 million patients in the U.S. alone. In Q2 this year that was echoed by a strong recommendation in Canada.

And as you know Shingrix represents a new standard of prevention with more than 90% efficacy in the prevention of shingles and the demand for this vaccine is high from both distributors and patients. More than 3 million doses have been administered in the U.S.

since launch to-date and we expect to vaccinate significantly more patients this year than were vaccinated in total by both us and our competitor in 2017. We saw sales of £167 million in Q2 and now we expect sales for the full year to be broadly and in the range of between £600 million and £650 million this reflecting our growing levels of supply.

So today our growth is being driven by the medicines and vaccines I've talked about and the three key launches identified as critical for 2018 to 2020 performance Shingrix, Trelegy and Juluca. This growth is supported by the optimization of our base business and a solid performance we’re still seeing in consumer health.

In the period to 2020 a number of new growth drivers will come into focus with launches in the near term for if of course successfully approved the two drug regimen dolutegravir plus lamivudine and a long acting cabotegravir plus rilpivirine.

And of course our most advanced oncology asset BCMA and potentially further indications for our respiratory products. And then in the longer term we anticipate seeing our earlier stage pipeline start have an impact on our growth outlook from 2021 as illustrated here on this chart.

And this of course will evolve as the data reads out and we supplement with business development to. But we have a portfolio of assets with a potential to launch in the subsequent five and obviously Hal is going to talk to you a lot about that in more detail later.

It is also worth noting our limited exposure to patent expires in this time frame once Advair has been genericized. Now last summer, I laid out our capital allocation priorities, which remain the same. The first is investing in the growth of our business and within that Pharma and its R&D pipeline is the most important commitment.

During Q2 we completed the buyout of the Novartis stake in our Consumer Health JV and this will allow GSK shareholders to capture the full value of a business we believe is well positioned to deliver future sales growth and continued operating margin improvements and bring certainty to future capital allocation planning.

Now, I'm just going to take a moment here to comment on what I know will be a question later on the recent press speculation regarding our consumer business. The Board's position on the group structure is unchanged.

We believe that the three business structure of the group offers significant opportunities on the current health care environment, and provides GSK with more stability in our earnings, and helps in free cash flow generation.

But as we have also consistently said, this is subject to each business continuing to perform competitively and having access to capital.

So with the consumer, we continue to see very good potential for growth and performance and hence our decision to increase our margin target for the business to approach the mid 20s by 2022 at 2017 constant exchange rates.

We are also investing in vaccines capacity and this is to support the role-out of Shingrix and our other vaccines including our meningitis portfolio. And then after investing in the business, our next priority for capital allocation is shareholder returns.

We know the dividend is important to our shareholders and we continue to expect to pay 80 pence in 2018 and focus on rebuilding cash flow over time before returning the dividend to growth. And then finally comes scale M&A. Beyond Pharma pipeline, BD activity where we will maintain a strict discipline on returns.

So, how we are going to fund our future growth. Well, with the recent new product launches the developments of the new R&D approach and the successful buy out of our consumer business we have evaluated the groups cost space and determined what is required to deliver competitive long-term growth and performance in each of the three businesses.

Simon is going to get you a lot more detail in a moment, but today we are announcing a new major restructuring program. Savings from the program will be fully reinvested into the group to help fund targeted increases in R&D and support commercialization of new products.

So this is going to supplement the other ongoing changes we have already making in our business to increase cost and cash discipline and to allocate resources better with more focus on growth and profit generation. So with that, I'm now going to hand you over to Simon, who is going to give you a little more detail. Thank you..

Thank you, Emma. Overall today second quarter results demonstrate encouraging progress towards our key strategic objectives. We continue to grow sales across the business and deliver operating margin improvements while investing the high new product launches.

Based on this momentum, we are confident in our delivery for the rest of the year and have upgraded our guidance for constant currency adjusted earnings per share growth of 2018. Our earning release provides an extensive amount of information.

So I'm going to focus on major points, our expectations for the rest of 2018, and important comparisons to take note within your modeling. I will also provide greater detail on the new major restructuring program we are launching today.

As usual, my comments will be on a constant exchange rate basis except where I specify otherwise and I will cover both total and adjusted results. Starting with the headline results, group sales are 4% to £7.3 billion, total EPS 9 pence and adjusted EPS 28.1 pence up 10%.

Total operating profit was £0.8 billion up over 100% compared to the small operating loss in Q2 2017. Adjusted operation profit grew 7% ahead of sales with profit growth in all three businesses contributing despite significant investments behind new products in respiratory, HIV, and vaccines especially Shingrix.

On currency the strengthening of sterling compared with last year particularly against the dollar resulted in a headwind of 4% on sales and 7% to adjusted EPS. If exchanged rates remain in line with the rates at the end of the second quarter, we would expect the full year headwind from currency to be approximately 6% to adjusted EPS.

Total results for the quarter show a significant improvement on Q2 2017 with reductions in a number of the more significant adjusting items. Firstly intangible impairments were materially lower this year remembering that last reflected on decision to withdrawal Tanzeum.

Secondly, major restructuring cost showed a further step down compared to last year as the existing program nears completion. And finally transaction related adjustments were lower primarily due to the buying of Novartis' interest in the Consumer Healthcare joint venture during the quarter.

Partly offsetting this was an increase in the charge for the remeasurement of the ViiV contingent consideration liabilities driven by both exchange movements and changes to sales forecast following the recently completed GEMINI study. The rest of my comments will be on our adjusted results.

Turning to the topline this quarter's growth of 4% was driven by continued momentum in all three businesses and by particularly strong contributions from HIV and vaccines. Sales within the pharma business were up 1% driven primarily by the HIV portfolio which grew 11% in the quarter. Respiratory sales declined 2%.

We’re growing momentum in Europe and international as the region switched to the new product is offset by continued competitive pricing pressures in the U.S. Trelegy and Nucala performed strongly with Trelegy benefiting from share gains after an expanded U.S. label. Nucala continued its global rollout and also benefited in the U.S.

from market expansion, as well as some restocking after destock in Q1. Seretide/Advair continue to decline and as we transition our respiratory portfolio globally but also impacted by the step-up in U.S. pricing pressures are highlighted in Q1.

The pricing comparative Advair should be slightly easier in the balance of the year as the increased pricing pressure really started in the second half of last year before then again picking up in Q1. I still expect an overall decline in Advair for the year of around 30% assuming no generic entry in 2018.

Although might be little worse depending on how the anticipation of an imminent generic impacts year end stock in positions. I’ll come back to our expectations for generic Advair and its impact on our guidance shortly. Breo grew 4% in the quarter with strong growth outside the U.S. being offset by a decline in the U.S.

This reflects another quarter of the RAR catch-up that we flagged at Q1. Our overall volume growth in the U.S. was strong at around 30% with a catch-up now largely done we expect to be back to good net sales growth in the second half.

Established Pharmaceuticals declined by 5%, however the quarter benefited from favorable RAR adjustments for mid tail and some post divestment inventory sales.

I anticipate that the decline will be steeper in the second half and overall continue to expect the performance for Established Pharmaceuticals to be a decline in sales of mid-to-high single digits over the full-year including the impact of divestments.

Despite the pricing pressures we're experiencing in our pharmaceuticals business, the momentum we have from our new products and the recent investments we've made, we remain confident that we will deliver overall sales growth in the low-single digits assuming we do not see a meaningful Advair generic before the start of Q4.

Turning to vaccines, sales up 16% primarily driven by further acceleration of Shingrix, as well as growth in hepatitis which benefited from a competitive being out of stock.

Emma highlighted earlier the successful Shingrix launch and we continue to work on increasing supply but I can confirm that we have plans now in place to deliver sufficient doses to fulfill Shingrix sales in the range of £600 million to £650 million for 2018 as a whole.

Previous vaccination patents for Shingrix vaccines suggest we will see stronger seasonal demand in Q3 and Q4 and I expect to see this reflected in the phasing of sales in the second half. The meningitis franchise remains an important growth driver for the business even though this quarter saw a decline of 3%.

Bexsero was particularly impacted by the completion of catch-up vaccination programs in Europe, while Menveo was impacted by minus supply constraints that have now been resolved. I expect a positive second half and we’re well-prepared as we head into the back-to-school season.

As I said previously, vaccines sales will continue to be lumpy due to tenders and the impact of CDC stockpile movements and this is demonstrated in the quarterly results for a number of vaccines including Synflorix and [inaudible], as well as our overall international sales. As a reminder, Q3 last year was very strong driven by flu sales.

It is difficult to predict precise ordering patents between Q3 and Q4 but current booking suggest it might be a bit more weighted to Q4 than last year. The momentum in the business continues to give us confidence in the mid to high single digit outlook for sales CAGR over the medium term.

But 2018 is likely to show higher growth than this as a result of the Shingrix performance. Turning to consumer sales, up 3% despite the 1 percentage drag from the combined impact, the divestment of non-strategic brands, GST in India, and generic competition for TDS in the U.S.

Quarter 3 is expected to be the last quarter impacted by GST, and although the decline in TDS may spread into next year, it will no longer be a material factor in 2019.

A strong performance from oral health was partly offset by a weaker quarter for wellness due to an abbreviated allergy season in the U.S., as well as tougher competitive pressures in the patent category particularly in Europe. Importantly, the business continued to achieve a good balance of growth between price and volume.

Power brand growth dipped in the quarter due to stocking patents in the phasing of some promotional activities, I anticipated that growth will pickup in the second half, from there I expected to contribute strongly overall for the year. We remain confident in delivering low single digit growth for consumer for 2018.

Turning to our operating profit, our adjusted margin of 28.8% was up 30 basis points, so the actual rate is 80 basis points on a constant currency basis.

COGS, as a percentage of sales increased primarily reflecting an adverse year-on-year comparison for vaccines, which benefited from £45 million settlement in Q2, 2017, for lost third-party supply volume Aside from this, we saw a broadly flat COGS performance as favorable mix in continuing supply chain efficiencies offset U.S.

Respiratory pricing pressures. SG&A was up by was 6% in the quarter as we invested significantly behind driving new products in Respiratory, HIV, and Vaccines, particularly Shingrix. This was partly offset by reductions in back-office and other noncustomer facing resources, and I would expect SG&A growth to slow over the second half.

We need to continue to support key seasonal products in Q3. R&D cost down 15%, down 6% excluding the impact of the PRV. And as I mentioned the Q1, the first half was expected to see reduced spend as the savings from last year's portfolio choices kicked in.

But we also still expect to see those savings start coming back into R&D over the second half, when we should see pharma R&D spend start to grow again, accelerating into Q4. Royalties down 23% due to payments from the sales of Cialis, which ended in 2017, and we continue to expect around £200 million for the full-year.

In the bottom half of the P&L we continued to manage our funding costs carefully. Net financing costs in the quarter included the additional cost of the Novartis buy-in, which came in from June 1st. With additional debt funding for the buy-in and some of our older debt now refinanced at lower rates.

I expect funding costs for the year as a whole to be around £725 million. On tax, the adjusted rate was 20% in the quarter, and we continue to expect a rate of 19% to 20% for the full-year. The charge for minorities in the quarter was £170 million compared to £174 million a year ago.

The ViiV minority interest increased due to the share of the PRV cost that impacted the minority last year, and this was offset by 2 months saving on the consumer healthcare at minority interest. As we recognized 100% of the profits from when the agreement to acquire full ownership became unconditional on approval of shareholders on 3rd of May.

Moving to cash generation and net debt, we remain very focused on driving greater cash discipline across the group in improving our cash conversion. Free cash flow for the Group during the first half of the year was £0.8 billion, up £0.4 billion compared with last year.

This increase driven by improved operating profit, reduced restructuring spend and tighter control of capital expenditures, as well as the comparison with the cost of the PRV in Q2, 2017.

This progress was partly offset by the Vaccines milestone payment to Novartis at the beginning of this year, foreign currency movements and a greater increase in working capital in the first half last year.

The working capital increase reflects the usual seasonal build we see in the first half but also additional inventories going in behind new products in Respiratory, HIV, and Shingrix. And the rapid take-up of Shingrix is also led to a step up in receivables which we would expect to collect during the balance of the year.

Like last year, I expect cash flows overall to be weighted to the second half. Net debt now stands at £23.9 billion after the £9.3 billion impacted the Novartis buy-in. Dividend payments at £2.1 billion, and adverse currency impacts of £0.4 billion, partly offset by the increased free cash flow and some small disposals.

Our credit ratings have recently been confirmed unchanged and we remain comfortable with our balance sheet capacity to support future investment requirements in the business. Our results demonstrate the benefits of having clear financial goals to set out in our financial architecture.

Rigorous benchmarking is used to target competitive cost structure for each of our businesses, while ensuring that we prioritize the investments that would generate the most attractive long-term returns.

Ongoing efficiency improvements are particularly focused on streamlining back-office activities where we can take advantage of our recent systems improvements to automate and drive down costs. We've also made significant changes in procurement with a new global organization driving top quartile savings.

In the commercial space, advance data and analytic tools are helping us target more precisely our product and market investments.

We've also unlocked deeper large-scale structural changes in our cost base through major restructuring, including the integrations around the Novartis vaccines business and the formation of the consumer joint venture, as well as the reshaping of our pharmaceutical commercial footprint that we initiated last year.

Through these twin efforts, we resized our cost base to allow each of our businesses to be competitive in the markets in which they operate and fund the investments needed to deliver our key future growth drivers.

But this is clearly something we need to keep under review, and with the new product launches underway, the recent buy-in of Novartis stake in the consumer joint venture and a new approach to R&D in place. We've evaluated again the Group's cost base and the requirements of each of the three businesses to deliver competitive long-term growth.

As a result, we're today announcing a new major restructuring program which aims to deliver £0.4 billion of annual savings by 2021. The new program is expected to cost total of £1.7 billion, comprising cash costs of £0.8 billion, a non-cash costs of £0.9 billion.

This new program aims to significantly improve the competitiveness and efficiency of the Group's cost base, with savings delivered primarily through supply chain optimization and reductions in administrative costs.

Savings from the program will be fully reinvested into the Group to help fund targeted increases in pharma R&D, and support commercialization of new products.

As you think about your models and future spend levels for R&D, adding most of the savings identified to the regular low single digit increases in R&D, gives you a guide as to how we are thinking, we will need to step up R&D spend. The cash cost of the program will be self-funded through improved cash conversion as well as disposals of fixed assets.

The program is not expected to have any impact on our dividend policy. Moving on to expectations for 2018, based on an encouraging first half, I'm very pleased to be able to upgrade our guidance for the year. Assuming no generic Advair, I now expect adjusted EPS growth of 7% to 10% for the year on a constant currency basis.

And in the event of 1st October, entry of generic competition, I expect adjusted EPS growth of 4% to 7%, again on a constant currency basis, with U.S. Advair sales for the year of around £900 million, again in constant exchange rates.

The major moving parts enabling this upgrade include the positive momentum demonstrated by Shingrix and the benefit to earnings of the full ownership of the consumer healthcare business. These more than offset the continuing pricing pressures we're seeing in U.S.

Respiratory, which also leads us to continue to expect a steeper decline in Advair sales before generic competition of around 30% for 2018. The eventual timing of the launch of a generic Advair will clearly impact the growth rates we can expect to see across 2018 and 2019. So, in conclusion, it's been a positive first half.

Our new product launches are going well. We're working hard to drive cost and cash discipline across the Company and seeing the benefits within the results we've reported.

We've upgraded our 2018 guidance and we are increasingly confident in our financial outlook for the Group of mid to high single digit EPS growth over the 5 year period 2020, even with the new investments we're making in R&D and new products.

Our financial architecture and the new major restructuring program we have announced, will provide us with the flexibility to make the increased investments in the new approach to R&D, which you'll be hearing about from Hal, shortly. And with that, we'd like to take your questions related to our Q2 results.

And I'm going to invite Luke, David, Brian and Luke to join Emmer and me on the stage to take your questions. Just ask any R&D related questions, please save that for Hal, later. Thank you..

We'll be taking questions in the room and over the phone from the mic roving side. We will request that those asking questions to state name and institution for asking the question and ask no more than two questions at a time so that everybody has a chance to participate.

For those in the room please wait until myself or a member of my team has passed the microphone to you before you start speaking. And after you’ve asked your question please can you pass it back again so that we can move it on to the next questioner. Thank you. With that I’ll hand you over to the team..

James Gordon from JPMorgan. It’s a pipeline question but the financial question rather than a pipeline data question. Two questions one was just R&D was down this quarter but how much the R&D grow in the next few years and asking that both in terms of the P&L and also in terms of M&A.

So for the P&L how - I mean you put some cost savings coming through. But if I benchmark versus peers and the level of investment for the Pharma business could you go up to high teens as many of your large peers are. And in terms of the R&D not going through the P&L but actually doing some business development.

How aggressively might you do that so I think previously you said just bolt-ons, but could it be quite big bolt-on what is bolt-on count as they were not lot of very eminent obvious face regarding decisions.

Could a big chunk of the rebuild be external?.

I'll just answer both of those briefly. So in terms of percentage of R&D I’m not a big fan of saying there is needs to be a percentage spend in R&D - and I know that how we’ll take this position as well.

We will spend according to the data readouts that come and we are minus six excluding the PVR in part because we stop the whole load of programs and as Simon has already said, we expect increases to accelerate towards the end of the year and for the models you should assume that the savings program we put in place is assuming that the data justify it is added to spend that we have.

I'm quite relaxed about having even a potentially quite lumpy R&D spend according to the assets that we’re putting in place. And in terms of PD, I'm not going to sort of set numeric criteria around what qualifies as a bolt-on.

I would anchor us in we’re feeling good about some of the organic momentum that we have whether it's the recent launches that we have or indeed some potential assuming that approved pending ones in that period 18 to 20 for our outlook. Whether it's the new dual therapies in HIV or indeed BCMA you’re going to hear a lot more about.

And then we have a whole new cohort that we’ll be looking at and how we’ll highlight some of later today. But we absolutely do expect to do more business development to strengthen that pipeline it's the first priority and capital allocation. In the room we’ve got Kevin Sin who has been here for all of three weeks.

So he won’t be outlining his full and complete structure for that yet, but you will hear from Hal how he thinks about PD. And by the way obviously focusing on the priorities that he is laying out in terms of assets or technologies, partnerships as well.

But it’s not just going to be in-licensing, we're also looking at out-licensing and creating more flexibility for funding in that way. We just announced tapinarof it may also be in other parts of the broader portfolio as we have a review ongoing with Horlicks.

So we're quite comfortable that with the strategy that we’re laying out today organization that we have of the balance sheet and the capacity to foresee that but a lot is going to depend on the data that reads out in the next couple of years in terms of how much we need to accelerate that or not..

Just to add to that. I mean remember also when you look at R&D spend the three businesses have very different characteristics.

So that the group numbers not very useful if you look pharma R&D to pharma spend and the overall shape of that P&L I think if you kind of run your own models through the numbers we’re just talked about I think - that’s a relevant benchmark and I think they’re pretty competitive as to what we expect and we obviously have factored in some element to PD because that’s central part of the strategy clearly there is a degree of unpredictability around that but we’ll have to deal with when we get there..

Next question please. So a fun game of entertaining pas the mic, for the day in case you guys pick these next..

So Graham Parry from Bank of America/Merrill Lynch. And so you’ve upgraded 2018 guidance and nothing consensus it looks like it's running a little bit below the range at the moment. But the next year you’re still going to be facing slowing HIV potential Advair generic coming maybe possibly even at the turn of the year.

The increasing in R&D which that you got some savings to help, but when you put all that together how comfortable are you with where consensus numbers are sitting for 2019 and in particular the current assumption of flat margins into next year.

And then secondly question for David on dolutegravir so NBRx absolutely have now dropped around 28% since Biktarvy launched in Biktarvy's equaling you roughly on NBRx. TRx look like they’re flattening off in terms of absolute and so could you perhaps just run through the dynamics that you’re seeing in the market.

How long you think it takes for new-to-brand prescriptions to actually translates into total prescriptions and if you’re seeing any switching from dolutegravir regimens always it just all the new patient share gain at the moment?.

So David that one is coming to you in a second but I mean just on to the first one. We’re saying, we’re obviously not going to - or we don’t comment on consensus.

We’re very pleased with the 2018 upgrade and as Simon said, we’re feeling increasingly confident about our 2020 outlook whether that’s because of the momentum Shingrix the consumer buyouts, U.S. tax reform and we are absolutely expecting to digest the Advair genericization. And I’ll remind everyone our 2020 outlook is within a range.

So we’re feeling increasingly optimistic about that but David you pick up for HIV..

So as Emma said first of all globally overall dolutegravir and dolutegravir based regimens grew 18% in the quarter. I think if you’re going to the U.S. as we showed TRx for BTG overall up to around about 37,000 clearly varies week-to-week but 37K a week.

And our market share the way we define it of core and SDR has grown a little bit it’s just above 28% or so. So we're pretty pleased with that, I would say when you drilldown into it, Tivicay particularly looks absolutely rock solid.

So we’re seeing almost no switching from Tivicay and indeed some prescribing of Tivicay still into new patients quite lot of Tivicay as we said before somewhere in the 40% to 45% range just with [inaudible] but that business looks very, very stable.

Triumeq is a bit more competitive, we are seeing some switching around the edges some of that is undoubtedly going to the competitors, some of it is actually going to Juluca. So there is some switching from Triumeq perhaps not as much as some might have anticipated.

As Emma showed, we’re actually quite pleased with the way Juluca has launched after over thousand scripts a week got about 1400 to 1500 physicians now in the U.S. prescribing. And I think that paves the way very nicely for GEMINI and dolutegravir and lamivudine.

There is clearly appetite for two drug regime so that's where I don’t think any of those trends are actually that different from Q1 it's really been very much a continuation and I think we’re pleased with that..

Okay next question please..

Michael Leuchten from UBS. I had two questions on the financial side the upfront costs for the restructuring program seem high relative to the savings. So what makes this program different from what maybe you’ve done previously.

And then on the free cash flow definition I think you've now moved dispose against from intangibles into free cash flow just your thinking behind that what that means?.

So I think what is different about this program is the particular focus on the supply chain and the moment you get anywhere near our fixed asset footprint you end up with reasonably sizable non-cash write-offs.

And yes you can either take a view, you never go near those or if you want to confront them and address the overall complexity we have in our supply chain and that’s an issue and that’s basically told you a number of times. We felt that was justified.

The cash costs are 400 million against cash cost of 800 million so very similar paybacks to what we've seen in the other programs we've done, but it’s really driven by that particular focus on the consumer supply chain post the Novartis buy-in where we can really get off to that business in a way that we couldn't with our partner.

And now a year on with commercial focus being much clearer, R&D in place we can look at the pharma supply chain agency to what we really need to go forward and get both of those in one program that's really why it’s a bit different.

And then on the free cash flow all we’ve done is a small tweak to the definition to bring in disposals of intangible assets not businesses intangible assets, because we have the costs and not the disposal benefits whereas on the fixed side we have both in.

And I think that the effort just a question of balancing is by 18 million in the quarter and about 40 million last year so it’s not big number..

Next question please..

Emmanuel Papadakis from Barclays. Maybe just on the inevitable Shingrix capacity question. You said you had enough to make to sell 600, 650, figure that you kind of provided us.

Does that represent the ceiling on what you can make, and if not, where is the ceiling in what you can make this year and what might be the additional flexibility between now and the end of the year on that?.

Well, thanks for that question and I'm also is picking out one that's coming through from [Danny from Axor], as well. So, I won't pick that up for the second time. But obviously we are delighted with the early start to Shingrix. Obviously, it's also in line with that preferential recommendation which was beyond initial expectations.

We did significantly mobilize supply and continue to do so, and I'm not going to comment beyond that, confirm the increased outlook of 600, 650. But we do expect to continue growing this business through next year and for it to be a very material contributor to growth for the Company.

Supply is a bit bumpy but we're working very tightly with them, CDC, and with wholesalers are particularly focused on that second injection and you know very confident considering we're also looking at the geographic rollout pacing that we can maximize this launch in the year.

I don't Luke whether there's anything you'd add to that?.

No, I mean it's what you said, it's clear, it's a key growth contributor also for the future and that's why Simon said, we keep on investing and we supply more going forward..

Maybe if I could take the second question. The contingent consideration liability increases a consequence to positive GEMINI study.

Is there anything you can tell us about what we should think that might translate into in terms of sales potential?.

Well I don't think we're going to give forecast, but I think you can sense from the increase of degree of confidence improved..

And what did really change is the probability of success, because clearly that has gone up a lot..

I think we have a question now on the phone.

Emma, if you're ready?.

Two questions. In the past, the number of guidance elements have been provided for 2016 through 2020 beyond earnings, but they have not been reiterated so far today.

So these include the Respiratory, Vaccines, Pharma, Consumer, and total turnover, Should we assume that all of those elements are intact or not intact since they haven't been reiterated? And secondly, is Horlicks still likely to be divested in 2018 and what impact would that have on earnings if it is divested? Thank you..

Thanks, I'll only take the earnings, but the short answer to the question whether all the other guidance elements are intact, is, yes..

And on Horlicks, I think it depends when it happens. The plan is still to get it to a conclusion during the course of 2018. But obviously we need to balance that, we're making sure we get the right price. So, I think when we conclude that, we can give you some more specific help on that..

It's Keyur Parekh from Goldman. Apologies if you addressed this in your opening remarks Emma, but there's been some recent press speculation about the broader structure of the Group.

As you go through kind of the Shingrix launch rest of the world, just help us think about conceptually would this be a good time for you to think about something different or is - as is kind of a good place to be in for the next couple of years?.

So, thanks very much, Keyur, but I'm not going to repeat what I did say in my introductory remarks, which is, the Board's position on this is unchanged. We like the structure of the Group for its continuity and balance of the cash flow, as long as all three businesses continue with strong capacity and have sufficient access to capital.

And on that basis we're unchanged for now. Thank you.

Next question, Andrew?.

I was going to ask this question to the Chairman, but in his absence it's going to go you. It's Andrew Baum from the Citi, by the way. So, he's going to be indicated and understandable willingness to reassess the Group structure in light of the context which you alluded to.

Does the Board also remind us also related to reassessments of the physician engagement policy with GSK as currently running with, you recently hired a new General Counsel, there's several of us who think it's uncompetitive versus your peers. I'm going to suspect the same maybe true of your internal staff.

So, whether there's any intention to renew that and what it would take to renew that? And then a second question for Simon, that relates to business development. You ceased R&D in your dermatologic creams area most recently.

Given your in-market sales are substantial, and there are now some private equity players coming in for picking up some of these established brands.

Are there potential opportunities to generate capital to reinvest elsewhere in the business particularly within derms?.

Thanks very much Andrew. I'll take the first question. And it's an important one, we have been investing heavily as you know internally in terms of all medical engagement capability, and we do continue to look at this.

Well, we look at it through the lens of very much what is in the interest of the patient in terms of new data coming through and also what's going to help the HCPs that we work with especially as the invasive pipeline develops. What matters to us is patient interest and transparency. And on that principle, we continue to look at it but no news today..

And on the assets side, I mean I think as we've said a number of times. We continue to review the established pharmaceutical business to see whether there are better opportunities in disposing off those assets. Generally the portfolio is a very strong cash and margin contributor.

We've got number of disposals that are washing through the numbers this year which add some genericization which as we go into 2019 and beyond reduce the drag significantly.

But I think we're very open-minded where there is real value, but we are now managing that business much more discreetly as a distinct entity to lever margin and cash into funding some of the other objectives that we've described today.

So, typically when we benchmark those alternative proposals, they don't stack out very well but occasionally they do and some of the disbursals were made to ask them would be good example of that. But we keep looking, and if a good value opportunity comes out we're very open minded..

The bulk of the value we can create is one through more efficient and focused supply chain, better forecasting, and then overlaying that a greater concentration of commercial effort on a smaller number of products because we're quite disbursed in markets such as China and India.

And I think there's a fair amount of work that's advance that should you benefit over the next couple of years..

We're going to take a question online now from [Danny at Axor] on 2020 guidance..

So, Simon, perhaps you can answer this.

The question is related to what delivers and drives us to get earnings to the upper end of the range in 2020 in terms of 2020 outlook?.

Well, I think that we've highlighted a couple in particular in the upgrade that we gave for 2018. In those we certainly expect to continue to play significantly as we go through to the 2020 period and complete that outlook that we gave back at the time we closed the Novartis transaction.

But alongside that, continued growth in our new respiratory products, growth in the meningitis franchise, and as I just touched on it in a very different contributions for some of the established portfolios as well coupled with continued costs drivers and operating leverage and good focus on the bottom half of the P&L, put all that together along with the improved cash conversion and I think you can see how we get to the 2020 outlooks we've previously given, and fund a very significant step up in R&D spend that we're planning to put behind the new approach to R&D, as well as supporting some of the commercial priorities that we've identified.

So, it's really more of the same, as that kind of probably the one line answer to that..

Thank you. Next question, please..

It's Kerry Holford from Exane. Two questions please, firstly on Shingrix. Can you confirm whether have you started your DTC campaign on that yet? And given the speed of the ramp, do you think is Vaccine could now be more profitable earlier than you previously anticipated? And also can you just remind us which ex U.S.

regions you've now launched the Vaccine in? Through allergy is my second question, and more broadly into respiratory. So you just spoke little about previously about commercial prioritization.

Can you detail what that actually entails? Have you increased the number of reps, and can you talk about the relative positioning in that promotional process of allergy, Anoro, Breo, and how you're now promoting each of those products to doctors?.

So, since Luke is also leading the execution of Shingrix around the world, why don't you pick up both of those questions, please?.

So, the good news is we've not actually had to commence any DTC.

We did originally have quite a significant investment assigned for DTC but as you're no doubt aware, the press coverage, New York Times, Washington Post, et cetera has meant that we have a need to engage in that at that point, which is mainly we've been able to deploy that that effort to products like Bexsero.

Outside of the U.S., we've launched in Canada. It's very interesting, so the NARIET recommendation in Canada is not as strong as the U.S.

recommendation, but what's striking and certainly just come in, what's striking is we've a 9 fold increase in the number of GPs who are regularly writing Shingrix, and we've got a mark that was declining at about 30% for the last 3 years, Zostavax is now more than a 100% growth.

So, the demand is there and I think that's encouraging as we look into Europe and other places. The other place that we've got a very narrow launch is in Germany and that's very deliberate. We want to establish a patent of use in a subset of patients. Germany of course it's really influenced by the presence of STIKO and the recommendation with STIKO.

So that will be longer and then we have a small allocation going to Japan for the same type of reason there. In terms of Trelegy, and I think this is a key shift in the culture. I mean, Simon, has made the point in terms of reduction and resources scenarios.

Historically if we adjusted sales force because that's where the cost tended to come out because as people were visible you could do that. What we've tried to do to fund Trelegy and really be quite bold in terms of our investment on Trelegy is to reduce the back office and reallocate those resources.

So, the positioning of Trelegy, we're going after people who have had one or more exacerbations in line with the label. With Anoro, we positioned it for COPD patients who are symptomatic and if you are exacerbating there's Trelegy, and that's essentially the strategy in a very simple way.

We split the teams historically in some markets, we'd had people selling two or three products. The net result when we looked at market research was physician confusion, which is not the objective. So we've split that, we're trying to avoid that at all costs.

We split that and then consistently when markets launch, I want almost the entire sales force on Trelegy at launch so that we really inject energy around that.

And you can see those uptakes whether you look at the U.K., you look at Germany, you look at Australia, Canada, that's not fully reimbursed yet, but if we look at the patient program, again, these trends are very strong and now we just need to keep that going..

Laura Sutcliffe, Berenberg. Another Shingrix question, please. Clearly Shingrix is going very well. Its more expensive in some of the other more commoditized vaccine products, we've not seen any DTGs some of the reasons you just mentioned.

So, what are you thinking about in terms of margin in the vaccines divisions going forward and when we might see some of the benefits of that?.

We're not going to get into a breakdown of margin by product, but I think we've very clearly and consistently had a target of plus 30%. And also to chariot that we would move the margin around quarter-to-quarter depending on when the investment requirements were, when most acute, and we've seen that this quarter.

But if you look at the shape of the business with the growth drivers we've got meningitis, Shingrix, and the established vaccines business, there's nothing to say that we couldn't deliver a sustained performance in the 30% to 35% range that we typically have for our own business pre the acquisition of the Novartis assets historically and that's probably the right set of guide..

Just like you've seen the results, there is quite a bit of pressure for DTPA in Europe, as well as Synflorix in emerging markets through [Gabby]. So that's - so I didn't answer that in your question..

Jo Walton from Credit Suisse. Two questions, please. If we look at the gross-to-net in the U.S., you can see that Respiratory is one of the biggest areas of rebating.

Intrigued as to what you think might happen if rebate were rolled back and you had to move to some sort of net pricing, I mean effectively your speculation, your war gaming, whatever it might be, how you think that might impact you because rebates are a big part of the Respiratory business..

They are, and then I'm going to ask Luke to comments as specific we are not going to be in the business of speculating certainly and not speculating publically on what's going to happen as the follow up from blue print, but you're right.

On that pricing - if you look on that pricing in Pharma, already we had CAGR at 5 years, one last year, one is 5 in fact this quarter a little bit more than that. So it is a therapy area under the degree of pressure, but that's why we are so focused on the new respiratory because it's quite focused on ICS/LABA.

In terms of policy, we have obviously responded ourselves to the request we are very supportive of anything that's going to still encourage innovation, but actually help with the out of pocket for patients and bringing most transparency to that huge differential between gross and net is actually a good thing.

We wouldn’t necessary support - who based - removed a complete label we do think that’s we’re transparency the value chain is a positive move. I don’t know Luke whether you want to add anything in terms of….

Yes, I would just add the discussions are comprehensive and there are some clear markets for the administration out there in terms of rebates sort of safe harbor, and we’ve been involved through pharma in giving our views you can actually read our submission on the AAHS website.

And I think to Emma's point it's too early to say, but I would expect that there will be some changes in the structure..

And the second question it’s a consumer question in a different way. I wondered if you could just rephrase for us what synergies you think there are between pharma and consumer. Are we moving to a more consumer led prescription market where some of your consumer insights are valuable.

I mean understand that you want to keep businesses that perform well in their own right. But the debate is how much synergy there is between any of the individual businesses that adds more..

So I’ll let Brian talk about the synergies that he sees from the consumer and the web, but I’ll just make a couple of points on the reverse side of it. First of all the Shingrix launch is a consumer launch. Most of its distribution is through the retail environment in the U.S. where we are very familiar operators.

I think its 60% is that right so the actual 65% of the distribution. So lot of the planning initially around how to launch this and has been most would agree a good start.

And was actually in partnership with the consumer team effectively you’re asking and adult to self present to go and printout themselves it’s not a baby that's literally carried in whether they like it or not. So it is we do see that as being a relevant capability.

And the second thing it’s been very interesting to me from and this is I think - we would agree a long-term view. When you think about the deal we announced today with 23, which is we’re potentially extremely exciting in terms of identifying these genetically validated targets.

And therefore addressing is fundamental challenge in the industry about probability or success.

It also very interesting from a consumer empowerment point of view, whether you’ve got 5 million people that sign up now there will be 10 million very shortly who are massively motivated around their personal health and 80% of whom at the moment I think that’s correct are voting for being able to participate in research.

So there is I think over the long-term and we shouldn’t overstate this we will start to see patient power emerging a bit more strongly.

The only industries where the end beneficiary is neither in charge of the paying or the choice that's involved and over time with the transparency of information and more value demonstration I think it’s going to be relevant.

Now that does not mean we don’t need to prove the other criteria we’ve laid out as critical to a group structure right now but the whole board is supportive but Brian may be you can talk about..

Yes may be just quick on Shingrix both Luke and I engaged quite a bit on that and our team is actually work quite closely on the Shingrix plan. We actually transferred some folks from the consumer marketing group into Luke's group. I think the classic advantages we've had so far is we talked about Flonase which is a $5 million product in the U.S.

We switched at OTC £200 million in 12 months and now we’re actually launching that around the world and we’re seeing good growth on that. Most recently the Pharma business did quite a bit of work on our CRM program that their engagement with HCPs is obviously their expertise. We do a lot of that with dental professionals and doctors around the world.

We were able to take that off the shelf and launch it in 80 countries around the world last year something we could never do if not part of the group structure. So we continually look for those opportunities to take advantage of being part of GSK and they’re there..

And I’d say the next one is Bexsero, I mean the upside of having a delay and the Shingrix availability ex-U.S. is so I think we can do a lot more of Bexsero particularly in Europe where I think initially we had supply constraints and then of course we started to think well is this a U&V market.

I think the conclusion we reached right now it’s going to be private market and that again lends itself to the skill set that’s Brian team and we have another exchange going on that dimension..

So thank you very much. I think I’m going to bring this an end to the Q&A around Q2. I know Q2 is very exciting but wait to see what’s coming next. Let’s take a 12-minute break. We’re going to have a - back at 3:30 sharp please. Thank you very much..