Good afternoon, ladies and gentlemen, and welcome to the Analyst Call on the GSK Second Quarter 2019 Results. I will now hand you over to Sarah Elton-Farr, Head of Investor Relations who will introduce today’s session..

Thank you. Good morning and good afternoon. Thank you for joining us for our Q2, 2019 results which were issued earlier today. You should have received our press release and can view the presentation on GSK’s website. For those not able to view the webcast slides that accompany today’s call are located on the Investors section of the GSK website.

Before we begin, please refer to Slide 2 of our presentation for our cautionary statements. Our speakers today are Chief Executive Officer, Emma Walmsley; Iain Mackay, Chief Financial Officer; and Dr. Hal Barron, Chief Scientific Officer and President of R&D. We have a broader team for Q&A.

We request that you ask only a maximum of two questions, so that everyone has a chance to participate. Our presentation will allow for approximately 45 minutes slightly longer than usual time to update you on our R&D progress. And with that, I will hand the call over to Emma..

Thank you, Seth. 2019 is an important year of execution for GSK and I am pleased that we’ve delivered continued good operating performance with growth in group sales and earnings in our first two quarters of generics competition to Advair.

Group sales growth of 5% in CER terms reflected the particularly strong performance in vaccines with Shingrix of course, but also with our meningitis portfolio and we also saw good performance in consumer healthcare. Our group adjusted operating margins were down 1.4 percentage point from a CER basis.

We expect tight control of SG&A spend while investing behind on new product launches and increasing investments in R&D as planned as we work to strengthen our pipeline and accelerate our priority assets. On a total basis, earnings per share were up over 100% to £19.5 and adjusted earnings per share increased 4% to £30.5.

Reflecting our good start to the year, we are today upgrading our 2019 guidance and Iain will walk you through that shortly. Our free cash flow year-to-date was £535 million in line with our expectation. As guided previously, we expect cash flow to be weighted to the second half of the year.

Few years ago, I laid out my long-term priorities for GSK Innovation, Performance and Trust. All to be powered by a necessary culture change. This year, we’ve continued to make good progress with a number of meaningful achievements in the quarter.

For Innovation, we continued to execute on our new product launches and have demonstrated strong growth with Nucala and Trelegy in respiratory with the oral two drug regiment in HIV and most notably in vaccines from the Shingrix. Strengthening our pipeline is critical to our long-term success and we’ve made some good progress here also.

Among our achievement, we had positive data read out in three core areas oncology, HIV and respiratory; and we started a Phase III program with otilimab anti-GM-CSF agent for rheumatoid arthritis.

We’ve also signed an important partnership with the University of California to work with the CRISPR Pioneers, Jennifer Doudna and Jonathan Weissman on improving our success rates in drug discovery, an important element of our long-term approach to improving R&D productivity.

In Performance, we continue to make progress and Iain will cover this in more detail in just a moment. We’re on track to complete the formation of our JV in consumer health with Pfizer shortly and continue to make very good progress on integration planning. We’ve also evolved our commercial model.

We’re making important changes that will allow us to increase our competitive performance and we are continuing to attract new talents to GSK to support our shift towards the most specialty focus portfolio in the future. And finally on Trust, we want GSK to continue to lead with the broader contribution to society.

In the very best way we build trust is to innovate and we are committed to giving you regular and transparent updates on our Innovation progress and that's why you’re going to hear from Hal in just a moment.

We continue to remain focus to impacting our approach to global health and recognizing of course that all achievements depend on the energy and talent of our people. I was very pleased to see our most recent employee survey showed a significant improvement in engagement, reaching the highest score we’ve achieved at GSK in a decade.

I’ll take just a moment to talk about our new launches in a little more detail where sales have been driven by new data on further approvals. In respiratory, Trelegy continues to do well with sales of a £120 million in the quarter. Globally, launches have started well and we now have the only once daily triple therapy to COPD in 36 countries.

We met the primary endpoint in the CAPTAIN study in asthma patients and plan to file for regulatory approvals in the second half of this year. In asthma biologics, Nucala remains the market leader in total sales and continues to grow well. We’re confident too that we are well placed with the introduction of self-administration in the U.S.

which is showing some encouraging early sign. In oncology, we’re delighted that the Zejula, the PARP inhibitor, we acquired in the Tesaro transaction achieved a positive headline results in the PRIMA study earlier this month.

This significantly expands our opportunity to help more women with ovarian cancer, promoted in the under treated segments of the market today. We anticipate these data will enable us to file for U.S. approval by the end of this year with other market to follow.

We’ve also filed for approval for using treatment of late-stage ovarian cancer on the back of the date of QUADRA study. 2019 is a pivotal year for our HIV business with the launch of Dovato and a flow of positive data that will help support on new portfolio.

Later today, at the IAS Conference we're presenting positive data from the TANGO switch study and the 96 weeks data from the GEMINI study. We believe these results confirm the durability of the Dovato, an importantly, there were no cases of treatment emergent resistant in this studies.

The accumulation of positive clinical data, the experience the physicians are building and the fast progress we’re making with reimbursement in access in the U.S., will reinforce our confidence into drug regimens. And lastly in vaccines, Shingrix continues to be a major driver of our growth. We continue to see high levels of demand in the U.S.

and we also saw strong uptake this quarter in Germany and Canada. We were pleased to receive approval in China in May and are planning a phased introduction of dose starting in 2020. Our capacity expansion plans for this transformative product and our portfolio are making good progress. And with that, I will hand you over to Iain..

Thanks Emma. All the comments I'll make today will be on a constant currency basis, except where I specify otherwise, and I'll cover both total and adjusted results. On Slide 9 you'll see a summary of the group’s results for Q2, which was a strong quarter with 5% group revenue.

Overall, this was driven by strong performances in vaccines and consumer, offset by a 1% decline in pharma as expected. Total operating profit is up 80% with total earnings per share up over 100%, reflecting lower charges for the quarterly measurement of the ViiV contingent consideration liability and the conclusion of the Novartis’s JV in Q2, 2018.

On an adjusted basis, operating profit declined 1% and adjusted earnings per share was up 4%. We’ll see the drivers behind these in more detail in a moment.

We’ve lowered £370 million of free cash flow in the quarter in line with our expectations, and as guided previously, we expect cash flow generation to be weighted towards the second half of the year. On currency, weaker sterling particularly against the U.S.

dollar and Japanese yen results in a tailwind of 2% on the sales and 5% to adjusted earnings per share. Slide 10 summarizes reconciliation of our total to adjusted results. Main adjusting items in the quarter were major restructuring focused on the supply chain representing non-cash charges relating to ramp up of the program we announced in July 2018.

Within transaction related, our management of the ViiV contingent consideration liability primarily driven by changes in exchange rates. And within disposal column, the main contributors again from the revaluation of the embedded derivative in respective GSK's exposure to movement in Hindustan Uniliver shares price.

Our comments from here onwards are on adjusted results unless stated otherwise. Slide 11 summarizes the pharmaceutical business where revenues were down 1%. Stocking with respiratory, sales were up 12% with continued growth from Trelegy and Nucala particularly in Europe and international.

However this was partly offset by Relvar/Breo which declines 16% globally, driven by 42% decline in the U.S., reflecting the impact of the generic Advair on pricing in the ICS/LABA class. The contingent good growth expectations outside the U.S.

demonstrate by the continued performance of the product which in the quarter grew 15% in Europe and 21% in international.

In HIV, the dolutegravir franchise was flat in the quarter with the dynamics of the global level highlighting the competitive environment and the shifts in the portfolio towards two drug regimens, with growth into Juluca and Dovato offsetting declines into Tivicay and Triumeq.

At a regional level, dolutegravir grew in Europe and in international but declines 6% year-on-year in the U.S. with market share holding flat in the quarter. Initial shares trends for Dovato encouraging with an MBRX share of 2.5%, which is 50% higher than Juluca at the same point post-launch.

But as anticipated, it will take several quarters to become an increasing contributor to growth as we accumulate more positive data. Our Established Pharmaceuticals portfolio declined 7% overall driven by U.S. adverse sales, which were down 61% as expected given the first full quarter of generic competition.

This was offset by welcome upside in Ventolin, which continued to benefit in Q2 from the authorized generic launch in the U.S. earlier in the year. We expect this performance to continue until we see substitutable generics enter the market, which we anticipate in early 2020.

Outside respiratory, the remainder of the established pharma portfolio declined by 1% in the quarter, helped by some tenders and phasing of contract manufacturing while the decline of 5% over the first half of the year was more in line by longer-term expectations for this part for established products portfolio.

With the business trajectory for pharma in line with expectations, we continue to expect a slight decline in 2019. Turning to operating margin, we saw decline in the quarter mainly driven by an unfavorable product mix due to impact of generic Advair.

TESARO dilution, which in line with previous guidance, we expect to have a sustained impact over the balance of 2019, and pharma R&D spend which increased 21% reflecting our investment behind priority assets.

Slide 12 gives you an overview of vaccines performance in Q2, with sales up 23% driven mainly by Shingrix while also from strong demand for our meningitis portfolio with Bexsero up 24%, collecting demand in all regions and share gains in the U.S. We also benefited from some positive CDC stockpile movements and out established vaccines.

Q2 Shingrix revenue of £386 million was driven by continued strong uptake in the U.S. as well as good signs of uptake in Germany and Canada. You'll recall last year, we estimated a dose range in the high teens of millions in the next two to three years. Our capacity expansion plans are progressing well.

We continue to be successful in accelerating actions designed to increase the supply capacity and therefore increasingly confident of achieving the upper end of the ratings we gave previously at the front-end of the timeline. As we said before, we do not expect a significant step change in doses until we bring a new facility online.

Q2 operating margin was driven by enhanced operating leverage particularly from Shingrix in the U.S. Turning to Slide 13, consumer had a quarter with stronger growth as anticipated. Sales were up 4% despite a drag of around 1% from the combined impact of the divestments and the phasing out of low-margin contract manufacturing.

We're pleased to see a good performance from our prior brands driven by Sensodyne which grew 7% in the quarter and a strong performance in the U.S. Operating margin Q2 was 20.4%, slightly lower than last quarter, as expected, reflecting seasonal factors as well as investment in business in order to drive innovation and stronger growth.

On Slide 14, we summarize sales and adjusted operating margin. At a group level, SG&A grew below sales with continued tight cost control despite increased investment in Tesaro and new product launches. While R&D increased as we invest in the development of our pipeline including the Tesaro assets.

Moving to the bottom half of the P&L, I would highlight the following. The timing of the settlements for a number of open issues with tax authorities benefited the tax rate during the quarter and drove a 2% benefit to the earnings per share growth in the first half of the year while we continue to expect a tax rate of around 19% for full year.

On interest based on our range initiatives undertaken in the first half, we now expect net finance expense for 2019 to be around £900 million slightly lower than previously guided.

On free cash flow, we remain focused on driving greater cash discipline across the group and generated £535 million of free cash flow in the first half of the year, very much in line with our expectations.

This was impacted by upfront payment of €300 million to Merck KgaA, the launch of generic Advair and the relating phasing of rebates offset partly by improved operating profits and working capital management. As previously noted and seen in prior years, the generation of cash flow is expected to be weighted in the second half of the year.

When we issued 2019 guidance at the beginning of the year, we anticipated a number of factors that would lead an earnings decline of 5% to 9%. These elements generic Advair, integration of the Tesaro cost base, increased investments in R&D and higher net debt leading to higher net interest payments are playing as we expected.

However, we are seeing better operation performance across our vaccines portfolio and some in year benefit from rental ahead of the introduction of substitutable of generics expected in 2020.

Additionally, we saw in Q1, our one-off benefit to share of associates and we’re also benefiting from a lower net interest expense from the back of refinancing activities. Combined these factors together with the settlement for a number of open issues with tax authorities, have driven earnings growth 11% in the first half of this year.

We’re pleased to have captured these upsides in the front half and our view in the balance of the year remains broadly unchanged with our full year six months of generic competition to Advair as well as the phasing of tax and non-controlling interest having a negative impact and as anticipated acceleration investment in R&D.

Taking these points into account, we now continue to expect adjusted EPS to decline in 2019, but now in the range of 3% to 5%. And with that, I’ll hand over to Hal..

Thank you. In July last year, I shared with our new approach to R&D and made a commitment to being more transparent about the decisions we’re taking and the progress we’re making to regular update like this one. I'll spend the majority of this presentation on our pipeline highlighting the progress we’ve made since we set out new approach one year ago.

To recap what I said at Q2 last year, our new approach to R&D is based on the multiplier effect of science, times technology, times culture.

We define this is strengthening our pharma R&D pipeline by focusing on science related to the immune system, the use of human genetics and the applications of advanced technologies such as functional genomics, machine learning and cell therapy. I believe we made significant progress over the past 12 months resulting in a much stronger pipeline.

I’ll take you through this in more detail in a moment. We’ve also made good progress on our technology strategy, which I will cover at the end of my presentation. And on culture, we strengthened our peer review process with a focus on smart risk taking and our single accountable decision making model.

We’ve also hired some outstanding people and established some exciting new partnerships. Turning back to the science, in the last 12 months, we’ve advanced eight assets in the Phase I, three assets in the Phase II and four in the Phase III. In addition, we’ve also progressed three vaccines into the clinic.

Importantly, we’ve also gained approval to three new medicines including Dovato, Dictova and the Nucala pre-cell syringe. In this slide, you can see a summary of what I've just mentioned with specific details on each asset. These blue do show progression, green for approval and red for termination.

As you can see in total over the last 12 months, we’ve progressed or added 18 assets and terminated 11. As I mentioned, four assets have progressed to or completed their registration studies. The first bintrafusp alfa previously referred to as M7824 is a molecule being developed in collaboration with Merck KgaA.

We’ve now started a registrational study in biliary tract cancer. I’ll speak more about this later. The second is otilimab or GSK-165. This is a monoclonal antibody antagonist to GM-CSF for which we have recently imitated a Phase III study in rheumatoid arthritis.

In addition, two of the assets we acquired from Tesaro have recently completed their Phase III studies, Zejula for ovarian cancer and dostarlimab for endometrial cancer. I’ll also discuss both of these in more detail in a moment.

The significant progress we have made over the last 12 months has resulted in the pipeline showing on this slide with 44 medicines and 13 vaccines currently in development. In addition to the overall progress made within our pipeline, we’ve also achieved several key milestones from the last six months since I spoke with you.

As you can see, we anticipated having 10 pipeline milestones in the last six months. In addition, we look to obtain the headline results from the PRIMA study early, which helped us to achieve nine positive outcomes from these 11 milestones.

We had five proof-of-concepts studies read out positively, two Phase III studies read out positively and two submissions all over the last six months.

Our anti-IL33, long acting anti-IL5 and HBV ASO assets have just recently achieved proof-of-concept and we are currently analysing the data and working through our internal governance processes to determine next steps. I wanted to take the opportunity today to also focus on the acceleration we have delivered in our oncology pipeline.

This slide shows our oncology pipeline as it was this time last year. The profits we have made over the last 12 months is clear. Our oncology pipeline is now significantly stronger than it was a year ago with more than a doubling of the number of oncology assets in the clinic.

This has been delivered by the progression of our own assets, the acquisition of Tesaro and our alliance with Merck KgaA. Not only do we now have a significant number of diverse molecules in the clinic, many with the unique mechanics of action.

We also believe that many of these molecules can be combined together to enable innovative combination studies. This is strengthened our overall pharma R&D pipeline and accelerated the pace of development and data readout. We now have the potential for three oncology launches within the next 18 months.

I’m now going to take you through five of these assets in more detail. The first is the Zejula.

In my presentation at Q2 last year, I said we were going to focus on using functional genomics to identify gene or gene action and explore the concept of synthetic lethality to discover novel targets, novel combinations and novel population of patients to get benefit from our medicine.

We acquired Tesaro primarily to gain access to Zejula, a member of the PARP inhibitor class which was the first example of the synthetic lethality medicine to be approved. A commonly held view was that PARP inhibitors only worked in women who had a germline mutation in the BRCA gene so called gBRCA.

This occurs in roughly 15% of patients with ovarian cancer. We hypothesized that other genetic mutations in the homologous recombination pathway could identify women who may also benefit so called HRD-positive patientss.

The PRIMA study was designed to answer this question as well as whether the Zejula would demonstrate benefit in an all-comers analysis.

Based on these data, we are confident that the benefits Zejula could extend patients in the first line maintenance setting is both statistically significant and clinically meaningful, particularly given that the PRIMA study enrolled women who are at high risk for recurrence.

We can't comment further on the date until it's presented at upcoming scientific meeting, but we remain on track to file before the end of this year. In addition to the positive PRIMA data, we're also making significant progress in other areas of Zejula's development, particularly for women with ovarian cancer.

The FDA accepted our supplemental new drug application for Zejula in late-stage ovarian cancer treatment based on the QUADRA data. The application was granted priority review and has an action date of October 24th.

The AVANOVA data was considered best at ASCO this year and showed potential for Zejula in combination with Avastin to provide benefit in the treatment site. This is very exciting given the toxicity associated with platinum-based regimen.

In addition, the recently published TOPACIO study demonstrated the potential for Zejula in combination with the PD-1 inhibitor to benefit women with platinum-resistant ovarian cancer.

The HRD-negative cohort response rate was intriguing in the study given that both PARP inhibition and PD-1 inhibition in this patient population has had limited activity.

Lastly, we expect a pivotal MOONSTONE study investigation Zejula with dostarlimab, the PD-1 inhibitor we acquired from Tesaro in platinum-resistant ovarian cancer patients to begin enrollment this year. We hope to complete the study actually by the end of next year.

Moving on to BCMA which now has the generic name belantamab mafodotin, this program continues to advance at an impressive pace and it is a good example of our cultural progress in terms of improving our focus and investing behind the most promising effort.

Here, you can see the full DREAMM development plan across all lines of multiple myeloma, which as you know remains a disease with substantial unmet medical need. DREAMM-2 is the pivotal, first pivotal study, we started for belantamab in July 2018. Enrollment was faster than expected and we now expect the headline data to readout in Q3 of this year.

As a reminder, we are conducting the study in patients who have failed daratumumab, a more difficult to treat population than was enrolled in DREAMM-1. These patients have very limited treatment option and thus the unmet need is higher. These data are planned to support filing in the fourth line setting, which is on track for the end of this year.

We hope to make belantamab available to patients in 2020. The updated data from the DREAMM- 1 study that I mentioned in February, showing a median progression free survival of 12 months, supports our belief that this is a promising future medicine. Before moving on I also wanted to mention our plans for second line.

We have two ongoing combination studies in this population DREAMM-6 and an investigative sponsored study. That will enable us to design the DREAMM-7 and DREAMM-8 studies optimally and we expect these pivotal second line studies to start in the first half of next year.

We're also planning to start two other Phase III studies this year, DREAMM-3, a third line monotherapy study and DREAMM-9 in the first line in combination with revlimid, velcade and dexamethasone. The next asset I'd like to discuss is bintrafusp alpha, a molecule we are developing in collaboration with Merck KgaA, we announced in February.

It is a first-in-class bifunctional fusion protein designed to simultaneously block the TGF-beta and PD-L1 pathways. Despite recent advances with checkpoint inhibition, many patients do not respond to the anti-PD-1, anti PD-L1 class of therapies.

TGF-beta is believed to create a suppressive tumor microenvironment and has been proposed as a resistance mechanism to the treatment of PD-L1 or PD-1 blockade. We have four studies ongoing and are planning to start additional studies later this year. This extensive development plan will allow us to explore a number of hypotheses in parallel.

The most advance of these studies is in second line biliary tract cancer. This is the patient population for which there is no effective therapy. Our early data which represented at ESMO last year demonstrated a response rate of 20%.

The study is progressing, but based on these data we agree with regulators to begin a single arm registration study in 141 patients.

The first line non-small cell lung cancer monotherapy study versus Keytruda in PD-L1 high patients continues to progress well and exploratory studies will be initiated in HBD-positive related cancers as well as triple negative breast cancer in 2019. Next, I’d like to discuss dostarlimab, our anti-PD1 antibody acquired from Tesaro.

There are a number of ongoing studies both in monotherapy and in combination including with the Zejula in the first study in ovarian cancer. The GARNET study which evaluated dostarlimab monotherapy treatment in patients with advanced solid tumors including the recurrent endometrial cancer was presented at the SGO meeting in March.

Preliminary data from this study showed clinical activity regardless of micro-satellite stability status, and women with endometrial cancer, there was no real response rate of 49% of the MSI population and 20% in the MSS group. The full dataset will be available in Q3 to support filing in Q4.

We are very excited about these data and the potential of dostarlimab to help these women as endometrial cancer is the most common gynecologic cancer in the United States and GARNET is the largest study of an anti-PD-1 monotherapy in patients with recurrent or advanced forms of this disease.

And finally, our ICOS receptor agonist program, ICOS is a stimulatory receptor on the surface of T-cell that is important for the proliferation, survival and function of the cells against foreign antigens including new antigen expressed by tumor.

Our ICOS receptor agonist GSK609 is a monoclonal antibody that binds to and activates the ICOS receptor without cell depletion and we believe this later part could be very important. At the end of last year we announced that we achieved proof-of-concept for GSK609.

We look forward to sharing the data supporting this at ESMO where data in both monotherapy and in combination from the ongoing Phase I/II study with Keytruda in head and neck squamous cell carcinoma will be presented. We have a number of ongoing studies including one in combination with CTLA-4 and an ICOS-based long platform strategy, study.

We believe this could be an assay with considerable potential across a range of tumor types. I’ve spend the majority of this call discussing oncology, but we continue to make good progress across the pipeline. I’d like now to highlight five other assets. Otilimab for rheumatoid arthritis has now started Phase III.

The clinical program includes patient who have failed methotrexate and targeted therapies and compares otilimab against both JAK inhibitor and an anti-IL-6. We recently achieved proof-of-concept for the hep B anti-sense assay that we’re developing with IONIS. We are reviewing this data to inform our path forward.

We’re excited by the potential of this assay as chronic hep B remained a very serious disease globally. In respiratory, we had two proof-of-concept studies read out positively this quarter, our anti-IL-32 receptor agonist and our long-acting anti-IL-5 agonist.

Both molecules are currently being evaluated alongside of broader portfolio to make sure we continue to prioritize our investments behind those programs that are differentiated and can provide benefit to patients who have significant unmet medical need.

Another promising molecule is gepotidacin for which we're planning to start two Phase 3 studies in the second half of this year for patients with uncomplicated urinary tract infections and urogenital gonorrhea.

I’m excited about this potential new medicine because of its unique mechanism of action and oral formulation which makes using it in the community setting more appealing. In vitro activity has been demonstrating against many susceptible and importantly drug-resistant pathogens that cause a range of bacterial infection.

Developing antibiotics with novel mechanism is incredibly important and gepo could be an important treatment options for patients with uncomplicated UTI and gonorrhoea. Now I’d like to give you a brief update on the progress we have made on our approach to leveraging advanced technology.

In July last year, I shared our new approach R&D which is anchored in the use of human genetics and cutting-edge advance technology such as functional genomics, artificial intelligence, machine learning as well as self-therapy to identify novel targets and differentiated medicines for patients.

We believe outstanding people working with and for GSK will be fundamental to achieving this vision. In the last 12 months, we’ve reached major agreements with 23andMe, a laboratory for genomics research and most recently with the Company called Lyell.

As you can see from this slide, we are working with the very impressive people both internally and as collaborators. Unfortunately, I have time to speak about everyone on the slide, but these peoples are world-class scientists who are pushing their chosen fields to the cutting edge.

In the human genetics, our extent exclusive collaboration with 23andMe is going well. We have already agreed to progress six targets together and we continue to evaluate others. We hope to be in a position to move our first joint program into the clinic in 2020.

In functional genomics, we announced a laboratory for genomics research with Jennifer Doudna and Jonathan Weissman. I'll talk more about this on the next slide. I’m also delighted to welcome Chris Miller, an outstanding scientist who joined us from AbbVie to lead our work in this area.

A new collaboration and I’m very excited about is with Lyell, a company focused on cell therapy, specifically exploring the concept of T-cell exhaustion.

We will share more about this later this year, but Rick Klausner and his incredible team, will be core to advancing our working in cell therapy as we believe T-cell fatigue may play an important roles in limiting the efficacy of both CAR-T and TCR-T therapy. And finally, a brief word on AI/ML.

We have several partnerships in this area, but are currently concentrating on building our own internal capability. We are focusing our efforts on early target discovery as we believe this is the best place to apply the power of AI/ML.

We are very pleased that Kim Branson another outstanding scientist has joined us from Genentech to lead our work here and he’s building a very impressive in house team. As you know, we recently formed the laboratory for genomic research in San Francisco. I’m very excited to announced this great partnership with University of California.

This project is a great illustration of the point that I made in the previous slide that working with outstanding peoples fundamental to our R&D strategy.

The rationale for this partnership is very straight forward, take the most advanced technologies with functional genomics field that’s CRISPR and worked with the pioneers of that technology Jennifer and Jonathan, who work together to develop better medicines faster.

I spoke in July last year about genetically validated target being twice as likely to become medicine. We are aiming to use CRISPR another genetic technologies to better understand why certain genetic mutations associated with various diseases and use this information to discover new drug target.

I will continue to update you on our progress across our technology strategy as we apply human genetics in advanced technologies to further accelerate and strengthen our R&D pipeline. So to close, I will share with you the pipeline milestones we expect to deliver over the next six months. These will inform the basis for my next R&D update to Q4.

By the end of this year, we will have the first pivotal data on belantamab in fourth line myeloma and for dostarlimab in recurrent endometrial cancer. We are looking forward to presenting our ICOS data at ESMO and starting the Phase III studies for gepo.

We're on track for six submissions, three of which are in oncology in the next six months, Zejula in first-line ovarian cancer, belantamab in fourth-line myeloma, dostarlimab in second-line endometrial cancer plus fostemsavir in HIV, Trelegy in asthma, and lastly we will submit daprodustat for regulatory approval in Japan.

There is also the possibility that a number of proof-of-concept studies in oncology may read out, though the timing of these will depend on the style of the treatment effect observed.

We will also continue to build our AI/ML group and will complete integration of Tesaro into GSK including the creation of the Synthetic Lethality Research Unit based in Boston. Personally, I am pleased with the progress we've made in the last 12 months to strengthen our pipeline, improve our technology capabilities and shift our culture.

Over the next six months, we will see a number pivotal data readouts that we hope will further get validate our new approach to R&D. With that, I will hand it back to Emma and look forward to answering any questions you may have in the Q&A..

Thank you, Hal. So, as a reminder, we've seen some good progress this quarter on our priorities of innovation, performance and trust; and we are on track with our key areas of focus. We're driving improvements in our operating performance. We are progressing our pipeline with a number of further key readouts to come.

We're investing in our executional capability for specialty portfolio and we're working towards the successful integration once the consumer JV has completed shortly.

Successfully delivering these priorities over the coming years will provide a clear pathway for the creation of two great companies, one focused on pharma and vaccines, and the science of immunology, genetics and new technologies, the other on consumer health. So, we're now joined for Q&A by Luke, David, Brian and Roger.

And with that, operator, this team is ready for everyone's questions..

[Operator Instructions] Your first question comes from Emmanuel Papadakis from Barclays. Please go ahead..

Thanks for taking the questions. This is Emmanuel Papadakis from Barclays. I should probably start with the obligatory guidance question.

Perhaps, sustainability of the guidance of great we've just seen in terms of thinking about the run rate for Ventolin and the Established Products will be particularly helpfully reference, some inventory at Relenza benefit in Q2.

Just trying to think about how those run rate still looking in the second half will be very helpful? And then maybe on similarly financial topic, free cash flow, you did call out H2 waiting for the year.

Given its important to your dividend outlook, perhaps, you could give us just a bit more color on the second half of the year? And do you think it's now feasible with the revised guidance to get to or beyond the level of 2018 free cash flow i.e., just over 5.5 billion? Many thanks..

Thanks, Emmanuel. So listen, both on guidance of free cash flow time they want to….

Absolutely. Yes, Emmanuel, on free cash flow first. Look, the overall outlook that we provided at the fourth quarter, and I think then went over again the first quarter was certainly driven and informed by genericization of Advair and then the timing of pre-genericization rebase and that run-off.

And we would expect to see a step down from overall free cash flow in 2019 versus 2018, which saw a lot of progress made in our regard. Overall, the theme currently as it relates to guidance around the profitable that we’d referenced momentarily has a similar read across to the overall guidance from a free cash flow perspective.

So, as in previous years, we’d expect to see strong cash flow with generation over the course of the second half of the year we’re very much in line with where we expect to be at the half. And in terms of overall for the year as guided earlier, we’d expect to see a bit of a step down against 2018 informed by Advair genericization principally.

In terms of the overall guidance, the guidance that we provided in the fourth quarter and in terms of what we’re driving to down 5 to down 9 adjusted EPS is.

Those key factors remain obviously consistent, so the genericization Advair obviously keep the broader impact of the genericization of pricing in the ICS/LABA class is an important factor because certainly when you look at Breo/Relvar in the second quarter and the first half year, we’ve seen that tick across in the pricing and the overall ICS/LABA class.

So that’s some of the pressure that we’d expect to see continue over the second half of the year and directly related to ADVAIR genericization.

One of the welcome features of the first half was Ventolin perhaps somewhat unexpectedly, but we launched early in the year an authorized generic for Ventolin and really anticipation of other substitutable generics coming to market, and we’ve seen very-very strong tick up of that.

I think it represents an opportunity for lower right to pocket expenses for patients, and we’ve seen very good uptick in that regard. And being authorized generic what we do see is quite traditionally our lower rebate coming through that.

So, we’re seeing some benefit coming through Ventolin for the remainder of the year, but we do expect this effect to be largely limited to 2019 where we would expect to see other substitutable generics coming to market in early 2020 in that regard. So, the guidance overall for 2019 absolutely in line with what I said during the presentation.

Key factors actually haven’t changed the great deal since fourth quarter and first quarter, but what is very encouraging is a great performance from the vaccines team particularly driven by Shingrix and the meningitis portfolio and one-off event on associates as I talked about in the first quarter, and then halfway some timing coming through the resolution, the number of tax matters with tax authorities, around the world and very much unusual course of business..

Thank Iain. Next question please..

Thank you. Your next question comes from Graham Parry, Bank of America Merrill Lynch. Please go ahead..

Great, thanks for taking my questions. So, firstly on vaccine, if you could just help us understand some quantification and the benefit of CDC stocking where that hit aided Shingrix and the right run rate for Shingrix for the year? And then secondly on HIV, I wondered if you can comment on the multiple data that was published at IAS.

In vitro data looking at viral resistance emergence with dolutegravir plus 3TC versus Biktarvy suggesting increased viral resistance emergence with dolutegravir 3TC and any thoughts on why that is this quarter with the clinical data suggest GEMINI and TANGO that you’re seeing any critique of that study would be useful? Thank you..

Thanks, Graham. So, I'll ask Dave that to pick on your second question. I’ll just comment briefly on Shingrix outlook for the year. And you remember at Q1, we guided that we thought it would be roughly maintained run rate.

For the rest of the year, we would -- as far as Iain has alluded as part of the upgrade, we would expect actually that the second half would be more in line with the full first half.

This year, we’re really pleased with the ongoing strong demand for Shingrix and we’re equally pleased with the progress that Roger’s team are making in terms of our capacity expansion. There is a, let just say, a possibility of further progress beyond that, but we will update you on that at Q3.

And beyond that and perhaps go to David on the HRD question..

Yes. Thanks, Graham. I mean I’m not really getting into much detail of the logical because obviously it wasn’t our study. Although, as you said, it was a poster I think presented yesterday at IAS in Mexico and it's an in vitro study.

What really matters I think and what we’re very pleased about is later today in Mexico, investigators and the team is going to present the GEMINI 96-week data, read out and also the TANGO study which was switch study we did Dovato.

And I think and we believe that data would be very positive both from an efficacy point of view and importantly across around the thousand patients in the study on the Dovato arm. We’ve seen zero treatment emergent resistant there in a clinical with patients doing right across the world.

I think that would be seen as very reinforcing of durability of Dovato.

I mean the one -- so the technical point I would add that will come out in the TANGO data is, one of the things we did is some archived DNA analysis to look for resistance and particularly resistance from the 184V mutation which potentially end cause resistance in lamivudine and therefore make in the Dovato setting the argument as it could make dolutegravir become monotherapy.

And we did the archive testing to pick up very low levels of resistance. What was interesting is overall out of the 650 patients in the study there is any picked up seven patients of 184V even at the low level. So in the instance of it is very small for the Dovato arm and none failed.

So, I think we’ve now got some very specific evidence around that, which I’m sure you would be very helpful. So, we’re feeling I think increasingly confident of the durability and importance of two drug regimens..

Thanks, David. Next question please..

Thank you. Your next question comes from Kerry Holford, Exane BNP. Please go ahead..

Thank you, guys. Two questions please. Firstly, just following up on ViiV. Thinking about the outlook for the remainder of the year. So in the quarter, U.S. sales were down 6%. I wonder, David, if you can talk to how you explain that to evolve in the second half of the year? And in the first half of the year, that equated to just 1% sales growth globally.

Are we still expecting as the ex-U.S.

regions to deliver more significant growth to drive that higher? Or are you looking at sort of that remaining similar level for the remainder of the year 1% growth or so? And then secondly on Zejula for Hal, I wonder, I know you can't give us some more details on PRIMA, but if we're to say that data can comment at ESMO.

Can you tell us whether or not we would get the detail results by subgroup and here I am talking about HRD positive versus negative. I am also interested in any view you may have on how that data could compare to Pillar 1 for the abstract, if that is also positive. Can these two approaches co-exist? Many thanks..

Thanks Kerry. So we'll go to David first on ViiV and then come back to Hal on the two pronged set of your questions around Zejula.

David?.

Yes. Okay, thanks Kerry. So, dolutegravir was flat in the quarter in Q2 and not 3% year-to-date, and then of course we have the drag which is about 2% of the older product particularly at the [indiscernible] for entry. So overall that put ViiV into slightly negative territory for the quarter and not 1% from the year. And I think as we said in the U.S.

future growth will primarily come from our two drug regimen, Dovato and Juluca. Obviously, we have also in 2020 from cabotegravir, our long-acting for which we have been going to the priory review PDUFA data at the end of the year and also a much smaller amount from fostemsavir.

I think we do remain very confident in the growth potential of our HIV portfolio. Overall, it's early days for Dovata first in the U.S. I think overall the launch is pretty much what we anticipated. As Iain said, MBRX is now about 2.5%. A weekly TRx has gone up to just over 350 strips a week.

We've got about 80% reimbursement coverage now so that's gone very well and very fast, and overall Dovato is about 50% ahead of Juluca at the same point. I mean of course it is challenging as we've always said a very well established treatment paradigm and it will take time to build momentum.

And as physicians gained experience, we're very encouraged by the data that I talked about earlier in response to Graham's question. And obviously, we hope that should have a big impact.

Outside the U.S., we continue to grow very strongly; and international, particularly driven by Japan and Russia; and in Europe actually, we gained market share dolutegravir volume up about 8% with a bit of pricing drag there, but that was reduced overtime. So, overall, we remain confident in our growth outlook for the HIV portfolio..

Thanks David. Hal..

Yes. Hi, Kerry, thanks for the question. You know, as you know, we've just un-blinded the data. So, we've only completed limited number of analyses. As you know, we're very pleased about that.

The hypothesis that Zejula would benefit women beyond those who have the gBRCA mutation in facts the hypothesis that the HRD-positive patients, those with the genetic defects in the homologous recombination pathway could benefit was validated. And the way the study was designed as once we validated that hypothesis, we could ask the question.

Does the overall patient population benefit? So those are the analyses we've done. Obviously, there's a lot of interesting data in the dataset. We will be exploring that, figuring out what are the most interesting questions to provide data on. But as you know, we can't comment further on either the data or the analysis because it's just too early.

In terms of [Solo-1] that you mentioned, again we are looking forward to seeing that data as well later this year. And I think it’s important to remember first of all that [Solo-1] is exploring whether PARP inhibition benefits the women with ovarian cancer in the first-line maintenance setting.

Actually, we think that Zejula and the PRIMA study I've answered that question. Zejula does benefit women in the front line maintenance setting.

The real question that the world will have I think is the incremental value that Avastin adds to PARP inhibition there unfortunately Paolo is not answering that question, but for the 25% of women who are being treated with the Avastin currently will I guess have information as to whether the combination works.

I think it’s also important to realize that questions that will be evolving relate to Avastin and the benefit that it has both in terms of the improvement of progression free survival, but also the recent data from the GOG-218 on overall survival where there is really no improvement in the overall survival and there is obviously toxicity and there is cost.

So all of this will partly put together in a way that we can digest that and understand how to think about benefiting the women in the first line setting.

But again, we’re very excited that hypothesis that the PARP inhibition in Zejula particularly will benefit the women who have the homologous recombination defects and excitingly in the all-comers analysis, the benefit was there as well. So, we look forward to sharing more that data when we have it..

Right, Hal. Thanks very much. Next question please..

Thank you. Your next question comes from Seamus Fernandez from Guggenheim. Please go ahead..

Thanks very much. I guess I just had to ask a requisite question around the Senate's bill and the proposed impact relative to some of those differences that have been proposed.

I just was hoping, Emma, if you could just give us your any broad stroke thoughts? And then if possible where GSK kind of fits in the context of that proposal since then I know it’s the moving target, but I think investors would certainly benefit from hearing your thoughts there? Thanks..

Thanks Seamus. So listeners as everyone know, these proposals were published late yesterday. So I think a 40 page document with over 30 detailed provisions, so we need to take a bit of time to analyze this and understand the provisions and understand any implications they might have.

It’s also and again just looking at the issue very important in those that all of this is subject to discussion potentially amendment, and even in this ultimately past many as not due to big impact until the reflecting so 2021, 2022. And all that said, of course considering the size and the importance of the U.S.

market, we take these issues very seriously. And today, we don’t have significant exposure to part B, but as we’re thoughtful on how our portfolio will continue to evolve, within the pharma business noting that this quarter our vaccines business of the U.S. was about 30% of the our sales excluding consumer.

So the key area we’d be looking at net on this is part B, but we’d be thoughtful about any evolution in part B in terms of our approach with new assets.

And there are few print support I suppose that we would be supportive of just the broad base rather digitally talking about this specific proposal, and we are absolutely supportive which is why we were also supportive of the previous rebate and discussion.

But all things that reduced the out of pocket cost for as many patients as possible in any of the price reductions that we pass onto payers by no way to patients.

That’s already key principle, likewise we’re supportive of principles that incentivise responsible pricing, and most fundamentally that incentivise innovation and ongoing innovation and access to that innovation so the patient that need it.

So, I will keep, we’ll keep watching it obviously the answer to these kind of environmental context continues to be, make sure you price responsibly.

I think if you look at GSK's track record and where its performance has come from that is something that the Company has been long committed to and make sure you innovate or value which is why all the work that Hal has that progressed with, with the R&D team is so important and so we want to outline that with you today.

But we will be I’m sure watching this space and we'll see what comes through that. Next question please..

Thank you. Your next question comes from Mark Purcell, Morgan Stanley. Please go ahead..

Yes. Thanks very much for taking my questions. I have two.

Firstly for the Zejula, can you help us understand your plans to support the drug outside ovarian cancer on the back of the PRIMA and then obviously the AVANOVA data, which are very interesting and implying a role I guess the potential -- hypoxia caused -- did the damage to the, synergistic effect with this molecule.

I’m asking this question because there are some unique advantages of it over other PARP inhibitors including better blood flowing barrier penetration and potential, possibly in tumors such as lung cancer for example. And then secondly on the [indiscernible] and the neutropenia SAEs we saw recently.

Could you discuss the risk maintenance initiatives you've put in place? And whether how successful you believe these are in terms of improving the risk benefit of this drug for patients as you move forward into early lines of therapy? Thanks very much..

Right. Thanks. So I think that's both of you, Hal..

Yes. Okay. Good questions, complicated questions, so let me take a few minutes to think about that. But the question about the Zejula beyond the frontline ovarian, I think it's a great question and we have a very robust development plan that includes a number of studies as you highlight in ovarian cancer.

I think you’re right the AVANOVA study is very exciting. It is important to realize that was a treatment paradigm study that looked at the combination of Avastin in combination with niraparib as a potential treatment. And this is exciting on a lot of levels.

One, we did see a pretty significant effect in a uncontrolled single arm trial, but we’re excited about where that might be able to take us in terms of maybe later line therapy when patients have progressed on their platinum-based front line therapy. It’s really tough on patients to take platinum continuously in the second, third and fourth line.

And if we can potentially design studies to find drugs like niraparib and Avastin that would be as good, maybe even better. But certainly with the better safety profile, I think that would be a really significant advance for these women because you know they’re very sick by the stage and likely to die and improving the quality of life is critical.

So that’s an exciting approach.

I’m also excited by the TOPACIO data, small numbers, but there's some intriguing signals and there again small numbers in particularly when you look at the combination of niraparib plus dostarlimab where we're starting to learn a little bit about what PARP inhibitors may be doing beyond simply blocking the replication fork and the homologous recombination repair process and looks also like when you do that, you actually activate the STING pathways and you almost by definition because you have this DNA damage, start to present more new antigens.

And if you think about it, that could be an exciting synergy with PD-1 inhibition because it's been known that T-cell infiltration in ovarian cancer is actually seen in about 60% of patients such, but t-cells are not getting in there and activating to kill the tumor the way we would hope.

And so, we think by presenting more new antigens through this STING activated pathway and presenting more new antigens that we might be synergistic with PD-1 and there's a lot of preclinical data to support that, as I said, and it's also exciting that we actually have a systemic IV STING agonist that we could think about.

So, the idea of that synergy particularly when you -- when you look at the data as I said in the TOPACIO study where we have actually significant responses in the gBRCA wild pipe platinum refractory group where we typically don't see any kind of responses and in fact the PD-1 class has been particularly unimpressive in that, in that setting as well.

So the effect that we're observing I think the numbers were about 18%, 19% response rate in that group, if I remember right. That's encouraging and so, MOONSTONE is going to follow up on that data and potentially provide some interesting findings.

As you point out that there's a lot of other places we can think about trying to help patients, particularly exciting given that concept now that we think is real, which is that it's beyond BRCA and in lung cancer although gBRCA mutations are extremely uncommon, HRD abnormalities are actually not uncommon.

And so, it's possible that by identifying patients who have defects in homologous recombination through other non-BRCA like RAD50 and [indiscernible] protein gene defects in KT and ATM and all the other ones that are known to be mutated in lung cancer, ARCC.

We may be able to find a population that would respond to PARP inhibition, and we have a number of trials and the same concept that I described where there may be synergy between niraparib and PD-1, not to get too ahead of ourselves, but that's an exciting combination as well because we might be able to improve on the already impressive findings of PD-1 in lung cancer.

So, that's an exciting opportunity. And lastly as you point out, and I think this is a very good point that they make is that. While you don't see typically many women who develop brain mets which is thankful in ovarian cancer, it is unfortunately not uncommon in lung cancer.

And so, if these PARP inhibitors are actually effective in lung cancer, we think we have a uniquely advantageous approach because of the fact that we cross the blood brain barrier and that is something that we're thinking about how to get a better handle on.

So with that and of course you know there's always an opportunity to think about other diseases like prostate, pancreas and triple negative breast cancer and the synergies, there is there's an enormous amount of development opportunity that we can do.

And with the other 15 molecules in the clinic including bed inhibitors and as I said, STING agonists. There is just lot of places where we can do combinations. And with functional genomics, we're hoping we can actually rank our opportunities so that we go over the most compelling projects first, and so, yes, just a very exciting time..

Thanks Hal.

Then the comments on [belantamab]?.

Yes, great -- sorry. So, belantamab, so BCMA, you know it's important to remember that myeloma is a plasma cell dyscrasia and so just the disease alone causes thrombocytopenia that’s known.

BCMA is known to cause thrombocytopenia, and so the combinations of various drugs where we know there’s going to be additive talks, it’s important to get a strategy to minimize that as you point out. And so without going into excruciating detail, the modifications we’re putting in place are several folds.

First and probably most importantly is that these findings are usually dose related and we are using a lower dose in the Phase II studies DREAMM 6 in the IFS, and that should help us figure out whether it's a C-max or C-min area under the curve et cetera.

How do you optimize the dosing to minimize this problem as well as are there ways of certainly educating the sites to ensure that when a patient does get some toxicity that are managed well? And we think the combination of doing both of these will result us in having a safe and effective window for providing this drug and in particularly given how active it is we can set the risk benefit is likely to be something we can demonstrate, but of course that’s why we’re doing the trial..

Thanks Hal. Next question please..

Thank you. The next question comes from James Gordon from JP Morgan. Please go ahead..

Thanks for taking the questions. James Gordon from JP Morgan. I have two questions both about Zejula please.

And for the first specifically, clarification around the PRIMA study result, but in your press release it says that the study is statistically significant and why there was cross by market data, and in the study the original endpoint was just an HRD positive patient.

And then, how we state on the call it sounded like the study due to deterioration of primary that did show benefit in just HRD positive first and also in the whole population. So could you just clarify, what was the primary that was tested to this work to the some population and in all-comers please? And the second question was also on Zejula.

So the press release referenced AVANOVA and talked about the strong data we saw, presented at ASCO so Zejula plus avastin.

Were you slightly misdated because there is the potential to get this patient labels so you could actually have mono and an avastin combo? I mean that’s why things like or do you think that whatever the mono and avastin combo that’s only the Astra likely tied as a please?.

Hal?.

Okay, so let me explain the design of PRIMA and it’s a relatively common approach to designing trials and then binding. The primary endpoint was tested hierarchically, so by that I mean the first question you asked of the data is the one that we have the most confidence in, which is the HRD positive population.

And the analysis plan calls for answering that question and if positive, only if positive, do you go on and then assess the all-comers? And because the HRD population was positive, we then went on to test the all-comers analysis and what I said in the script is that. That was also positive. So that’s how that works.

And it’s done to avoid having to spread or I should say share alpha, but that doesn’t matter. But it’s a common way of doing what's called hierarchical testing. Then the other question was about AVANOVA. Yes, we were pleased with the data. It's very intriguing the combination is as I mentioned is a possible treatment regimen is interesting.

I think that in terms of treatment setting it's going to be important clinical data to look at, but the plan is not to be filing that with the PRIMA study..

Thank you. Next question please..

Thank you. Your next question comes from Tim Anderson from Wolfe Research. Please go ahead..

Thank you. A question on PRIMA again, so a short top line press release you said it was clinically significant today. The top line release only describes safety as in line with prior data set, but PRIMA looked at the lower starting dose to try to avoid thrombocytopenia.

And from our prior conversations with you guys, I think the goal is to have thrombocytopenia in line with competitors PARPs like in lynparza. So I’m wondering on a safety, if you can say that was achieved in PRIMA with that dosing modification? Second question is the Shingrix opportunity in China.

My understanding it will be a cash pay product, no government reimbursement, which is not uncommon with multinational vaccines. If I think of cortisol also cash pay, explosive growth, consumer awareness is high. There is a big different here with your product in that cervical cancer is potentially fatal and shingles is not.

So, I’m wondering if you can just layout, what you think is the commercial case for Shingrix will be over time? What the awareness of shingles areas?.

Okay. So just to give Hal a break for a second, I’m going to come to Luke to comment on the Shingrix launch in China. Obviously, there is a question both of capacity and market creation from our point of view, but Luke do you….

Sure, Thanks Tim. So, and I think the analogy of the fellow you make with HBD is interesting. I mean if you look without the Shingrix, right now, we're doing 90,000 doses a month. If you go back to a couple of years ago, the awareness is relatively low.

So, I think once your product enters the marketplace and companies begin to be active and physician has a solution with indications to become engaged. You’re correct our assumption is that it’s going to be a private market product. If you look at pricing for celebrex and cortisol, again these are very much in line with the prices in the U.S.

and that’s our assumption in China.

In terms of what would drive that, I mean we’ve looked at this as you can imagine in some depth there is a, few things which are very favorable, you’ve got obviously in all the population, you have relatively concentrated families with children working and also as a pretty well developed appetite for information on the web.

So, we think a number of these things are in line with it. I think the broader question in and this is really where fits in the context we supply with Shingrix is, we try to work out beyond the U.S. and Canada and Germany where we now which the market that we would enter and right now the focus is likely to be in the private market..

Thanks, Luke, Hal..

Yes. It’s a good question. So, the PRIMA study as I said the primary end point was in the HRD positive and subsequently all comers if positive.

There was as you point out and it’s an important subgroup but a smaller subset of patients who are randomly allocated towards the end of the trial to the so called weight complete dosing regimen where the women whose body weight was less than 77 kilograms and whose platelets were I think less than 150,000, were administered a lower dose 200 milligram.

So I should point out that the concept of lowering dose for lower body weight patients particularly those with low platelets would make sense given this is non target effect.

And in fact clinician often do this in the real world, it’s not uncommon to see patients actually identified and do those but we thought it was important in the PRIMA study to actually study it in a controlled way.

As you point out I can’t comment further on the data in terms of subgroup or sub-analyses now, but all of this data or much of this data were presented at coming scientific meetings and we will look forward to discussing with you then..

Thanks Hal..

Luke, did you have anything you want to add there?.

I mean I think it's interesting as you look at usage rates in the U.S., where we have the best data I mean obviously patients start on 300, around 50% automatically drop down to 200 mg immediately so physicians are adapting the behavior in line with the protocol..

Thanks, next question please..

Thank you, and your last question comes from Jill Wilson of Credit Suisse. Please go ahead..

Thank you, two quick questions. On the vaccine, I wonder if you can help us on the improvement in profitability.

How much of this we should build in to our future modeling because it comes from the leverage of Shingrix, which you know doesn't look like it's going away and therefore should give us a strong sustainable base? And how much could be attributed to one-time practice? And the second question for Emma on the new marketing and scheme whereby you are paying -- you're paying your reps more in line with the prescriptions that they are responsible for? How are you going to decide whether that is successful or not? and what should we look as shareholders investors to see how that is maturing?.

Thanks very much. I'll let Iain comment on the vaccine margin delivery and outlook and then I'll come back on your last question, Jill..

Great, thanks very much. I think overall, clearly, we're very pleased with the PARP performance to vaccines business and Shingrix is a standout in that regard. With the margin where we have it now, obviously in the high 30s, that's informed by an effect in the first quarter and the inventory adjustment, which we mentioned.

And also you'll see that both SG&A and R&D fairly tightly controlled within that business. As we move forward and continued, we probably see a step up to some degree in SG&A to support as we gradually moved to expand market launch from a Shingrix prospect we go forward into longer-term.

And then also from an R&D perspective, as Howard mentioned earlier, there's a couple of interesting priority assets coming through vaccines where the step up in R&D to support that development are key features.

So in terms of the medium-term, from an operating margin perspective, we very much see that margins for vaccines in the mid 30s, notwithstanding the very good performance that we've seen on higher volumes and good cost control coming through the first half of the year..

Okay, thanks Iain. And then finally just on the update of our policies which as you know has been around sales force incentive, but also around engagement and with HCPs so that they can hear from practicing HPCs where we have new data. We've laid out several key priorities for the Company.

We know we want to deliver an improvement in operating performance and we want to deliver a much stronger pipeline and I've been pleased to be able to demonstrate. There is always lots more work to do and some progress on both of those.

Within that we are talking fundamentally about the shift in our portfolio to more specialty medicines and the update to sales force incentive was linked to that.

We are building under Luke's leadership an ever strengthening specialty team and we want to be able to attract the very best, including in the field and there is specific expertise around that competitively. And as you know when the initial policies were rolled out, there is no follow on from other players in the industry.

So we think this is very important, but it contains to our specialty workforce in a certain key geographies particularly where we’re launching new assets in the same way as our HCP engagement is comprising, physicians is contained to new data either or around existing products or new launches.

And the answer to Hal knows whether it's working to make sure that we are successful with the new products that we bring to market over the label we expand or new launches we’re talking about coming through in 2020 and beyond.

And that’s why we're delighted to seeing some of the progress we had on data that we’re going to be filing with six new registrations hopefully in the next six months. And Luke's building out the team that he has, so we’ll see with the numbers that come through. So, with that everybody, thank you very much. Thanks for joining the call.

Obviously, it's a busy day today and we look forward to talking to you soon. Thank you. Good bye..

Thank you. That concludes your conference call for today. You may now disconnect. Thanks for joining. Enjoy the rest of your day..