Good afternoon ladies and gentlemen and welcome to the analyst call on the GSK First Quarter 2020 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 Q1 2020 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 two of our presentation for our cautionary statement. Our speakers today are Chief Executive Officer, Emma Walmsley; Luke Miels, President, Global Pharmaceuticals; and Iain Mackay, Chief Financial Officer. We have a broader team available for Q&A.

We request that you ask only a maximum of two questions so that everyone has a chance to participate. And with that, I will hand the call over to Emma..

Working in partnerships; taking a global approach while of course providing strong focus and practical support to our base in the UK; maintaining a deep commitment to access; and investing in long-term pandemic preparedness. Our number one focus is the development of a vaccine.

This is core to the exit plan the world needs, and we're working with companies and institutions globally including in North America, Europe and China to help find the best and most effective vaccine. Our aim is to develop multiple adjuvanted COVID-19 vaccines.

GSK has long been the leader in vaccine adjuvant technology and our expertise in this area is proven.

As many of you know, the use of an adjuvant can be of particular importance in a pandemic situation, since it may reduce the amount of vaccine protein required per dose, allowing more vaccine doses to be produced, and therefore contributing to protect more people sooner. One of the most recent collaborations to be announced is with Sanofi.

Together, we bring proven technologies and considerable scale. We’re planning to start trials in the next few months and if successful and subject to regulatory considerations, aim to complete development and make the vaccine available by the second half of 2021.

Of course, there's a lot of work to do and no guarantees, given this as an early stage of development. But we believe if we are successful, we'll be able to make hundreds of millions of doses annually by the end of next year. Data from our other collaborations will be available in the coming months.

We remain as we always have been committed to global access and across this portfolio, vaccine collaborations. We’ll reinvest short term profits generated in coronavirus-related research and long-term pandemic preparedness, either through GSK internal investments or with external partners.

Alongside vaccines, we're also exploring therapeutic options and earlier this month, we entered into a new collaboration with Vir Biotechnology.

Together, we'll use Vir’s proprietary monoclonal antibody platform technology to identify and accelerate new antiviral antibodies that could be used for therapeutic or preventative options for COVID-19 or future coronavirus outbreaks.

Our first priority is to accelerate two very promising antibody candidates that target COVID-19 directly into Phase 2 clinical trials within the next three to five months. The Vir platform is highly complementary with our R&D approach to focus on the science of immunology.

Additionally and more broadly, we’re screening GSK marketed and pipeline assets for antiviral activity or potential use in prevention or treatment of symptoms related to COVID-19. So, all-in-all, you can see we're pursuing a broad set of initiatives as part of our response and commitment to being part of the solution.

So, let's now move to our Q1 performance.

We've seen a very strong start to the year with our performance reflecting good underlying execution, the addition of the Pfizer consumer healthcare portfolio and towards the end of the quarter, a significant step-up in demand, including patient and consumer stock building for many of our products, as a result of the pandemic.

Pro forma group sales growth of 10% in CEO terms reflected an increase in sales in all three of our global businesses with a particularly strong performance again in vaccines, driven by Shingrix and Consumer, where we saw double-digit pro forma increases in four of our five main categories.

Group adjusted operating margin this quarter was 29.4%, reflecting the strong sales growth across all three businesses, a more favorable mix in vaccines and the continued benefit of restructuring. On a total basis, earnings per share were up 89% to £0.315 and adjusted earnings per share increased 26% to £0.377.

Earnings growth benefited from a reduction in our effective tax rate in the quarter, reflecting a number of one-off items including the revaluation of tax assets. Our free cash flow this quarter was £531 million pounds, benefiting from our strong operating performance across the business.

We've also continued to make progress on our long-term priorities of innovation, performance and trust. Sustained focus on commercial execution delivered good growth of our new products, Nucala and Trelegy in respiratory and our two drug regimens Dovato and Juluca in HIV.

Meanwhile, Shingrix also continued to perform strongly with some RAR benefit as we further accelerate live, although short-term demand is now being impacted by slowing vaccination rates in the U.S. under containment measures. We've also made progress on our pipeline with regulatory submissions accepted on three oncology assets.

We're anticipating FDA approval of Zejula in the first line maintenance setting for ovarian cancer shortly, and Luke will talk to the opportunity here in just a moment.

We've also had regulatory submissions accepted for two other oncology assets, belantamab mafodotin in relapsed/refractory multiple myeloma, and dostarlimab in the second line treatment of recurrent or refractory endometrial cancer. We expect the belantamab review to complete closer to the PDUFA date in August.

And as we said previously, the ocular events associated with belantamab are unique adverse events that we take very seriously and we're working with the agencies to ensure a safe and effective use in the target population.

We were pleased to see our long-acting two drug regimen in HIV, Cabenuva receive approval in Canada, and we've been engaging with the FDA on the path forward for Cabenuva in the U.S., and expect to make a resubmission around midyear. Also in HIV, we filed for European approval for fostemsavir for heavily pretreated patients.

We look forward to making these important new treatment options available to patients. In performance, we continue to drive growth in sales and have seen an improvement in our profitability this quarter with continued good cost control. We built up capabilities in oncology, ready-to-support our expected launches.

In consumer, integration of the joint venture with Pfizer is progressing very well. We're on track to deliver our cost synergy targets and 90% of leadership roles are now in place. We’ve also, as planned, completed the divestment of our Indian nutrition business to Hindustan Unilever.

We are progressing a number of other consumers’ health brand divestments. Alongside streamlining our portfolio, proceeds from these divestments will also help fund cash costs of the integration. In February, we announced our programs prepare the group for separation in two new companies.

We've now started this important project to get us future-ready with no change to our medium-term targets and timelines. And finally, on trust, as I've always already described, we focus our efforts on solutions to pandemic and on supporting our people.

So, I'll now hand you over to Luke, who's going to give you more details on our Commercial performance in pharma and vaccines, this quarter..

Thanks, Emma. And hope you're all well. So, good news is that we've had a strong start in pharma in 2020 with growth in our new products across the portfolio. We did see some impact from COVID-19 towards the end of the quarter in Europe and in the last two weeks of March in the U.S.

And this was most notable in HIV, which benefited from customer stockpiling and as you'd expect Ventolin, which saw some stock building, but also increased use. Excluding COVID-19 impacts, the underlying trends are good and new products continue to perform well.

And to give you some examples, the Trelegy, we continue to see good growth in the class, and in our share in all key markets. And we expect to get you its approval of asthma later this year. In the case of Nucala, we remain the market leader in the EOS [ph] disease segment.

And I'm pleased to say that we're benefiting from strong launches of our home admin, but especially in Europe where we've seen a significant shift. We also have a good -- we have good data in nasal polyps and plan to file in the second half of the year.

Benlysta, which is in its 10th year on the market, continues to generate strong double-digit growth and the sub-cut formulation is increasingly important here. And we're pleased that the FDA designated our lupus nephritis indication as a breakthrough this quarter, and filing is planned for later this year.

On Zejula, I'll talk to the first line ovarian cancer indication in a minute. But, we are picking up a greater share of new patient starts as we benefit from the operational and execution changes we've made. We've also increased HCP engagement, and actively using the quarter data that was added to the label late last year.

As David can comment in Q&A, there's been a good uptake of the two drug regimen in HIV, benefiting from Dovato’s inclusion in both U.S. and EU guidelines. Like most companies, we did see some impact of COVID-19 towards the end of the quarter in Europe and the U.S.

And I think, this was seen across the portfolio and shown clearly here on the slide in prescription data for some of our inhaled respiratory assets. We would expect some of that to unwind during Q2, but underlying demand for our products remains strong. People are focused and using this time as productively as possible.

We move fast to adapt and to move calls and content onto digital very quickly. And right now, I mean our people are at home, but they're engaging with HCP and we are active in areas like virtual speaker programs. I really want to stress this.

From the start of the lockdown, we've also focused not only on managing the initial phase but on plans to reengage when restrictions are lifted. We expect that going forward, we will see an increase in digital engagement but we are ready to engage with more traditional means as well. So, I think agility and flexibility here are going to be key.

Next slide, please? Moving on to Zejula. With the strong PRIMA data that you all know, Zejula is positioned, if approved, to be the only PARP approved as a mono-therapy in first line for women who do not have a BRCA mutation, which equates to about 75% to -- about 80% of women with ovarian cancer.

In March, we were also pleased and proud to see Zejula included in the NCCN guidelines as a first-line treatment option with a recommendation that covers 80% of patients in the first-line maintenance setting. Upon approval, Zejula will be the only treatment option recommended for BRCA wild-type patients, who did not receive Avastin at treatment.

Now, watch and wait is still an option here, but only for patients, if you look at the guidelines with a complete response. Plus, Zejula is recommended to all BRCA mutant patients, which is at parity with Lynparza mono-therapy. So, we think this will put us in a competitive position once we receive approval, which as Emma said, we expect shortly.

Preparation for launch, as you can imagine, is very active and underway, and we've fully integrated with our teams and we've got some really strong leadership in place. The sales team is fully recruited and we're equipped to launch virtually under COVID-19 restrictions.

In the short term, I think it's fair to say, we do expect the COVID-19 could have an impact on the diagnosis and treatment of ovarian cancer, but we remain confident in the long term in the profile of this remarkable product. Okay. So, I'll finish on vaccines.

In quarter one, we were really pleased to see the acceleration of Shingrix supply continue, and that drove excellent growth. I want to stress though that the underlying demand for this product remains very strong.

That said, towards the end of the quarter, as the prescription trends illustrate, we began to see impact of stay-at-home measures prompted by the pandemic. Although wholesalers and distributors kept ordering stock through April, we expect to see a significant impact in the coming months.

Now, that being said, once the stay-at-home restrictions are lifted and patients can visit their pharmacies in person and access routine physician visits once again, we expect demand to rebound, and we are planning for that.

We are planning for measures to accelerate including driving prioritization of adult vaccinations and linking it to the upcoming Q3 flu season. In terms of supply, we are also on track for 2020 and our capacity expansion plans, including bringing new facilities on line, which remain unchanged.

Our limited phase Shingrix launch in China this year remains set to commence as we move through this year, subject of course to appropriate market conditions. We filed Shingrix for expanded use in immunocompromised adults in Europe last year, and we're on track to file with the FDA this year.

So, in conclusion, before I hand over to Ian, I’d just like to leave you with the following. So, although we're seeing fluctuating demand for our products, the underlying dynamic remains strong. We're using this time as productively as possible to accelerate our digital capabilities and make changes to be more competitive.

And finally, almost from the beginning of restrictions, we have been planning for a strong start when we are able to resume more normal activities. And with that I'll hand over to Ian..

Thanks, Luke. I hope everybody's fit and well today. All the comments I'll make today will be on a constant currency basis, except for specified otherwise, and I'll cover both total and adjusted results.

On slide 16 is the summary of the Group's results for Q1, which is a very strong quarter with 19% reported turnover growth, reflecting the addition of the consumer joint venture with Pfizer, turnover growth of 10% on a pro forma basis.

As you heard from Emma and Luke, we continued to see strong underlying performance of the business during Q1, even in these challenging circumstances. Additionally, this quarter, we saw turnover growth impacted by COVID-19 pandemic in various areas across our businesses.

In pharma, we saw turnover growth of 6%, approximately half to two thirds of which was related to pull-forward in stocking patterns, primarily respiratory in Europe and international, and HIV in the U.S.

And consumer turnover grew 11% pro forma, 14%, excluding the impact of brands that are under review or being divested, and around two thirds of which is related to increased COVID-19 demand particularly in the U.S.

Finally, vaccines, while we’ve seen some adverse changes in prescription trends in the last few weeks, we did not see any material financial impact in the first quarter. I’ll go into more detail on each of these businesses and the drivers in a moment.

Total operating profit was up 42% with total earnings per share up 89%, primarily reflecting the strong operating performance as well as increase in the value of shares in Hindustan Unilever.

On an adjusted basis, operating profit was up 24% reported and 14% pro forma, while adjusted earnings per share was up 26%, reflecting both the operating leverage as a result of higher sales, and the one-off impact of a revaluation of deferred tax assets during the quarter.

We delivered £531 million of free cash flow in the quarter, also reflecting the strong sales growth, improved operating performance and timing of RAR payments. And then, currency, the net impact on sales was broadly flat with a 1% headwind to adjusted earnings per share. The next slide summarizes the reconciliation of our total to adjusted results.

The main adjusting items in the quarter were major restructuring focused on improving the efficiency of the supply chain, with also some initial charges for the separation preparation program we announced earlier this year.

Within transaction-related, the main contributor was a charge for the management of the contingent consideration liability relating ViiV, primarily as a result of movements in exchange rates.

And finally, the disposals column includes a gain from the revaluation of the embedded derivative in respect of GSK’s exposures to movements in Hindustan Unilever share price. My comments from here onwards are on adjusted results, unless I state otherwise.

Slide 18 summarizes the pharmaceuticals business where revenues were up 6% in Q1, as well as our new launches which continued to perform well with encouraging trends. We saw some impact from COVID-19 towards the end of the quarter. This was primarily due to stocking and longer prescriptions being written.

So, we have seen an increase in demand for certain respiratory products. Luke’s just taken you through the performance of some of our key products. So, I'll just point out a couple of important considerations. Starting with respiratory, sales were up 38% with growth from Trelegy, Nucala and Relvar/Breo across all regions.

Relvar/Breo grew 32% globally, benefiting from a prior period RAR adjustments in the U.S. For outside the U.S., sales grew 33% in Europe and 16% in international. Nucala continues to perform strongly following the launch of the at-home application with growth of 38% globally.

And in HIV, revenues were up 8% with the dolutegravir franchise up 9% globally. In the U.S., dolutegravir grew 3%, reflecting the shift within our portfolio towards our two drug regimens where we continue to build momentum as well customer stock-building related to COVID-19 towards the end of the quarter.

Excluding the impact of customer stocking, we estimate sales were flat year-on-year, in line with our previously stated expectations. Within the established pharmaceuticals portfolio, it declined 6% overall, driven by U.S. adverse sales which were down 40%, as expected, given generic competition.

This was offset by continued strong performance from Ventolin with which we saw some incremental demand as a result of COVID-19. Outside respiratory, established pharma portfolio declined by 2%. Overall in pharma, trends remained encouraging and our new products continue to perform well.

As I mentioned, we estimate approximately half to two-thirds of the turnover growth of 6% in Q1, which related to pull-forward in stocking patterns. Over the balance of the year, we expect there will be volatility in demand due to COVID-19 and also a degree of unwind, given the stocking impacts we saw during Q1 in respiratory and HIV.

Turning to pharma operating margin. As anticipated in our guidance at the full year, we saw a decline in Q1 informed by decisions we've made to invest in R&D behind priority assets, promotional activity for new launches and building specialty capability.

In addition, this quarter, we also sell price impacts including notably the impact of generic Advair as well as high provisions for legal settlements in the quarter. On slide 19, we give you an overview of vaccines performance with sales up 19%, driven mainly by Shingrix as well as our meningitis vaccines.

As I mentioned, we did not see any material impacts on the vaccines in the quarter as a result of COVID-19. Shingrix continues to benefit from our actions to increase the supply capacity with revenues in Q1 of £647 million, driven by continued strong uptake in the U.S. as well as the benefit from a one-off RAR adjustment.

As Luke has covered, underlying demand for the vaccine continues to be very strong and we're on track with our supply delivery plans for the year. However, we have recently seen a decline in Shingrix prescriptions as containment measures have limited patients’ ability to access the vaccine.

We expect that during Q2, we will see a significant impact from Shingrix performance as a result. However, we see this as a relatively short-term issue and we're putting the right plans in place to support increased demand once containment measures are relaxed, notably in the U.S.

Other vaccines that may be impacted by the ongoing crisis are our meningitis portfolio with a potential impact linked to back-to-school season in the U.S. as well as lower out-of-pocket sales in other countries, and also in hepatitis, which is likely to be impacted by the global reduction in travel.

Note also that the divestment of the travel vaccines, Rabipur and Encepur will have a slight drag on sales growth this year in the region of 3%. The operating margin of 48% primarily reflects operating leverage as a result of strong sales growth in the quarter, particularly from Shingrix, as well as improved product mix and higher royalties.

Turning to slide 20. Revenues from our new consumer healthcare JV on a pro forma basis were up 11%, with growth significantly impacted by consumer and government responses to COVID-19. We now have revised category reporting structure in place to appropriately reflect and help you understand the key drivers of the combined business.

And under this structure, pro forma growth was 14%, excluding brands that are divested or under review. The divestment of the Indian nutrition business to Hindustan Unilever closed on the 1st of April.

And we're moving forward with other divestments, which will continue through this year to refocus our portfolio and fund integration and restructuring activities within consumer healthcare. Q1 was a strong quarter with good power brand growth and the benefits from the formation of the GSK-Pfizer JV becoming increasingly visible.

We've also seen a significant impact in consumer from COVID-19 in the quarter. This varied across regions with a number of markets including the U.S. and UK experiencing increased demand, while others including China and India were negatively impacted by retailer shutdowns.

We estimate around two-thirds of the overall consumer growth in the quarter was related to increased COVID-19 consumer demand. We believe the majority of this is pantry loading, but there's some incremental consumer usage in the vitamins, minerals and supplements category and in pain and cough and cold.

We’d expect much of the pantry loading to unwind through the year, particularly over the next few months. Operating margin for the quarter was up 320 basis points, mainly driven by higher sales. With the integration on track, we’re delivering the planned synergies and continue maintain strong cost control while investing behind our brands.

On slide 21, we summarize the sales and adjusted operating margin for the group. As I mentioned, our group operating margin up 90 basis points reflects primarily the operating leverage from strong sales growth in the quarter.

However, this also reflects the high levels of resilience and agility we've demonstrated within our supply chain and the overall effectiveness of business continuity planning across the group. We’re also seeing the continued benefit of restructuring and tight control of operating costs across the business.

Moving to bottom half of the P&L, I'd highlight the following. Interest expense was £187 million, in line with last year, despite higher debt levels, reflecting the refinancing actions undertaken in 2019. The quarter also included a fair value gain on interest rate swaps, offsetting lower interest income on cash and adverse foreign exchange.

The effective tax rates of 13.7% reflected one-off non-cash impact of the revaluation of deferred tax assets as a result of the cancellation by the UK government of a previously planned reduction in the corporation tax rate, and non-controlling interest reflected Pfizer’s share of profits of the new consumer healthcare JV.

We delivered cash flow of £531 million in Q1, higher than expected, reflecting the strong operating performance we’ve seen across the business. The increased operating cash flow is accompanied by beneficial timing of RAR payments, offset by adverse working capital, primarily driven by higher trade receivables.

We also received the milestone income from -- milestone income from Novartis relating to ofatumumab, and as well as the positive cash flow we delivered in Q1. We closed the quarter with strong cash balances, have an effective approach to working capital management and maintain access to extensive undrawn committed facilities.

Turning now to our outlook and guidance for this year. When we first issued our guidance, we specified that it excludes any impact of coronavirus, which as we've discussed has already had an impact on our performance in Q1.

We presented a good set of results today with continued strong underlying performance along with some additional demand across our businesses reflecting customer behavior and stocking patterns as a result of COVID-19.

With the dynamic and uncertain situation, there are significant risks to business performance for the remainder of the year and particularly over the next few months.

In the coming months, as government imposed containment measures remain in place, we do expect to see the impact of changes to stocking patterns and reduced demands for those products which are at patient or consumer discretion, mostly vaccines, including Shingrix.

We are confident the underlying demand dynamics are strong and are focused on supporting patient access as restrictions are relaxed. Based on the current assessments of the impact of COVID-19, we're maintaining our full-year 2020 guidance at this time.

We will, of course, if needed, update guidance as more information becomes available to inform an expected financial performance for the full year. There is no change in our capital allocation priorities, investing in R&D behind priority pipeline assets and returns to shareholders.

And as noted in our earnings, we’ve declared a £0.19 quarterly dividend, in line with last year, and the expectations we set out earlier this year. As mentioned, we've got strong liquidity and access to substantial undrawn committed facilities. We’re focusing on business continuity, the safety and well-being of our people and delivering solutions.

And with that, I'll hand over to Emma..

Thanks, Iain. So, in summary, the business has performed strongly in the first quarter. Although of course we have uncertainty, especially over the next few months, we're confident we can navigate this crisis by prioritizing our people, business continuity and leading the way on solutions.

At the same, time, we remain very-focused on delivering our long-term priorities of innovation, performance and trust our 2020 areas of focus. We're progressing our pipeline. We continue to drive improvements in our operating performance. We're moving at pace with the consumer JV integration.

And finally, we started our programs to prepare the Group's separation into two new companies. One, a biopharma company focused on the science of immunology, the other dedicated to everyday consumer health. These two companies’ purposes, priorities and capabilities have never seemed more relevant.

Ultimately, we remain confident in the resilience and sustainability of GSK's business, our ability to deliver on our strategic goals and that we can be part of the solution for the COVID-19 pandemic. We're now joined for Q&A by Hal, Brian, David and Roger. And so with that, operator, this team is ready to take your questions..

Thank you. [Operator Instructions] And the first question comes from the line of James Gordon, JP Morgan. Please proceed..

Great. Thanks for taking the questions. James Gordon, JP Morgan. Two questions, both on vaccine. The first one is about vaccines’ recent performance. If I heard correctly, pharma consumers did give the COVID boost in Q1, I think 4% and 8% and the vaccines’ growth rate was clean.

But then, the vaccines pressure probably only really started at the end of the quarter in a way. So, could you talk about what you saw at the end of Q1, so what was the exit rate for vaccine division’s performance, or could you talk about what you’ve seen for April? How much acceleration have you seen already and is the U.S.

prescription trend for Shingrix much of a guide or was it a lot more benign than that? And then, the second question also on vaccines was flu.

So, we speculate that the governments might want to mandate or much more strongly encourage people to get flu vaccinations this year and for the next few years, because they don't want to deal with flu and COVID at the same time in all the people.

But, if that happens, is GSK placed to capitalize on much of that? Could you really scale up your flu vaccines or is that much more challenging because I think yours is A based [ph] and Sanofi’s is cell-based. So, is your vaccine for flu sustainable or can you participate in that also? Thanks..

Thanks. I'm going to pass this to Luke because it's related to commercial and frontline demand. But, headline is, you're right, great demand and a clean performance from vaccines in Q1.

But that definitely as both Iain and Luke mentioned, we’re facing a slowdown in Q2 just because of both, healthcare capacity and patients’ enthusiasm for -- or consumers’ enthusiasm for going outside. But, we are expecting rebound and it's not linked to the flu demand in fact.

Although you should anticipate a reasonably -- no significant incremental supply on flu from us.

But Luke, do you want to talk through the dynamics there?.

Yes, sure. So, James, I'll answer your second question first. So, last year, we sold 46 million doses in the U.S., which was pretty much everything we had allocated. And we've been able to do that consistently because of supply is so far, touchwood, very predictable, which -- purchases like that.

But as Emma said, we rely on GMP check-ins, for the source of this and that's the 12-month, at least, notice time. So, there's limited upside for us in the coming flu season. But linked to your other question, there is the benefit of having this flu volume then linking it to the Shingrix recovery.

Before I go through specifically individual vaccines and the dynamics there, if you take a medium to longer term picture, I think, we'd all agree that the world is in a way seeing a very unpleasant experiment where you don't have vaccine coverage for quite an aggressive pathogen.

So, I think when people reflect on this role and physicians have confidence to suggest vaccination to patients should be increased than it was before COVID-19 emerged. Now, if you look in the U.S., -- actually I’ll go to Europe first. So, Europe, we saw a big drop-off in vaccines; if you look at Spain and Italy, it dropped off.

But we're already seeing signs of the early shoots of the recovery, led by pediatric vaccines and that's very clear. Governments are signaling that they want these vaccines recruit very quickly and the U.S. is along with that. If you look at retail pharmacy in the U.S. and doctor visits, so they follow the CDC guidance.

When you look at in-home administrations for Shingrix, they dropped by about 90%. But again, I think the key thing here is, we haven't seen a reduction in people wanting to get a Shingrix shot. What we've seen is a reduction of people who don't want to get COVID and who've been told to stay at home.

So, our expectation is that when people can go back out there, they're going to seek these doses out. And what's interesting is, we had two ordering points in April for the major wholesalers. And the first one in April covered about 80% of the April sales, and that was filled. So, this actually helps us restock and clear some backorders.

If you look at the rest of the business, it was interesting. So, pediatric vaccines are really being prioritized. You don't see a big drop in visits. So, Pediarix shipouts went down about 40%, but we do see a bigger impact in Bexsero for example.

Now normally, Q1 is our lowest month, but the volumes went down in terms of shipping to practices and wholesalers by about 80% and Boostrix and Menveo were 70%. So, there is an impact there. It makes sense. Wellness visits are down by about two thirds. But, I think ultimately, we're in a position to capture these back.

I think, some of these orders were also driven by physicians being careful financially. And I think that's the other important thing to remember, which is once these restrictions are lifted, these physicians are going to seek to recover these patients, they've got practices to run, staff to pay.

So, we think there's going to be a surge in activity after these restrictions are lifted. And as I said, early signs in Spain and Italy would indicate that’s true..

Thank you. Next question is from the line of Steve Scala of Cowen..

Thank you. I have two questions. First, just to be clear, is the Shingrix 2020 guidance, which I think is about flat to slightly up with 2019, still intact? And then second, GSK has 96 recruiting trials on clinical trials.gov. That number is down by only 12 in the last five weeks.

These facts don't seem to fit with your cautionary comments on trials overall.

So, can you clarify these two points?.

Sure. So, I'll come to Hal to comment on the overall trials. And you’re, Steve, that the vast majority of our trials are not significantly impacted today, but Hal will comment in more details.

And just to be clear, on the Shingrix guidance, what we guided was maintain run rate plus a bit of the Q4 sales at the end of last year, which would still be certainly not flat year-on-year. So, now -- and that guidance at the moment is unchanged. There's no update to that. We obviously had a strong Q1.

We're really pleased with the progress we're making on supply. We do expect Q2 to be tougher because of the drop in rates under containment, but we are with -- the underlying demand is very strong and our supply is on track. So, we think we would be targeting a bounce back as containment is sort of relived.

So, there will be no changes there in overall outlook at this state. Obviously, we will update you as we get more information.

But, Hal, would you like to comment on the to-date impact on trials, please?.

Yes. Well, thanks for the question. I think, the simple answer is that data is consistent with what we said that we haven't really terminated, only a few programs. So, most programs continue to enroll, albeit some of them less robustly than had been previously anticipated. So, as Emma mentioned, one to three months delays for the vast majority.

A few have been significantly impacted, more than that, and a couple have been terminated or put on pause. But, I think that data is very consistent with the impact we're seeing, which is a nontrivial.

But because of the importance of the programs that we have ongoing and the ability for us to come up with somewhat novel ways of doing these trials, we're confident that the impact is modest..

Thank you. The next question is from the line of Geoffrey Porges of SVB Leerink. Please proceed..

Thank you very much and congratulations, by the way on doing all of this and also delivering good results. So, Hal, just on first of all the COVID-19 vaccine efforts. You must be taking a close look at these programs now.

Are you confident that you have a surrogate for protection yet? And could you just talk about the scale of safety that you think you will need for general use vaccine? And then, Luke, could you just talk about the upcoming pharmaceutical launches you have? Obviously, Zejula, belantamab.

Are you intending to launch, first of all? And secondly, what kind of degree of your typical effectiveness are you expecting, given the way that you're going to have to introduce them more or less on a virtual basis? Thanks..

Okay. We'll come to Luke on the commercial launches and readiness in a new environment first. And then, I think maybe hear from Roger first on the overall vaccine candidates and how we see that space. So, we've got multiple partnerships going on.

But, Luke do you want to go first?.

Sure. So, short answer is, premium will go ahead virtually. I think, we can do that quite effectively and being very thoughtful about that. And we've actually started that process with the NCCN and guidelines as well. With BCMA, ideally we'll wait, because it's a novel agent. It's new. So, we would hold back until the restrictions are lifted.

I hope that answers your question, Geoff?.

Great. Thanks, Luke..

Hang on. And you also asked about effectiveness. So, yes, I mean, there's lots of consultants running around right now with reports. I think, the data that we've seen just through our own good sell outcomes. So, this measures where the call related and the change in behavior. It's about 20% to 30% on average as effective as a face-to-face call.

That being said, there are some very, very interesting outliers where you can see some physicians really, really go with this medium, and we're seeing calls in people we normally might have only seen someone for 10 or 15 minutes drawing their calls out to 35 minutes.

Now, that might be because they don't have much to do because they're not seeing many patients. But interestingly, even in some of the more busy physicians like pulmonologists right now, we're seeing longer calls. So, I think it's going to be very stratified by the individual physicians.

What they prefer, the bulk of value though is still going to be derived from face-to-face rep calls and HCP events..

Roger?.

I think from a vaccines point of view, Emma’s mentioned, collaborations, we believe are going to be key to we think finding a vaccine solution. We've got seven partnerships in place. And I think it's a busy few months ahead as we start to see the data readout in those various candidates.

I'd say on your specific questions, I think it's too early to say if there is a surrogate. Obviously, we'll be in discussions with the regulator about that.

In terms of the level of safety testing as well, that’s another regulatory discussion that we'll have as we looked ahead and what are quite aggressive accelerated timelines of vaccine development compared to what would normally be considered.

What I would say is, with our adjuvant technology, this is a proven adjuvant that has been used before in previous pandemics and has very strong patient safety data and history as well, which means we've got a proven track record here of a platform that can be used for a number of partnerships to develop vaccines going forward..

Next question is from the line Andrew Baum of Citi. Please proceed..

I was listening carefully to how Emma you described GSK taking very seriously the -- I can remember if you said ophthalmic, but you referenced the adverse events associated with belantamab. Perhaps you could share with us now that the FDA has advanced discussions with you, the types of monitoring restrictions as you might expect in the label.

I'm more focused on the earlier lines of therapy than the third line, given the commercial opportunity that how restrictive they may be. That would be helpful. And then second, on your HIV franchise, I would imagine switching patients is going to be increasingly problematic if they don’t present in person.

So, perhaps you all could talk to maybe Juluca in the current environment -- Dovato, rather, in the current environment?.

Yes. So, thanks Andrew. And you're absolutely right. So, we’ll come to David on that. But, the switch market is going to be the bit toughest near term. Hal, why don’t you give a bit more commentary on BCMA and views on that? And then, we'll come back to David..

Yes. Thanks Andrew. I want to be careful our discussions with regulatory agencies are confidential and therefore, I’m not ongoing to comment on the ongoing discussions. But, I think a couple of things are important to remember.

The data in this heavily pre-treated refractory/relapsed patient population from DREAMM-2 was very robust and we see the benefit outweighing the adverse events experienced, particularly the ocular ones in the program.

What we have noticed, and I've discussed with you and all of you on the call several times before, is that these ocular adverse events are unique.

And although they were well managed in the clinical programs, it's important to us to make sure that myeloma experts and eye care professionals in the real world are able to work together to ensure that the drug’s used safely in patients. And of course, we're open to any approach that ensures patient safety is well-handled.

In addition to managing it well, we also have, as we move into earlier lines, the opportunity to do more dose exploration when belantamab is added on standard of care therapies or other effective medicines. It's possible that the dose needed will be lowered and therefore managing the unique adverse events through dose reduction is possible.

In addition, we're evaluating various schedules that might enable that.

And lastly, the one combination that I've mentioned, and this is part of an ongoing proof-of-concept study is, and you're aware of this study, but the really interesting data with the gamma secretase inhibitor is small number of patients and much support from preclinical data looking at inhibiting gamma secretase to prevent the clipping of the BCMA off the plasma cell.

And, in CAR-T therapy, this has resulted in a very high response rate, and again, a small number of patients. And we're cautiously optimistic that that combination may even be a third avenue by which we can lower the dose, and in addition manage the ocular adverse events.

So, again, we continue to believe the benefits seen in the 2.5 mgs per kg [indiscernible] outweighs the adverse events. But, we take it seriously and are looking at ways to optimize how the drug used in the real world..

David, do you want to talk about the 2DR and switch dynamics, please?.

Yes, sure. Thanks, Andrew. So, I think, the first point is, of course HIV is a lifetime disease. And patients with HIV of course need to take daily oral medication. Otherwise their viral load will rebound. They can potentially ultimately resist them. And that oral medication is pretty straightforward to renew prescriptions on an outpatient online basis.

So overall, we expect the HIV business to be pretty robust and resilient through COVID-19 period. And as we’ve seen pretty strong sales in the first quarter, of course there was some stocking in that [Technical Difficulty] probably about a week of early refills and extra stock coming forward.

But, the underlying performance I think was still strong, particularly with 2DRs of £186 million. We're pleased with the progress on the Dovato and Juluca. Dovato now recommended and preferred in the guidelines in the U.S. and in Europe. So, you're obviously right, Andrew. I mean, there is definitely less switching. It was down about 60% in the U.S.

I think it is probably down about 40% right now as physicians adjust for new patients, prescriptions online and they're not coming in and being revisited. So, that will kind of lock in the market share for the moment. It probably means, we'll sell a bit more Triumeq and Tivicay, and Dovato will stay stable.

But hopefully, once patients get revisited, that will start to rebound. But there is definitely an impact with the switching in the short-term on the 2DRs..

Thank you. Next question is from the line of Jo Walton of Credit Suisse. Please proceed..

Thank you. If I can return to a vaccines, in particular your COVID vaccine work. Are you largely related to helping to other people with adjuvants and then doing manufacturing of the resulting vaccine? Just wondering where you have this sort of spare capacity. We know how difficult it is to add capacity for something like Shingrix.

And yet between you and Sanofi, you seem to be able to promise hundreds of millions of doses. So, just some sort of help on how that comes about.

And if you could give us some sense of, if you're planning on this being an annual or every few years vaccine or whether you think it's likely to be effectively a one and done, even if it's a couple of shorts within that? And secondly, if I can just push you on Shingrix, the level of the RAR that came in there versus the incremental supply.

And clearly if we were just to take 4-time the first quarter, we'd be way higher than consensus for the year. I'm just wondering how big the RAR was? Thank you..

Yes. I think, the RAR -- and correct if I wrong, was 50 for the quarter.

Is that right, Ian?.

In the quarter, yes..

In the quarter, it was 50. And obviously -- and there's no change, as we said earlier. So, our overall outlook for the year on Shingrix, we had a great Q1, Q2. It is expected to look a bit different. But again, we're working on the balance. Supply is very much on track with what we've been aiming for.

And I completely understand the question in terms of how come we can -- a vaccine -- this normally takes 10 years, it’s 18 months in this kind of capacity provision. I'll ask Roger to explain the very significant differences.

And by the way, one of the reasons why -- when the question we were trying to answer is how do you get to a vaccine that works at scale, the best probability of success as fast as possible with COVID is a very different scenario in a pandemic crisis than with a new technology of Shingrix.

But perhaps Roger, you can give a little bit more kind of color on that in terms of the difference between that and the Shingrix capacity expansion..

Exactly. Listen -- thanks very much for the question. I think, to be clear, the partnerships that we have in place area adjuvant partnerships. So, we're obviously providing our adjuvant, which for those who don't know, is a separate vial of product that we deliver and is in preclinical and then moving into clinical testing.

I think, it's important to know that that adjuvant technology already exists as a proven adjuvant that we have supply before. It’s our adjuvant system number three. So, the supply chain actually already exists for it and is a discrete supply chain, is quite different technically from Shingrix, completely different technology.

So, the two aren't interchangeable. And we keep some redundant capacity in it for these very reasons for pandemic preparedness on flu. So, the supply chain is there now. We still have expansion to do.

So, to reach the levels that we believe that will be required for the partnerships that we have and for the populations involved, we believe that we will have to expand and that will take time. But, we're not starting from zero, like some other vaccines will have to. I think that's important.

Shingrix is also a very much more complex bulk process and also supply chain as well. So, I think that’s the difference. On the seasonality questions as well, I think it's too soon to tell, who knows.

But, with the fact that we'll be part of a number of different vaccines hopefully means that if that does become seasonal, we’ll be part of that solution as well..

The next question is from the line of Emmanuel Papadakis of Barclays. Please proceed..

Maybe wanted to kind of just your perspectives on the data you reported earlier this month in terms the nasal products opportunity. It seemed somewhat at face value inferior to the incumbent competitor in the past.

So, perhaps you could just give us some early thoughts in terms of the commercial potential and degree to which that’s synergistic on your current business in severe asthma and timing for that ramp, if any. And then, perhaps the second question just coming back to HIV capital because you said you’re going to refile in the summer.

Any color you can give us now in terms of class response, timing could be on the market and then assuming we're back in the semi normalized world, the speed of launch we might anticipate? Thank you..

So, David, do you want to talk about Cab? And then we’ll come Luke for the lifecycle management, commercial potential on Nucala..

We’ve had discussions with the FDA on Cab. And as we said today, we expect to resubmit in the middle of the year. We do expect it to be type 2. So, that can take perhaps six months for the FDA to review. So, on that basis, if all goes well, we would expect [Technical Difficulty] back end of this year or the early part of next year.

And just remember, this is entirely related to the CMC and particularly data on the specific quality control. It's not related to clinical safety data..

David?.

Yes, sure. So, Emmanuel, great question. I think, the key thing to zone in here, if you can compare our SYNAPSE versus SINUS-24 and 52 with dupilumab, the key area to look here is the number of previous surgeries.

So, for a mepolizumab Nucala, a 100% of these patients had had at least one previous surgery, whereas with dupi in SINUS-24 was around 69%, and in SINUS-52, it was 58%, and similar rights for the placebo in both those arms. If you look at three or more previous surgeries, they're very, very resistant disease, complex disease.

One in four mepo patients had previous surgeries, three or more previous surgeries where that was 23% and 15% respectively in SINUS-24 and 52.

So, our thinking is that the numeric differences there are really driven by a difference in patient populations with 34% of patients in GP studies had no previous nasal polyps surgery and therefore had less persistent polyps, which may theoretically be more easy to treat.

In terms of the opportunity, I would say, if you look about five years out, it's probably £80 million to £100 million of the opportunity. So, it's a nice add-on, it reinforces the product, but it's not transformational in itself..

Thanks, Luke.

Next question, please?.

Next question is from the line of Kerry Holford of Berenberg. Please proceed..

Hi. A couple of questions for me please. Firstly on SG&A. Some of your global peers’ reported SG&A figures were lower than the previous run rate.

As what happened with you in this year quarter, is it something we should anticipate being more apparent in to Q2, are you seeing a significant decrease in your spend, travel projects, and then likely that's simply being reinvested into digital and telemarketing? And then secondly, thinking about utilization, particularly in the U.S., how do you think about the rest of your business, rising U.S.

unemployment, and could the effective negative payer mix shift is significant to you this year, if not next? And I wonder if you would comment on which of your products may be at risk..

I'm going to ask Luke to comment for both. It’s very much in the bucket of sort of unknown, although clearly unemployment figure is significant. But in terms of direct impact, and I'm not sure we’re going to give a lot of detail to which product. But, Luke, talk a bit about the shifting mix.

And just in terms of SG&A, I think part of that growth came from either one-off legals or TESARO.

Is that right, Ian?.

Yes. That's right..

So, clearly, our goal is to invest behind our new launches and oncology preparedness and make sure that non-customer facing costs just keep coming down. And obviously, we're going to make savings in travel, like everybody is. And as Q2 experiences what it does, we’d expect that to stay a lot in control.

But, exactly, I said, we're very vested in making sure we have faster as opening -- markets do open up, and the investment in digital is ongoing. And obviously, we’re not making COVID-related redundancies. But Luke, do you want to talk a little bit about....

I mean, you can imagine we're looking at this very, very closely. As Emma said, it’s very hard to predict. But if I could just lay out our thinking, and I'll just take you through the products after that. So, as you know, if you get laid off in the U.S., you have the option of COBRA to bridge your commercial insurance.

Some people are going to go into the Obamacare health exchanges and people can enroll in those. And then unfortunately, some people may fall into the Medicaid category or that may be expanded. What's interesting is Congress did provide subsidies for COBRA in 2008, but they don't seem to be signaling that they're going to do this in 2020.

And also, let's not forget that employees who are furloughed, they lose their salary, but so far not their health insurance and there's good examples with Disney and other companies like that that are doing that. So, we're trying to calculate where everyone will land and it's really hard at this stage.

I mean, the baseline, if you look at right now, we think it's about a reduction of 9 million so far. So, that's roughly where we think it is.

But yes, I think it depends, with bankruptcies -- I mean, companies can still provide insurance on the bankruptcies, unless they choose to walk away from their plan, and then people aren't eligible for COBRA at that point. So, Chapter 11 doesn't necessarily mean that you lose your benefits.

Now, in terms of the products, the ones which have the higher commercial component Breo, Advair, Flovent and Ventolin. So, they're the ones which obviously we’ll watch closely. Nucala it a bit lower. I mean, there may be some impact on biologics because they're a bit more expensive.

But again, these patients tend to have severe disease, as well Trelegy and Anoro are mostly Part D. So, they're in a good spot as is Incruse. Vaccines, we think are going to behave differently. Again, these are single events or double events. So, from a cash flow point of view, not as challenging as a chronic medication.

And we think that if you look at pediatrics with the existing government, private partnerships in place, they won't be disrupted. In terms of Shingrix again, two times 150 is in reach for many people versus chronic medication. So, again, I think we are confident on the mid to long term there.

And then, I guess on the Zejula, I think, it ultimately is going to be driven by the level of people that are coming forward for treatment. We're seeing that drop. But again, I think in the mid to long term, we should be okay with this product. So, I hope that answers your question.

So, short answer is, some of the respiratory products are more exposed, but they are ones which are under pressure anyway. The ones that we need to grow aggressively, like Trelegy and the vaccines and Nucala are less exposed and Zejula of course..

Thank you. Our last question comes from the line of Graham Parry, Bank of America. Please proceed..

So, just then firstly on Shingrix, just wanted to square a couple of comments. So, you said the full-year guide is unchanged with Q1 was running quite a long way, well above the fourth quarter, plus a bit rate.

So, is that a little conservative in the Q1 -- sorry in the full year guidance in Q1 capacity, though indicative of what you think you can actually produce through the year? And you also said, you expect an impact in 2Q, but also fact that the April orders are being filled.

So again, is that just sort of anticipating some sort of drop-off down in April? And then secondly, in your comments around COVID impact, you specifically mentioned supply chain manufacturing as a COVID risk. And I'd say that's an area that most of the companies have been perhaps more robust in their statements on.

Is this because of their particular difference in GSK supply chain vulnerability or just a different communication style in terms of communicating with the market? Thank you..

I suspect. Thanks, Graham. So first of all, on Shingrix, there's no change to our outlook because as we said, we've had a very -- we're actually on track with our supply plans. We have had a strong quarter, but there is no question, Q2 will be tougher when -- as Luke said, the vaccination rates drop by 80% to 90% in the U.S. market.

The signals from wholesalers in the first two ordering dates of April are positive signals on the underlying demand, but that is going to flow through, but it's a signal of the confidence of a bounce back. So, we do think the curve will be differently shaped and we'll obviously update you as we go through the year and results come through.

And in terms of supply chain, I certainly won’t be signaling any specific concern. You may be right in terms of different company talks and communications. We think we've got a very robust supply chain and we're really pleased with the way of 70-plus factories are mobilized to fluctuating demand.

We just want to make sure that we are responsibly signaling the potential risks with a lot of uncertainty in the world. And this may be related to third-party suppliers or indeed government actions that one can imagine in the external environment, perhaps more fundamentally than internally. But no, no specific concerns that we're looking to flow..

I think I’d only add there, our commentary in the earnings release, Graham, is directly responsive to guidance from both the SEC and the FRC in terms of laying out the risk that may be forward-looking. But I'd echo completely Emma's comments with respect to the resilience and the performance of our supply chain..

Okay. So, with that everybody, again, thank you very much for taking the time to join us. Please do stay well. And we'll look forward to catching up with you soon..

Thank you. Everyone, that concludes the call. You may now disconnect. Thank you joining us..