Good afternoon, ladies and gentlemen, and welcome to the analyst call on the GSK Second 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 Q2 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 our 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. We have a broader team available for Q&A. [Operator Instructions]. And with that, I will hand the call over to Emma..

Thank you, Sef. And welcome, everybody, to today's call. I hope that you and those around you continue to be well. At this half year mark and in what have been extraordinary circumstances, I am pleased to report that we've mobilized across GSK to respond to the pandemic and have simultaneously advanced our long-term strategic goals at pace.

Adjusting rapidly to the new ways of working, we've secured supply, strengthened the pipeline, progressed multiple solutions for pandemic, and our integration and separation programs are all firmly on track.

While we have seen some COVID disruption impact to our performance this quarter, we're pleased with half year delivery, and our confidence in our business and its prospects remains high. Hal will give you an update on our innovation progress shortly, but particular highlights in the last few months include, in Oncology, the U.S.

approval for Zejula as a first-line monotherapy maintenance treatment for women with ovarian cancer. We were also pleased to see positive opinions from the FDA's ODAC and CHMP on belantamab mafodotin, a medicine, we believe, will be very important for multiple myeloma patients.

In Infectious Diseases, we made great progress in HIV with the presentation of truly groundbreaking data for long-acting cabotegravir in the PrEP setting.

And in Vaccines, we're poised to move into pivotal studies for very significant opportunities in RSV and meningitis and have just announced our collaboration with CureVac, targeting up to 5 infectious disease pathogens.

Despite short-term pressures, our performance fundamentals continue to strengthen with good momentum and strengthening commercial execution on our key growth drivers. We're winning share in Respiratory; in oncology with Zejula; with 2 drug regimens in HIV; and in power brands and consumer, including a notable acceleration in VMS demand.

We've seen strong acceleration of our digital capabilities as we've continued to increase our share of voice with HCPs, both virtually and face-to-face where possible, as well as winning share in an accelerating e-commerce channel in consumer.

Our consumer integration and company separation programs both continue to progress well and undistracted, with over 90% of Pfizer revenues now successfully remotely switched over to GSK systems. And Iain will update you on this and broader cost discipline later.

And we continue to progress our consumer divestments, including Horlicks, to set up the world's leading pure-play consumer health care company with the most competitive portfolio possible. On trust, alongside others, we helped launch $1 billion AMR action fund to fight another major risk to global health. We were delighted to receive U.S.

approval for a new pediatric formulation of dolutegravir. And finally, I was very pleased to see all-time record levels of employee engagement in the quarter driven by pride in GSK's purpose, our people's sense of being valued and the positive cultural changes we're making.

We've taken a comprehensive approach to respond to COVID-19 using our science and technologies to develop adjuvanted vaccines and therapeutic solutions, while at the same time, accelerating momentum on existing R&D projects and investing in our future capabilities and competitive advantage.

We at GSK firmly believe multiple vaccines will be needed to fight COVID, and it's why we've deliberately taken a unique collaborative approach with a proven technology to develop adjuvanted vaccines.

GSK's adjuvant is proven in a pandemic situation, and alongside improved efficacy, it can help reduce the amount of antigen needed and get to scale faster. We can deliver more than 1 billion doses of adjuvant in 2021. We announced an agreement to supply the U.K.

this morning, and we're in late-stage discussions with multiple other governments taking a global and access-led approach. We're also making good progress to start clinical development of promising therapeutic antibody options, which could be in market next year.

We've moved to accelerate our access to new technology platforms through strategic collaborations that will advance our R&D in multiple disease areas and could be relevant in future pandemics. And we continue to accelerate momentum with existing projects, which remains important while so much attention is focused on COVID.

Of course, as we expected, COVID has disrupted our performance this quarter. Pro forma group sales declined 10% in CER terms, with the greatest impact of the pandemic seen in our Vaccines business as access to vaccinations was limited. We also saw some of the patient and consumer stock build in Q1 reverse as expected.

Group adjusted operating margin for the quarter was 22.9%, reflecting particularly the performance in Vaccines, together with increased investments in our pipeline and new products, partly offset by ongoing tight cost control. On a total basis, earnings per share were up over 100% to 45.5p, and adjusted earnings per share decreased 38% to 19.2p.

For the first half overall, sales were up 8% reported and flat on a pro forma basis, with continued progress on our performance in Pharma and Consumer and despite the significant but short-term impact we saw from the pandemic in Vaccines.

Adjusted operating profits were down 7% pro forma as we continue to invest behind advancing our pipeline and new product launches. And the momentum here is encouraging in our key growth drivers.

In Vaccines, despite lockdown impact on vaccination rates, we believe the underlying demand for our key vaccines, including shingles and meningitis, remains very strong. The guidance from government agencies, including the CDC, is emphasizing the importance of routine immunizations and catch-up for all age groups, including adults.

We're seeing encouraging signs of recovery in selected geographies in Q3 and are investing to support it. So there remains some way to go to get back to pre-COVID levels for adult vaccinations such as Shingrix. We expect to see vaccination rates recover in the second half of the year.

We're confident it will come, but clearly, there remains a degree of risk on the exact timing. We continue to work on expanding capacity for Shingrix to support recovery in demand and to enable further launches around the world with this important and much-needed vaccine. Sales in our Respiratory portfolio are performing strongly.

With Trelegy, we continue to lead the market as a single-inhaler triple therapy and also grow the market, with sales up 58% in Q2. We're looking forward to the FDA's decision too on the asthma indication for Trelegy later this year. And for Nucala, we continue to see strong growth aided by strong uptake of at-home administration.

We're retaining leadership in all key markets and expanding our label in other eosinophilic indications, which will further cement our leadership. In Oncology, we've built a strong commercial platform from which to grow Zejula and also launch belantamab on approval.

Zejula in the U.S., the latest Flatiron data, which was for May, already indicated a 50% increase in Zejula share in first-line maintenance to 21%.

Although with the pandemic, we've seen delays in initiation of chemotherapy and debulking surgery in recent months, which does add a near-term headwind, we remain confident in the long-term outlook for Zejula, and there is a lot of opportunity with new guidelines and currently low levels of PARP penetration in first-line maintenance.

We continue to believe Zejula is an important medicine with potentially unique properties. In HIV, as expected, we've seen the unwind of Q1 pull-forward. And whilst the pandemic has reduced switching and new diagnosis, we nonetheless continue to see increases in Dovato and Juluca NBRx share to 9% this week in the U.S.

and are optimistic 2-drug regimens growth will accelerate when the situation normalizes. We also expect Dovato to benefit from a broader U.S. label later this quarter with the anticipated conclusion of data from the TANGO study. We continue to make great progress on innovation in HIV, and Hal will give more detail on this in a moment.

I'm now going to hand over to Iain who will take you through our financial performance and outlook..

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 10 is a summary of the group's results for Q2 and the half year. In the first half, turnover was up 8% on a reported basis and flat on a pro forma basis.

Excluding the impact of disposals, revenues were up 1%. Adjusted operating profit was up 2% reported and down 7% pro forma. Adjusted earnings per share was 56.9p, down 6%. For Q2, turnover declined 3% on a reported basis and 10% on a pro forma basis. Excluding the impact of disposals, revenues were down 8%.

As you've heard from Emma, we continue to see strong underlying performance of the business. However, during Q2, we saw turnover adversely impacted by the COVID-19 pandemic, with the most significant impact within Vaccines. I'll go into the business drivers in a moment.

Total operating profit was up 90%, with total EPS up over 100%, primarily reflecting the net profit on the disposal of Horlicks and Consumer Healthcare brands. On an adjusted basis, operating profit was down 21% reported and 27% pro forma, while adjusted EPS was down 38%.

Earnings were impacted by lower turnover, continued investment in R&D, support of new product launches and increased effective tax rate and a higher noncontrolling interest allocation of Consumer Healthcare profits. These were partially offset by continued tight control of operating costs across the business.

We delivered £2.5 billion of free cash flow in the first half, reflecting favorable working capital, timing of RAR payments and proceeds from divestments of intangible assets. And on currency, in the quarter, there was a 1% tailwind on both sales and adjusted earnings per share. Slide 11 summarizes the reconciliation of our total to adjusted results.

The main adjusting items in the quarter were major restructuring, which reflects continued progress in the Consumer Healthcare integration and separation preparation programs; transaction-related, within which the main contributor was a charge relating to remeasurement of the contingent consideration relating to ViiV Healthcare; and finally, the disposals column includes the disposal in the quarter of the Horlicks and other Consumer Healthcare brands.

My comments from here onwards are on adjusted results, unless stated otherwise. Slide 12 summarizes the Pharmaceuticals business where revenues were down 5% in Q2 primarily resulting from the decline in Established Pharma.

As expected, the COVID-19-related customer stock building in Q1, predominantly in Europe and the U.S., broadly reversed in Q2 with only a minor dolutegravir impact in Europe and the U.S. remaining. We estimate that the impact of the stocking reversal on growth in Q2 was approximately 4%.

The quarter also saw lower levels of new patient prescriptions in the U.S. and Europe, reduced market demand for allergy and antibiotics products in international and some pressure on net prices in the U.S. informed by a shift in channel mix. For the first 6 months, Pharma revenues were flat CER, and adjusted operating margin was 25.4% CER.

Emma just took you through the performance of some of our key products, so I will just point out a couple of important considerations with respect to the second quarter. Starting with Respiratory, sales were up 16% with strong growth from Trelegy and Nucala. In Oncology, Zejula sales were £77 million in the quarter, up 32%.

In HIV, revenues were down 3%, with the dolutegravir franchise down 2% globally. Sales were impacted in the quarter by customer destocking following the increased demand in Q1 due to COVID-19. We continue to see good uptake of the 2-drug regimens, however, giving us confidence in the longer-term growth outlook.

Excluding the impact of customer stocking, we estimate that HIV sales would then increase slightly in the quarter, and we expect sales to be broadly flat for the full year.

Our Established Pharmaceuticals portfolio declined 17% overall, impacted by Ventolin, which was down 39% as a result of generic substitution in the albuterol market as well as pandemic-related destocking in Europe. Seretide/Advair sales were up 2%, with the U.S.

up 34%, reflecting higher demand in the ICS/LABA class, offset by declines in Europe as a result of generic competition and pandemic-related destocking. Outside Respiratory, Established Pharma portfolio declined by 20%, primarily reflecting lower demand for our dermatology products and antibiotics during the pandemic.

Overall in Pharma, trends remain encouraging, and our new products continue to perform well. We continue to expect Pharma sales to decline slightly in 2020, excluding divestments. Turning to the Pharma operating margin.

As anticipated, we saw a decline in Q2 primarily reflecting sales performance, while we continue to invest in R&D behind priority assets and promotional activity for new launches. We have maintained a sharp focus on cost management across the business with focus on increased efficiency in noncustomer-facing activities. More on this subject later.

Slide 13 gives you an overview of Vaccines performance, with sales down 29%. As expected, Q2 revenues were impacted by containment measures, informing customers' ability and willingness to access immunization services across all regions.

Shingrix declined 19% globally, primarily reflecting lower vaccination rates in the U.S., which was partially offset by favorable return and rebate movements. The meningitis portfolio declined 29%, impacted by lower demand across all regions. In the U.S., Bexsero maintained and Menveo grew market share.

Hepatitis vaccines declined 62%, primarily reflecting travel restrictions. And DTPa-containing vaccines declined 43% as vaccination rates fell. Sales of Infanrix/Pediarix were also impacted by unfavorable year-on-year U.S. DC stockpile movements and supply constraints in Europe.

One should also note that divestments of the travel vaccines, Rabipur and Encepur, resulted in a drag to vaccine sales in the quarter around 3% and will have a similar drag on vaccine sales growth this year. The operating margin of 23.4% reflected the impact of reduced [indiscernible] quarter.

In the first half, Vaccines revenue were down 6% CER, and adjusted operating margin was 38.2% CER. Turning to Slide 14. Revenues in Consumer Healthcare on a pro forma basis were flat, excluding brands either divested or under review, reflecting the unwind of increased COVID-19 demand we saw in Q1. Including those brands, turnover declined 6% pro forma.

At a regional level, China returned to growth as mandated retailer shutdowns were lifted. However, this was more than offset by declines in Europe and the U.S. as a result of the pantry-loading unwind. The vitamins, minerals and supplements category continued to grow strongly with sales growth in the high teens on a pro forma basis.

This higher demand reflect an increased customer focus on health and wellness. In pain relief, sales benefited from the continued strong performance of Panadol and the successful Rx-to-OTC switch and launch of Voltaren OTC in the U.S.

This was offset by an adverse impact on Advil due to initial market misinformation relating to COVID-19 ibuprofen treatment, which has since been corrected. We're also excited about the launch of Advil Dual Action.

Sales also benefited from the increased retailer stocking ahead of a systems cutover in North America as part of Pfizer integration activities, which added 2 percentage points of growth in the quarter, largely in the digestive health and pain relief categories. This benefit is expected to reverse in Q3.

We're close to fulfilling our commitment to divest £1 billion of noncore brands in order to refocus our portfolio as well as funding integration and restructuring activities within Consumer Healthcare. Operating margin for the quarter was down 120 basis points year-on-year.

In the first 6 months, Consumer revenues increased 2% CER pro forma and 7% excluding the impact of divested and brands under review. Pro forma adjusted operating margin was 24.5%. With the integration on track, we're delivering synergies as anticipated and continue to maintain strong cost control while investing behind our brands.

On Slide 15, we summarize the sales and adjusted operating margin for Q2. As I mentioned, our group operating margin was down 530 basis points on a pro forma basis and is informed primarily by the sales impact in the quarter while we continue to invest in R&D behind priority assets.

SG&A for the quarter was down 5% on a pro forma basis, reflecting integration savings and reduced promotional and variable spending across all 3 businesses, a result of this pandemic. This is partially offset by targeted investments in customer-facing activities focused on growing the top line.

We continue to maintain a sharp focus on cost management and are on track to deliver, firstly, synergies from the consumer integration, achieving £500 million savings between now and '22; secondly, benefits from the separation preparation program across multiple activities, including the supply chain, development and R&D, commercial operations and our global support functions, resulting in efficiencies which will deliver £800 million of savings by 2023 and will contribute to meaningful margin expansion from 2022 onwards; and thirdly, savings from learnings over the past 4 months with opportunities initially across travel and entertainment, conferences and meetings, commercial real estate and through finding new ways of engaging with our customers, health care professionals and our other stakeholders.

We've included in the appendix this analysis covering the year-to-date information. Moving to the bottom half of the P&L, I would highlight that interest expense was £227 million.

The increase primarily reflects reduced swap interest income and foreign currency hedges and lower interest income and reduced overseas cash post the close of the divestment of Horlicks and other Consumer Healthcare nutrition products in India. This was partly offset by favorable refinancing of term debt.

The effective tax rate of 20.5% reflected delays in the settlement to open periods and updated forecast profit mix for the year. We now expect full year effective tax rate of around 16%. And noncontrolling interest reflected Pfizer's share of profits over the Consumer Healthcare JV.

We've delivered cash flow of £2.5 billion in the first half of the year. The increase primarily reflects the reduction in trade receivables as a result of collections following strong sales in Q1, beneficial timings of payments for returns and taxes, a lower seasonal increase of inventory and disposals of intangible assets.

These were partly offset by higher dividends to noncontrolling interests. Recognizing the lower Q2 revenues and the H1 impact on timing of RAR and tax payments, we anticipate lower free cash flow in the second half. Overall, we still expect cash flow to be a step-down from 2019.

As well as the positive cash flow we delivered in H1, 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. We're maintaining our full year guidance of adjusted EPS down 1% to 4%.

Our performance for Pharma and Consumer in the first half of the year is in line with where we expect it to be. We expect limited impact from COVID-19-related stocking patterns for the balance of the year in these 2 businesses. However, there remain notable risks to business performance over the balance of the year, primarily in Vaccines.

As evidenced in the second quarter, the pandemic's biggest impact has been here. The key variable in achieving adjusted EPS guidance in the full year is the timing of the recovery of vaccination rates.

Underlying demand for our Vaccines portfolio remains strong, and we put in place a range of actions to support the recovery of vaccination rates, which we anticipate and are seeing take place so far in the third quarter.

Should we experience a delay in recovery of vaccination rates of, say, 3 months, for example, this would adversely impact full year adjusted EPS by up to 5 percentage points. As we move into the second half of 2020, there's no change in our capital allocation priorities.

These are investing in R&D behind priority pipeline assets and delivering returns to shareholders. And as noted in our earnings release, we've declared a 19p quarterly dividend, in line with expectations we set out earlier this year. And with that, I'll hand over to Hal..

first, maximizing the patient impact of our marketed medicines such as Zejula, Benlysta and Nucala; second, bringing the transformational impact of cabotegravir to patients and treat HIV; third, advancing our oncology portfolio by achieving approvals for bela maf and dostarlimab while building a pipeline of future indication expansion; and of course, delivering proof-of-concept studies for a number of exciting earlier assets; and lastly, delivering a robust Phase III pipeline, including three new pivotal studies I mentioned earlier with our RSV and meningitis vaccine.

In closing, let me say I'm extremely pleased with the progress we've made over the last two years, and I'm confident that the approach we are taking is delivering. We will continue working to build a stronger, more productive and more innovative R&D pipeline. With that, I will now hand it back to Emma..

one, a biopharma company focused on the science of the immune system and genetics, the other dedicated to everyday consumer health. Ultimately, we remain confident in the resilience and sustainability of GSK's business and our ability to deliver very successfully on our strategic goals. So we're now joined for Q&A by Luke, Brian, David and Roger.

And with that, operator, the team is ready to take questions..

[Operator Instructions]. We now have Matthew Weston from Crédit Suisse..

Two questions, please. Firstly, for Emma. President Trump's proposed a number of executive orders on U.S. drug pricing, including international best price.

As one of the first CEOs who's able to comment immediately after those announcements, I'd be interested in what's GSK's view on the proposals and what you would expect to shake out as we approach the election.

And then secondly, probably for Luke, given the need for a vaccine rebound in the second half, can you talk about this year's flu season? How many doses are GSK targeting to ship versus last year? And should we assume price improvements given, I presume, high government demand for immunization across the board?.

Right. Luke in a second, but just to comment on the executive orders, which, as you said, have just come out. And we're reviewing that and monitoring how things evolve, obviously, being conscious and thoughtful about what can actually happen ahead of the election. I mean these are all fall topics have previously been raised.

And our position, frankly, is maintained, it's the same, which is we very much support any shifts that continue to drive access and support innovation that the world has never seen more than now is required for all of the unmet need.

And we're very supportive of programs that lower out-of-pockets, particularly for patients that are under economic pressure, and likewise, due governance around access to 340B.

We do, however, have concerns about international pricing indices and importation because global systems are not comparable, and the focus should be on maintaining safety and quality of products and also incentivizing innovation. Nonetheless, our #1 priority is continuing to focus on quality, needed, differentiated medicines.

You all know that GSK has a strong track record in terms of responsible pricing.

And actually, we have continued to innovate for access, and that's visible when you think about 3-in-1 respiratory with Trelegy; the fact that Zejula is a single treatment; or indeed, the whole growth we are seeing and investing in 2-drug regimens; and of course, commitments to price responsibly for any COVID solutions.

So Luke, do you want to comment, please, in terms of the focus on the flu season, which we know is very important?.

Sure. Thanks, Emma. Thanks, Matthew. So in the U.S., we expect to ship around 50 million doses in the upcoming season. The manufacturing team has done a great job, and we expect those to be in the market shortly. This is a critical part of our acceleration program for Shingrix.

And that's up from 46 million in 2019, which back then was about 19% of market share. And the U.S. is where we send 2/3 of our supply..

This is Louise Pearson from Redburn..

I got a couple on the RSV program, please.

So firstly, in terms of revenue opportunity in the older adults, do you see this as a vaccine that could potentially support a premium price point like a Shingrix should this program ultimately be successful? And secondly, specifically on the maternal vaccine, is there any reason to believe your vaccine will be differentiated from the Pfizer maternal vaccine, which also recently came through proof-of-concept?.

Thanks very much, Louise. And I'm going to turn to Roger. But absolutely, we do think that the RSV portfolio has tremendous potential, both in terms of unmet need and our competitive positioning. But Roger, perhaps you'd like -- not least, by the way, with our differentiated adjuvant, which has proven to work on all the people.

So Roger, perhaps you would like to give a bit more details on that..

Fantastic. Louise, thank you. Yes, we are completely delighted with the positive data that we saw in the 2 RSV assets that Hal mentioned. I suppose it's worth pointing out both the fast-track designation from the FDA also.

Just on RSV older adults, we really think we are likely to be uniquely positioned here because of the pre-F antigen and the adjuvant that Emma referenced as well. The adjuvant system in Shingrix is the AS01 adjuvant, which created greater than 90% efficacy in Shingrix.

So again, that's creating a level of excitement because we really believe that, that could offer potentially wider and longer protection. On your pricing point, I think if we do create that level of differentiation and protection, that level of pricing is appropriate. But obviously, that is to be determined as we run through the trials.

We're moving into Phase III in early '21. That's one. So we are excited about older adult. On the maternal side, just in terms of -- it's the same antigen as the older adult vaccine. It moves into Phase III in the second half of this year. Two points I'd really note here.

Number one, this is likely to complement other CDC-recommended maternal vaccines that we've got in our portfolio as well. So we've got experience in terms of how we operate in this maternal vaccination space. That will be the first one. I do think our vaccine offers potentially also polyclonal coverage versus in the competition.

We know also that we'll be up against monoclonal competition. And I think that could offer broader stream protection, which protects us against -- well, protects you against virus mutation or if viruses that are screened actually escape the monoclonal. So yes, excitement in both of those.

The good news is we'll share the data on this in Q4 later this year..

This is Keyur Parekh from Goldman Sachs..

Two, please. First, kind of just on the cost trends that we've seen this quarter, Emma and Iain, would love your thoughts on how do you see the sustainability of the growth in the cost as we go through the rest of the year. I think a lot of your peer groups seem to be reporting margins meaningfully better than expected.

I would be keen to hear your perspectives on how long do you think the need for reinvestment continues to be. That's question number one. And then question number two, on Zejula, I think kind of number's a bit below expectations for the quarter. Clearly, some stocking kind of moving from Q1 to Q2 or likewise.

But Luke, would love your thoughts on how you think you're doing in the real market please, kind of if you can refer to some market share trends.

And when do we anticipate a real pickup that justifies the value you paid for TESARO?.

Thanks, Keyur. So let's go to Iain first and then over to Luke..

Okay. Thanks, Emma. Keyur, thanks very much for the question. Look, cost, I think one of the differentiating aspects of our focus around capital allocation is investment behind R&D pipeline. Key assets in the pipeline is absolutely key priority for us, and you continue to see a cost increase in that regard as we invest behind those priority assets.

So in the second quarter, Pharma R&D up 13% and year-to-date overall for the company, up 11%. That will remain a focus for us. On the other hand, on the SG&A front, in the quarter, down 5%. Very, very strong focus on all noncustomer-focused activities.

So we continue to invest in terms of supporting new product launches and completion of the build-out in terms of specialty.

But if you think about the programs that we are delivering savings against, integration of the Consumer Healthcare business, Brian and the team beginning now to deliver savings from that integration, very much in line with the £500 million we expect to deliver between now and 2022.

The future-ready program, separation preparation program by another name, beginning very, very early stages of delivery. But again, between now and 2023, $800 million of savings with the lion's share of that delivered by the end of 2022 with meaningful margin improvement.

And then in addition to that, just the day-to-day tactical management of costs in the second quarter, we've managed T&E down to a very, very small number. As you would imagine, conferences and meetings down to a very small number. Found ways to continue activity with our customer, with our health care professionals through virtual means.

That's been particularly noted in the U.S., which, again, takes costs out of the travel and entertaining, the fleet expenses for the sales force, for example. So there's a very strong focus across noncustomer-facing activities as well as just continuing to deliver productivity through the supply chain and the commercial organization.

So happy with the progress in terms of 5% down on SG&A in the quarter. Continued focus in that area, but we'll continue to invest behind SG&A -- sorry, SG&A between -- behind priority assets and R&D..

Thanks, Iain. Luke, Zejula..

things that we can control and things that we can't. So in terms of things that we can control, I think we're doing well. So first-line market share jumped 14% to 21%. And again, if you look at the class, it's up 100% or close to 100% in 12 months. And we still only have 15% of women in first-line getting a part.

We had the leading share of voice to average at about 39% and actually got up to a peak of 49% because we rapidly changed our model when COVID hit. And then we also -- as soon as we had state-level clearance and government clearance, we got straight back out there.

If we look at message recall tracking, this is translating to strong and clear recall of our key messages, which, again, is encouraging. And then if we look at probably the most dynamic measure, which is the average new patient starts in the U.S., this is actually at an all-time high. So if you look at Q1 versus Q2, it's up 50% -- 58%.

And that's despite a big drop in late March and then most of April. And then finally, on things we can control, we've seen -- just over the last month, we've seen more than 400 new unique writers since PRIMA. So these are the things which I think were within our gift, and I think we're competitive there.

In terms of what we can't control, what is very clear when you look at the oncology market, there is a very dynamic trend here in terms of you've got slower progressing tumors, then the referrals, the new patient starts. And in-office treatment rates are lower, and ovarian is in that category.

So if we look at new patient diagnosis, they're down about 10% in April. Debulking surgeries are around 25% in the last data that I saw. So these are factors that are part of our control. But in the end, we launched PRIMA bang in the middle of COVID.

And I think now our focus is to keep executing like we are, growing the class and making sure that we're getting our fair share..

This is now Tim Anderson from Wolfe Research..

GSK, Sanofi and Merck. Yet all of the leading, the vanguard, COVID-19 vaccine initiatives are by none of the 3 biggies. Instead, they're led by companies that don't at all have the same level of experience in the space.

How did we end up in this place? I appreciate that GSK has multiple vaccine collaborations underway, but these are not commonly described as one of the leading programs. Was it because of the traditional vaccine companies feeling like vaccine development would be on the usual protracted time line or something like that? That's the first question.

On belantamab, I know GSK doesn't give single product guidance, but can you at least tell us whether you think this product has the potential to achieve blockbuster levels of sales, meaning crossing the £1 billion or $1 billion threshold at some point?.

Well, thanks, Richard. And I can just say yes to your second question, subject to the program of work that Hal outlined. And maybe I'll ask Luke in a moment to just comment a bit further as we prepare for the launch on that.

In terms of vaccine, I think it's interesting that you described the leading programs as being from -- and I understand why, from not the -- I suppose the largest vaccine manufacturers today. I actually think -- I would qualify a bit by saying the first.

All of us, I'd say, across the industry, large and small, believe that more than one vaccine will be required to address this.

And that's exactly why our decision right from the beginning was, a, a vaccine is the priority exit here, but treatments will still be required because, as you know, the FDA has also said they will consider approving vaccines with 50% efficacy.

And even if an extraordinary vaccine means that we're still going to require treatments, not just in the near term but for long term, which is why we invest in the areas that Hal talked about and excited actually about our prospects there.

But it's also why the choice that we made in terms of technology play was to bring an adjuvant, and that is important because it's proven at scale. It's safe, and we know it can add both efficacy and antigen-sparing benefits as well as allowing us to have multiple shots on goal, if I can call it that.

And you can see that evidenced by the way governments are engaging in contracting now is there's still a lot of uncertainty about what is going to play out in terms of results. We should all be encouraged by the early readouts with this offering on totally new technologies that haven't ever been licensed yet.

They are encouraging, but there's still a lot to see on duration of response and particularly on efficacy on different cohorts. And one of the big outstanding questions is what's going to happen with the older cohorts and the readouts there. So we, alongside others across the industry, are still very much engaged in the programs we're in.

As Hal said, we've got 2 already in the clinic, another just about to start.

And we're very confident in being able to supply, subject to positive results, 1 billion doses of the adjuvant, importantly, while still continuing and accelerating our existing pipeline and indeed investing in the exciting new technologies that are becoming more visible, be that in-house or with our CureVac deal.

So I think a lot more to come on in terms of where the vaccine solutions will conclude.

But Luke, is there anything else you'd like to add in terms of how you think about the upcoming commercial execution and prospects of bela?.

Yes. Thanks, Emma. So I mean, look, I think the key thing to anchor on here is that the -- I mean there is striking single-agent activity. And we believe that the side effect profile is manageable, and it's an attractive infusion regimen. I think we can execute a good plan in terms of managing -- optimally managing corneal event.

And I think also, just when we talk to physicians that use the drug, again, the efficacy is attractive. When -- in terms of managing the tox profile, let's see how that evolves and whether that's consistent with what we see with investigators once they get the drug in their hands and use it in patients and understand how it works.

I think also, you can see with programs that Hal highlighted like DREAMM-5, we're also being [indiscernible] minded in terms of the pathways through this drug in earlier lines. So short answer is we remain very confident about the asset..

This is Andrew Baum from Citi..

A couple of questions. COVID-19 is obviously going to have lots of impacts on the industry, but one that seems obvious to us is the importance of the government as a stakeholder is going to be materially greater going forward than it's been historically.

With that in mind, to what extent does that influence your capital allocation? I'm obviously thinking of areas that you're already in such as vaccines, but in addition, areas where you have been in historically, maybe thinking antimicrobial and anti-infectors more broadly.

Is this a driver for you to increase your investment there? And then second, on the announced deal in relation to vaccines, thinking about your pricing strategy for your COVID-19, there's obviously a divergence between the AstraZeneca approach being pro bono during the pandemic period and, obviously, Pfizer and BioNTech going for profit.

How are you thinking about pricing your vaccine for the pandemic period should there be safety and efficacy to meet approval?.

Well, thanks, Andrew. And I would definitely concur that the world and many governments have recognized the strategic importance of our industry and innovation within that and all in the context of the geopolitics that we know.

I think in terms of how it's influencing our capital allocation choices, Hal laid out very clearly in his presentation the mix of the portfolio of our pipeline.

But also it's worth underpinning GSK's strength in infectious diseases, be that prevention, which frankly is -- if there's one thing despite any quarterly impact that we should all believe is that fundamentally, the -- we should be absolutely confident in the strategic relevance and prospects of vaccination, which is an area that GSK has tremendous strength, a growing pipeline and increasing competitive capabilities.

But we also do have a broad infectious disease portfolio, continuing to pioneer in HIV innovation. And I think it's really important to underline the opportunity we see with cab, both in prevention and treatment. But also there's growing focus on antimicrobial resistance.

And we have, again, as Hal mentioned, an asset in [indiscernible] there as well, which we believe does have appealing economic returns. So I think that's been clear. In terms of the pricing of vaccines, this is a business that we have long led in and understood both the responsibility to drive access and the necessity to drive profitable returns.

And therefore, to keep funding innovation and what -- and our position, we're not -- there's no publication from the government in terms of the specific detailed terms of that, is that any short-term profits generated during the pandemic period would be reinvested in pandemic preparedness and those donations for access.

And pandemic preparedness is a combination of technology, new -- support for new pathogen work but also the funding of ever warm capacity, very much with thoughtfulness, for your first comment, of the global footprint in terms of manufacturing and supply..

It's Laura Sutcliffe from UBS..

I've got two questions on RSV vaccine. Firstly, what sort of time line do you think you might be looking at for Phase III readout for both of your assets that you're taking forward? And secondly, your older adult vaccine is obviously adjuvanted.

I think previously, the evidence has suggested there was little to no benefit from adding an adjuvant to vaccines that are going into this setting.

Should we assume that since you're going forward, you have seen something remarkably different here? I know the data will be presented later this year, but any color you can offer us would be very helpful..

Yes. I'm not sure you're going to get a huge amount of preview of data that's later to be presented.

But Roger, would you like to follow up for Laura, please, on those questions?.

Yes. Laura, thank you. I'd say just on the older -- I won't share the data we will publish and present later in the year. However, what I would say is that we have seen AS01 obviously in Shingrix performing incredibly well in the older adult population where we know the age-related decline in the immune system is critical.

So that's all I would say on that. In terms of timing, we are going to take RSV older adult into the clinic early in '21. Maternal will be going into Phase III in the second half of this year. And these are going to be quite large trials. We'd expect them to take a few years to complete with regulatory approval to follow on from that if it's positive.

What I would say is that certainly in the COVID environment, we're looking at clinical trial execution approach, regulatory engagement. And we'll be taking any learning in terms of how we do this effectively and efficiently into these priority programs..

This is now James Gordon from JPMorgan..

Two questions. The first one was just that your 2020 guidance is now caveated around the recovery in vaccination rates. And we are -- depending what we see in Q3, and we're a month into the quarter.

So could you talk about how much better things are looking for July and maybe what the exit rate is towards the end of this month? Is Shingrix, for instance, a good proxy for what's going on overall for vaccines? Or do we need to be careful reading through from that? And then the second question was just the Consumer spin-off.

I think when the spin-off was first announced, there was a plan for 3.5x or 4x levered and the base case was you dividend the whole company to GSK and Pfizer shareholders in '22.

Is that still sort of the concrete plan or default plan? Or might you do some other creative stuff like IPO-ing part of the business? Might you consider not putting quite so much debt in the business? Are there any other sort of things being considered there?.

So thanks, James. I'll ask Iain to unpack the guidance and assumptions a bit more for you. But just so there's no change in terms of our position on Consumer separation, be that former leverage or timing. So Iain, any....

Yes. Thanks, Emma. And maybe Luke can add some color on this. But I think as Emma mentioned, James, what we are seeing through July is a significant recovery of pediatric vaccinations back pretty much to pre-COVID-19 levels. Certainly, in the adult and adolescent vaccination, we're seeing encouraging activity.

It's not back to the levels that it was pre-COVID. But as we've pointed out in our guidance, that is the recovery that we are beginning to see, and we need to see that happen in the third quarter with a very strong performance coming through in the fourth quarter.

So we're encouraged by what we see so far, and our very strong view is it's not a question of if this demand comes back but when the demand comes back. And certainly, what we've seen through the 24th of July, which is the most recent -- 24th July is the data that we've seen most recently, certainly encouraged by what we see..

Luke, do you want to talk a bit more about the activity that's ongoing? Thanks..

Yes. Yes. Just to build on Iain's point, I mean there's a clear difference when you look at the U.S. and Europe. I mean Europe is -- the bulk of our business is pediatric vaccines, and that was -- rebounded relatively quickly. In the U.S.

pediatrics, if you look at the industry as a whole, in February, it was about 500,000 a week, and that dropped by 50% for 4 weeks in March and April. And then it rebounded pretty quickly. So it was a V-shape recovery. So it's about minus 40% in late April and minus 10% in June.

So it came back quickly, whereas adults, it dropped the same way, but it's been slower to recover. And so in early May, we're still around minus 50% plus overall for adult vaccinations, whereas pedia at that point was minus 30%. So it's just a longer area under the curve. In terms of just wellness visits as well, we've seen the same path.

There's a very strong rebound amongst pediatrics and 11- to 12-year-olds and 13- to 18-year-olds. It's a slow recovery for older people. I think also when older people are going back into their physician, there's going to be a hierarchy that the physician is going to focus on initially, so blood pressure, [indiscernible] acute dimensions.

In terms of what we're doing about it, again, we've not sat and been passive. So there's a series of things we've done. We've initiated some -- well, firstly, we've linked the early flu doses I mentioned earlier because people come into the flu shot. That's a prime opportunity for the pharmacists to bring up Shingrix.

We've also -- the field activity with our retail customers is back to the pre-COVID levels. And with retailers, we've got a lot of signage volume goals and some other things that I don't want to disclose. And we've also been chasing people for their second dose and getting them back there, and that's holding up quite well.

We're also doing DTC at point of sale. And there's similar things, again, that I won't cover. But we're doing everything we can, including targeted TV and some branded digital and print-based media as well. And as Iain said, I think we now need to see how that goes with the dynamics in the U.S..

This is Geoffrey Porges from Leerink..

Apologies for jumping on the call later. I may ask the question you've already answered. But first, on flu, could you just give us a sense of your timing for shipments to the U.S.

market, the volume change you expect compared to last year, most importantly, whether you see any net positive price due to mix of contracts? And then just a follow-up on the COVID program.

When can we expect publication of your preclinical data, particularly primary data? And could you comment on the mix of CD8 and CD4 responses that you've seen with AS0 in your other studies relevant to COVID?.

Thanks. So Luke, I mean, we had the question on flu before. Perhaps if you can just repeat what we're aiming for in terms of volumes roughly. And then, Roger, I don't know if there's any further disclosure you want to bring on the -- or how long the COVID programs..

I can make a very quick comment, Emma, if you come to me..

Yes..

Okay. So Geoffrey, shipping in July, linking and lining it up with the Shingrix acceleration program, we're targeting 50 million doses. And also getting them in earlier, which is something I didn't say earlier, is very important. It reduces the return rate that you see later in the year because physicians tend to over-order.

And that's up from 46 million in 2019, which is just down to 20% of the market, and we sold 2/3 of it in the U.S. In terms of pricing flexibility, no, it's very limited for this year in the U.S..

Okay.

Roger, [indiscernible]?.

Yes. I just -- I'm not going to go into any of the detail in terms of the data that we have seen.

I'd make more of a generic comment around -- I do think one of the things that is to play out in COVID-19 is this idea of immune response and T cell contribution to the performance of the vaccine then having potentially an impact on the population and the reaction of the vaccine in the population.

What I would say is that adjuvanted vaccines have got that historic delivery and track record of delivering both humoral and cellular immune response, which we think could be very important for COVID. Too soon to tell, though, and that will all play out over the coming months as more data on our vaccines and on the other vaccines comes to light..

Hal, anything else to add from your point of view on that?.

No. I just -- maybe to highlight something Roger said, which is I think that the cellular response, it could very well be important in the success of vaccines.

And I think in addition to measuring some of the classic markers that you referred to, I think GSK's vaccine research organization has put a lot of effort and I think a lot of innovation in actually what to measure what is actually predictive in the clinic as to what you want to look for, for surrogates for that.

So I think it's not only when but the quality of what you might see is going, I think, to be interesting..

Kerry Holford from Berenberg..

A couple of questions. Just quickly on the flu vaccine. I'm just interested to know whether there's any upside to your ability to deliver more than 50 million doses into the U.S. market. Sanofi is committed to ship, I think, 80 million. Just interested to see whether there's any upside to capacity for you.

And then just more broadly on the pipeline refresh. Hal, just is this something we should now expect to continue to see from you over the next -- on a 6-monthly basis going forward? And I wonder if you can talk to the reasons why you elected to deprioritize certain assets in the portfolio, the CLL for PI3 kinase and the HIV [indiscernible]..

Thanks very much, Kerry. And so, Roger, just quickly from you in terms of capacity on flu and then Hal to conclude, please..

Yes. Thanks, Kerry. Look, I think 50 million is going to end up being one of our highest volume, the highest volume in the U.S. as well. We are very close to maximum capacity here. So there's limited upside going forward in terms of this ag-based technology because it's not somewhere, as you know, as we have allocated a lot of our capital to.

So you're not going to see much more in terms of upside above the 50 million number within the U.S. supply..

Thanks.

So Hal?.

Yes. Thanks, Kerry. I think, yes, the answer is we will continue to focus our efforts in R&D on the most promising assets. And sometimes the science will translate out nicely, and we'll double down and be aggressive about developing assets. And sometimes, the data will emerge to suggest that we should abandon projects.

And of course, the risk is very high in the industry. 10% of projects that enter the clinic will ultimately succeed. And we think the most important thing is to follow the science and rigorously evaluate what the data in the clinic tells us.

We think by this focus on human genetics, functional genomics, machine learning, and particularly, the focus on immunology will allow us to develop a portfolio that has a higher probability of success.

And of course, by focusing, we have the opportunity to be developing and designing robust clinical trials to give us insights so we're not faced with deep uncertainty that sometimes plagues the industry at the end of Phase II. So I think the refresh is just our attempt to be rigorous scientifically and focus on the most promising assets..

Thanks, Hal. And thank you to all of you for dialing in. We look forward to talking to you soon. Thank you very much..

Everyone, all the speakers, thank you. That concludes your conference call for today. Thank you for joining, and all take care..