Good afternoon, ladies and gentlemen, and welcome to the analyst call on the GSK Third Quarter 2020 Results. I will now hand over to Sarah Elton-Farr, Head of Investor Relations, who will introduce today's session. Please go ahead Sarah..

Thank you. Good morning and good afternoon. Thank you for joining us for our Q3 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 website.

Before we begin, please refer to slide 2 of our presentation for our cautionary statements. Our speakers today are Emma Walmsley, Iain Mackay, Luke Miels, David Redfern and Brian McNamara. Hal Barron and Roger Connor will join us 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..

Thank you SEF, and welcome everybody to today's call. I hope that you are all keeping well. 2020 continues to be an extraordinary year. GSK has shown resilience and agility in tackling the challenges, while maintaining focus on our strategic goals, which remain firmly on track. We continue to strengthen and advance the pipeline.

In July, as mentioned at Q2, we received approval for Rukobia in HIV. And this quarter we've also had first approval and launches for BLENREP in multiple myeloma for Trelegy in asthma and new indications for Nucala. We've delivered positive data on our RSV candidate vaccines and GSK'836 in hep B.

Plans to progress these programs are underway both represent major opportunities for health care impact and have the potential to be significant future growth drivers.

We also initiated three major pivotal studies in meningitis vaccine second-line multiple myeloma and with our Vir antibody in COVID-19, a very exciting program you're going to hear more on later.

While there have been some short-term pressures as a result of the pandemic, especially in vaccines early in the quarter our performance fundamentals continue to strengthen. And we're very confident our vaccines portfolio and pipeline will drive growth for years to come.

Brian will update you in more detail, but the momentum we're building in our commercial execution is driving encouraging growth across our new products, setting the course for strong future performance.

And this has also been a quarter of disciplined cost control, as we've made substantial progress on both our consumer integration and company separation programs.

We continued to deliver efficiency in our support functions, further simplify our site network, and achieve an important milestone on building one development organization in R&D for Pharma and Vaccines that will improve agility decision-making and scientific collaboration as well as our cost base.

Our pipeline includes several COVID solutions and we remain committed to building stakeholder trust as we deliver them. We have in place supply agreements with multiple governments for our partnered adjuvanted COVID-19 vaccine and have pledged to maintain our focus on safety and global access. Turning to the quarter.

Strong performance from our future growth drivers combined with a focus on cost has offset the ongoing pandemic impact. We've delivered margin and earnings growth this quarter and expect to deliver within our earnings guidance range in 2020. All numbers referenced are on a constant currency basis.

In Pharma, we're very encouraged by the strong performance of our new and specialty products with sales up 12%. This was offset by a decrease in Established Pharma of 18% and Iain will go into that in more detail in a minute. The greatest impact of the pandemic has been in our Vaccines business, where sales were down 9% in the quarter.

However, we're encouraged by the accelerated recovery towards pre-COVID level of immunization as the quarter progressed and the strong performance in flu up 21% year-to-date – sorry, up 21% in the quarter. Year-to-date Shingrix sales are up 6%.

In Consumer, we continued to reshape the portfolios and pro forma growth in our ongoing business was 3% driven by vitamins and oral health. Overall, we're gaining share and our power brands are performing strongly.

Group adjusted operating margin for the quarter was 30.8% with the impact of vaccines more than offset by tight cost control and the realization of restructuring benefits with SG&A down 10% pro forma, while we've continued to invest in our pipeline and our new product launches.

On a total basis earnings per share were 25p and adjusted earnings per share were up 1% to 35.6p. And before I hand over to Iain, I'd just like to remind you of the great progress we're making on our portfolio of COVID solutions.

Our aim is to develop multiple adjuvanted COVID-19 vaccines and we now have three different vaccine collaborations in the clinic that could move to pivotal studies by the end of the year.

We also have two exciting therapeutic approaches in clinical studies through our collaboration with Vir, which Luke will speak to later; and our aGM-CSF antibody otilimab. And so now to Iain with more detail on the quarter..

Thanks, Emma. All the comments I'll make today will be on a constant currency basis except where I specify otherwise, and I'll cover both total and adjusted results. On slide 9 is a summary of the group's results for Q3 and the year-to-date. In Q3, turnover was down 3% CER. Adjusted operating profit was £2.7 billion up 4% CER.

Total EPS was 25p down 9% CER and adjusted EPS was 35.6p up 1%. In the year-to-date turnover was £25.4 billion, up 4% reported down 2% pro forma. Adjusted operating profit was £7.1 billion, up 3%. Total EPS was 102p, up 55% and adjusted EPS was 92.6p, down 4%.

We delivered £2.3 billion free cash flow in the year-to-date and in the quarter; there was a 5% headwind on sales and 9% in adjusted EPS from currency movements. Slide 10 summarizes the reconciliation of our total to adjusted results.

The main adjusting items in the quarter I'd highlight are major restructuring which reflects continued on-track progress on the Consumer Healthcare integration and transformation and separation activities.

And in transaction related within which the main contributor was a charge relating to the re-measurement of the contingent consideration relating to ViiV Healthcare. The main component within this was an increase in our forecast for cabotegravir PrEP following the very strong clinical data that we shared earlier in the year.

Comments from here onwards are on adjusted results and a constant currency basis unless stated otherwise. Slide 11 summarizes the Pharmaceuticals business where overall revenues were in line with expectations, down 3% in Q3 and down 1% in the year-to-date.

Excluding Established Pharma, revenue grew 12% in the quarter and was up 12% in the year-to-date reflecting our strong commercial delivery. Respiratory was up 26% with continued strong growth from Trelegy, Relvar/Breo, and Nucala. Benlysta was up 13% extending its double-digit growth after more than nine years on the market.

In Oncology, Zejula sales were £92 million in the quarter up 47% reflecting excellent commercial execution. We remain very excited by the prospects of both Zejula and BLENREP which launched in the quarter. Our new products continued to perform strongly and Luke will comment on these momentarily.

HIV revenues were flat with dolutegravir franchise up 1% with very strong performance from Dovato. The Established Pharma portfolio declined 18%. Within this Respiratory was down 18% reflecting generic competition for Advair/Seretide and Ventolin plus accelerated brand erosion of Flovent in the U.S.

The rest of the Established Pharma portfolio was down 19% with COVID-19 impacting performance, particularly in antibiotics. Additionally, we've seen increased government-mandated generics in certain markets. For the current year, we expect the total Established Portfolio to be down mid-teens.

Next year we would expect the Established Portfolio to revert to its historical norm of mid to high single-digit decline and we continue to review opportunities for divestments in this portfolio. Pharma operating margin was 28% in Q3.

470 basis points increase reflected a favorable product mix a benefit in the quarter from the recognition of prelaunch inventory and approval of BLENREP within R&D. Favorable comparison to 2019 pertaining to nonrecurring manufacturing write-down and legal settlements and tight control of costs and benefits -- and benefit of restructuring actions.

These were offset by increased investment in new product support and targeted priority markets and in R&D focused mainly on oncology and total 2019 programs. Year-to-date, margin was 26.3%. Slide 12 gives you an overview of Vaccines performance in Q3 with sales down 9% driven by adverse impact of the pandemic.

Shingrix sales were down 25%, reflecting lower adult wellness visits in the U.S. through -- particularly through July and August. However, by the end of Q3, Shingrix weekly U.S. prescriptions reached similar levels to the same time last year.

Shingrix revenue has grown 6% year-to-date and we've put measures in place to support further growth through Q4 and beyond. Recent trends are encouraging and demonstrate the strong underlying demand for this vaccine and we continued to make progress on expanding supply capacity.

Flu vaccines performed well with revenue up 21%, primarily reflecting strong execution on supply and sales. We expect the increase in flu immunizations, particularly amongst older adults to support further recovery in Shingrix performance. The meningitis portfolio grew 1% with the disrupted back-to-school season in the U.S.

affecting Bexsero performance. And Established Vaccines declined 15% reflecting lower demand due to the pandemic environment, particularly in hepatitis as expected.

The operating margin of 44.2% was 500 basis points lower, primarily reflecting the negative operating leverage from COVID-19-related sales decline and investment behind key brands such as Shingrix. In the year-to-date, Vaccines revenues were down 7% and adjusted operating margin was 40.7%.

Turning to slide 13, Q3 revenues in Consumer Healthcare on a pro forma basis were up 3% excluding brands either divested or under review. Including those brands such as Horlicks turnover declined 6% pro forma. Reversal of the Q2 systems cutover stocking benefit impacted overall growth by around two percentage points.

Oral health grew 5% at CER with Sensodyne up 7% driven by strong global commercial execution. The pandemic had a sustained positive impact on vitamins, minerals, and supplements which grew 18% driven by increased consumer focus on personal health.

However, this growth was partially offset by weaker performance in respiratory health with a lower cough and cold season so far and in pain relief informed principally by Advil market share. The Rx-to-OTC switch of Voltaren in the U.S. is performing very strongly.

Operating margin for the quarter was down 90 basis points year-on-year, mainly reflecting the impact of divested brands and increased brand investment, partially offset by synergy benefits from the Pfizer integration and tight control of costs. There is no change to our previous guidance for Consumer margins.

And year-to-date Consumer revenues were flat pro forma and up 6%, excluding the impact of divested or under review brands. Pro forma adjusted operating margin was 23.8%. Brian will provide more detail on the Consumer Healthcare performance and an update on the business shortly. On slide 14, we summarized the sales and adjusted operating margin for Q3.

Our group operating margin was up 240 basis points on a pro forma basis. Lower cost across the group offset reduced sales operating leverage, which was mainly in Vaccines. Across the company, we're beginning to realize restructuring benefits from programs announced earlier this year.

We continued to manage operating costs very tightly and have realized significant savings in categories such as T&E. During Q3 in SG&A, we realized a one-time benefit from restructuring of post-retirement benefits and a non-recurrence of a highly -- of high legal costs from Q3 2019.

We continued to invest in new product launches, and our pipeline progress remains firmly on track with Pharma R&D year-to-date spend up 6%.

The lower R&D spend in the quarter was the result of a benefit from the recognition of pre-launch inventory upon approval of BLENREP, comparably lower spend related to niraparib and dostarlimab, following their filings at the end of 2019, plus the realization of transformation savings, synergies and efficiencies.

This was partly offset by increased investments in the progression of key assets such as BLENREP; ICOS; otilimab for rheumatoid arthritis; and two key COVID programs being otilimab for COVID and the Vir antibody. R&D in Vaccines and Consumer slightly down in the year-to-date.

And with the realization of noted transformation synergies and savings, we now expect R&D for the group to increase mid to high-single-digits for the year. All our pivotal programs are on track. The COVID-19-related delays initially experienced, now recover with the exception of gepotidacin.

We've included the analysis covering the year-to-date information in the appendix. Moving to bottom half of the P&L, I'd highlight that interest expense was £197 million, mainly reflecting lower debt. The effective tax rate of 16.8% was in line with expectations and we still expect a full year effective tax rate of around 16%.

And finally, non-controlling interest reflected Pfizer's share of profits of the Consumer Healthcare JV. We delivered cash flow of £2.3 billion in the year to September.

The reduction primarily reflected higher dividends to non-controlling interest and adverse exchange impact, partly offset by lower seasonal increase in trade receivables, beneficial timing of payments for returns and rebates, higher proceeds from disposals of intangible assets and improved operating profits.

As we indicated at Q2, we expect free cash flow to be lower in the second half of 2020 than the first half, and we still expect cash flow for the year to be a step-down from 2019. We closed the quarter with strong cash balances, an effective approach to working capital management and maintain access to extensive undrawn committed facilities.

We set our guidance range of minus 1% to minus 4% CER adjusted EPS in early February this year. I think it would be fair to say that quite a lot has happened since then, but I'm pleased that the group has responded with agility and we're still on track to deliver within this guidance range, albeit at the lower end.

The performance for Pharma and Consumer, so far this year, is in line with where we expect it to be with good commercial delivery on our new and specialty products in Pharma and our power brands in Consumer Health.

We're encouraged by the Vaccines business recovery through the quarter, with a stronger performance in September, which has continued so far in October, compared to a year ago. In Vaccines across the age categories, this recovery is mostly complete in pediatrics while slightly slower in adolescents informed by the return-to-schools disruption.

In older adults, the increasing immunization rates and uptake of generics is encouraging and demonstrates strong underlying demand. Achieving our guidance does depend on sustaining this recovery of adult immunization rates, particularly in Shingrix.

We continued to make good progress in improving supply capacity for Shingrix ahead of our new facility coming online and we'll update you on the details behind this in Q1 next year. There are no change to our capital allocation priorities. We continued to advance the pipeline as noted by Emma earlier.

We're making great progress with the integration of the Pfizer consumer business, and advancing the transformation across all aspects of GSK, and are confident in our preparations for the separation. As noted in our earnings release, we've declared a 19 pence quarterly dividend in line with expectations set out earlier this year.

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

Thanks, Iain. Hi, everyone. As you know, we've been working hard on our commercial execution to ensure that we're competitively resourced with a particular focus on new product launches and our key markets. And the changes we've been made are now starting to pay off.

Sales in our growth areas of respiratory, HIV, immuno-inflammation and oncology, were up 12% this quarter to £2.5 billion. Changes we've made include updated HCP engagement policies and sales force incentives to allow us to compete more effectively and responsibly in the key markets where we're driving growth.

Now we're also winning share of voice with strong acceleration of our digital capabilities as well as increased face-to-face engagement where possible.

And though the lockdown restrictions have as expected, impacted on some of our portfolio, especially Established Pharma we've taken the opportunity presented by the new ways of working to amplify our digital presence, complementing more traditional approaches very successfully.

And with these measures in the right investment, we are seeing great momentum across our new product portfolio, which we expect to build further in the coming quarters as we bring our pipeline assets to market. Starting now with Nucala.

We had another great quarter, delivering a strong competitive performance and maintaining our leadership in the IL-5 class. This remains a market with significant growth opportunities with unfortunately only 27% of eligible patients in the U.S. receiving the biologic. And we're leading share of both new and total IL-5 patients in the U.S.

and remain the leader in other key markets around the world as you can see on this chart.

Nucala's leading position is built on its proven efficacy derived from its precision targeting of IL-5 to reduce its intervals to normal levels, differentiating it from other biologics and we're using that benefit to rapidly expand into other eosinophil related condition.

In the U.S., we now have approval in EGPA and HES and have recently submitted our application for nasal polyps. We've also had a first to GSK when we submitted three indications in parallel to DMA later this month or early this month and our studies in COPD are ongoing. And we continue to see great growth outlook from Nucala.

Staying with Respiratory and moving to Trelegy, we continued to not only lead the way in once-daily single inhaler triple therapy for COPD but grow the market as well. We are growing our share in the U.S. where we are the market leader, as well as in other major markets around the world.

This is an increasingly competitive area, but we've maintained a leading share of voice in the U.S., Europe and Japan and continue to see strong growth. The opportunity in COPD is significant with less than 25% of patients in the U.S. who need triple -- or need a triple therapy on it today so there remains substantial scope for growth.

Additionally, we received U.S. approval for asthma. About 30% of U.S. patients in the -- or adult patients in the U.S. with asthma on an ICS/LABA remain uncontrolled, so they could benefit from triple therapy. And it is early days.

But in the first three weeks to market we've seen a doubling of NBRx for allergist prescribers showing that there is an unmet need that is recognized. Next slide please. Benlysta -- switching to Benlysta. It continues to be a great product for us and for lupus patients around the world.

In Q3 we again saw double-digit growth after more than nine years on the market supported by the uptake of the sub-cut formulation and the success of our IV launch in China. Lupus is a market with considerable upside potential and we're driving through this -- through targeted life cycle management, building data and works for new indications.

This quarter we're very pleased to say we've published positive data from the BLISS LN trial in the New England and received priority review for our submission to the FDA. We expect to have approval by the end of the year and are on track to become the first and only drug indicated to both SLE and lupus nephritis.

We will also have the combo study with Rituxan in-house by the end of the year and we're hopeful that this combination if successful could potentially lead to clinical remission.

With our ongoing investment and generating important data we are well-positioned versus potential competition with established efficacy in a broad base of lupus patient, long-term real world outcomes data and a recognized long-term safety profile. What is interesting is more than 80% of eligible patients remain untreated with Benlysta in the U.S.

and of course even more around the world. The number treated will increase further with the lupus nephritis indication and so there's plenty of opportunity for growth remaining to help these patients. Now to oncology.

Through the ovarian although the ovarian cancer market has been impacted by the pandemic with fewer patients undergoing first-line treatment in the first half of the year, we have been able to execute commercially with Zejula and drive our share of the market.

Our best-in-class label, the only PARP inhibitor for all-comers in the first-line maintenance setting has been key to driving market penetration not only in the BRCA-mutant population but across all patient types. And that is now supported by both the NCCN and ASCO guidelines for patients who responded to chemo.

As of August, almost half of all patients starting on a PARP inhibitor are now getting Zejula. And by now one in three were the new or repeat patients are on Zejula in the front line. In Q3, we saw a 50% increase in the average weekly new writers in the U.S. and we've doubled our overall market share from 14% in April to over 30% in August.

We also know there's significant opportunity to continue to penetrate the market with watch and wait still unfortunately being used in more than 70% of women in the first-line maintenance setting in the U.S. And finally we're focused on accelerating opportunities beyond ovarian with improved outcomes for a broader set of patients.

In Q3, we initiated the ZEAL study in combination with pembro to investigate the impact of Zejula on both squamous and non-squamous non-small cell lung cancer patients in a maintenance setting.

So with these differentiated properties and a superior tumor penetration and the ability to cross the blood-brain barrier, we believe Zejula has the opportunity to improve outcomes and be the best-in-class PARP in lung. Next slide please. We launched BLENREP for heavily pretreated multiple myeloma patients at the end of August in the U.S.

And though it's early days we are seeing a positive response across the board from physicians, patients and advocacy groups. There's a high unmet need in multiple myeloma and over 500 HCPs and over 200 patients have already enrolled in our fully operationalized REMS program.

We've had a highly experienced sales force -- we have a highly experienced sales force and our in-person access to HCPs is highest amongst the competitive set. We're also focused on the continued development of this important medicine and have a robust program in place to improve the safety profile by studying alternative doses and scheduling.

Importantly, we also have studies investigating Blenrep in novel combinations with other drugs like pembro, which can have potential synergistic effects; and a combination with SpringWork's gamma secretase inhibitor, which appropriately inhibits the cleaving of BCMA, potentially enabling a clearer target driving superior efficacy and an improved side effect profile.

And we anticipate sharing data on some of these combinations in 2021. Shifting to Vaccines on the next slide. We saw continued impact from the pandemic in the quarter with lower adult wellness visits and vaccination rates in the U.S., although momentum improved substantially in September. For Shingrix, we saw a steady increase in U.S.

prescription volumes through the quarter. And by quarter end they've reached a similar level to that last seen before the pandemic and comparable to the same time last year. We've been very successful in driving this recovery through our DTC campaign in conjunction with flu season.

And wholesale inventory levels are now considered normal with about 1.2 million doses in the channel. Outside of the U.S., we saw strong demand from Germany and great progress in our phased launch in China which is going well. Next slide please.

But before I hand over to David, I'd like to take you through -- before David takes you through the 2DR momentum in HIV, I just wanted to highlight the upcoming readout that we're anticipating for our COVID antibody that we're developing in collaboration with Vir.

Although, there are many vaccines in development for COVID, including our own collaboration on adjuvant approaches with Sanofi and others, we believe a therapeutic offering will still be necessary.

There's a lot of uncertainty about how the pandemic might develop but it seems likely that we'll continue to see a high level of infections in 2021 and beyond. And even if a vaccine is successful, it will take time to distribute and is unlikely to be 100% effective for everyone.

So on that basis, I think, it's fair to say that there will be a clear need for therapeutics. The Vir antibody has been developed for an antibody -- from an antibody taken from a patient affected with SARS-CoV-1.

The AS03 antibody was found to have extremely high affinity with the SARS-Cov-2 spike protein and is highly potent in neutralizing SARS-Cov-2 in live virus similar assays. It has three features, which lead us to believe that we have a potentially best-in-class asset.

The first is that it has a unique receptor binding site which is highly conserved and is required for viral entry into the host. In clinical tests of over 80,000 sequences show that this epitope is highly conserved across circulating viral strains, and therefore, we expect a high barrier to resistance.

Furthermore, escape mutants identified for similar antibodies against other viruses have attenuated or no infectivity. Secondly, the antibody has high potent effective function in vitro allowing the recruitment of immune cells to kill off infected cells.

This potency potentially allows us to have a lower single dose, which will be important as we scale up manufacturing given the large number of potential patients and the fact that global demand for therapeutics is likely to outweigh supply for some time.

And finally, the antibody has been engineered to extend half-life and will potentially enhance the viability in the lung. Pivotal COMET-ICE study in the early treatment of patients with high risk of hospitalization is ongoing and we anticipate having initial data available by the end of the year.

On top of this we, were planning to expand studies to include hospitalized patients and for use in prophylaxis. This collaboration has significant potential and is very exciting to us. Let me now hand over to David to take you through HIV. .

Thank you, Luke. Hello, everyone. As in the rest of our business, HIV is also benefiting from strong competitive execution. We have the leading share of voice in both the U.S. and Europe and the benefit is clear in the momentum, we are delivering in the two drug regimens and across our HIV business. We are now seeing U.S.

dolutegravir NBRx share outstrip our TRx share. A key point of inflection which demonstrates the traction that we have achieved the two-drug regimens, which now have over a 9% share of NBRx in the U.S. Dovato in particular, is performing very strongly. We saw the inclusion of the TANGO switch data on the U.S. [Technical Difficulty].

This has helped Dovato accelerate its share of the U.S. switch market. We now see about one-third of Dovato scripts come from new patients, one-third from competitor regimens and therefore only one-third from other dolutegravir [Technical Difficulty] regimens.

As such, overall, we are seeing a positive net switch to dolutegravir regimens helping to increase our overall market share in the U.S. In Europe, we are growing ahead of the market and dolutegravir is gaining market share as we continue to roll out Dovato.

We've been able to launch early in all markets across Europe despite the pandemic and Dovato now has the leading share of voice in all measures of all countries. We have also seen a positive start for Rukobia, which has U.S. insurance coverage of over 70%with 250 patients already on therapy.

And we are making good progress in our discussions with the FDA on CAB in the PrEP setting. We are on track to file for U.S. approval for PrEP in the first half of next year and anticipate a 2022 approval.

We still expect HIV revenue growth overall to be broadly flat 2020, but anticipate a return to growth in 2021 building on the momentum we have established for Zejula and Dovato and with the expected U.S. launch of CABENUVA in the first quarter of 2021. I will now hand over to Brian to talk about Consumer..

Thanks, David. I'd like to provide a quick update on our progress with integration, which is progressing well and is firmly on track. Our positive momentum has continued despite the challenges related to the pandemic. Importantly, we've delivered significant milestones to date.

96% of the Pfizer Consumer Healthcare revenue are now on our systems with 71 markets having made this transition since the start of the pandemic. 87% of co-locations are complete and 39 of the 41 warehouses identified for closure are now closed.

Furthermore, all future market cutovers, employee transfers and production site integrations remain on track. At the time of the transaction, we've provided synergy and financial guidance for 2022 and this remains unchanged. We continue to expect annual synergies of £500 million by 2022 with up to 25% reinvested back into the business to drive growth.

We have also delivered on our divestment commitment with transactions meeting our target of £1 billion in proceeds already signed. Through this process, we have divested more than 50 growth-dilutive brands, strengthening our existing portfolio.

Our separation program is also on track with work around the future organizational structure and system separation well underway.

Now it's important to remember that the end goal of all this integration work is to bring together a fantastic portfolio of category-leading brands with a strong geographic footprint positioned in a sector which is now more relevant than ever.

I continue to be excited about the potential of what we have created, a 100% focused global leader in Consumer Healthcare, addressing consumer needs and driving better everyday health. I look forward to sharing more with you on this great business over the coming years and in the run-up to separation.

Coming back to performance, I'd like to share some detail on the growth drivers behind today's results. I will focus on year-to-date results to take out the volatility behind the pantry loading and the systems cutover.

Pro forma revenue excluding brands divested and under review grew 6% year-to-date supported by healthy brand growth and overall share growth. Vitamins, minerals and supplements continue to benefit from increased consumer focus on health and wellness. And as a result, we saw a strong performance by Centrum, Emergen-C and Caltrate.

On a pro forma basis, category sales grew in the high teens across all three quarters this year and with growth at 1.5 times the market. E-commerce was strong across all categories, growing at about 80% year-to-date and now representing over 6% of sales, up a few percentage points over last year. Key markets such as U.S., China, U.K.

and Germany are ahead of this level. Importantly, we grew significantly ahead of the market and are gaining share. Turning to our priority brands. Across our nine power brands, we saw five of them deliver high single-digit or double-digit sales growth with eight of the nine gaining or holding share.

On innovation, we had a number of exciting launches so far this year. Let me share some details on just a couple to give you some color on what we're doing. We launched the Voltaren Rx OTC switch in May, our fourth Rx OTC switch over the last six years and the first in the pain category in the U.S. in over 20 years.

Voltaren is the number one topical pain reliever globally, despite having not been in the U.S. or just pain market in the world. The brand is off to a great start, growing the overall U.S. topical category, delivering 100% of category growth and since launch is the number one HCP-recommended topical pain brand.

In the quarter, we also launched Advil Dual Action, which is the first-ever combination of ibuprofen and acetaminophen and early results are encouraging. With that I'll hand it back over to Emma..

a biopharma company focused on the science of the immune system and genetics and a new world-leading consumer health company dedicated to everyday health. We believe the creation of these two new companies will deliver significant new options for sustainable growth and returns to shareholders.

We're now joined for Q&A by Hal and Roger and with the rest of the team. And so with that operator, we're ready to take your questions..

Thank you, Emma. Your first question comes from Keyur Parekh. You are live in the call, Keyur. Please go ahead..

Thank you for taking my question. Dave, Emma, first of all congratulations on your recognition of your achievement. So, [Indiscernible] on that, just linked with that, who among your senior management team has the best curtsy technique so far..

A lot of hands going up on that, it’s recognition for the company I can assure you Keyur nobody in my house takes their tails off on the floor anymore, but anyway, going to your technical question..

Well. You still haven't answered the question, so the two questions. One, Hal, there's some amount of confusion on the update that your partners at Merck and you put out about bintrafusp alfa. So I was just wondering if you could share your perspective on, what kind of you made out of the update.

Clearly, the trial continues, but kind of the proposed expansion of the enrollment kind of isn't happening. So, I was just wondering if you could share some perspectives on that.

And then secondly, as it relates to, kind of the reiteration of the guidance kind of for the full year, how much of that relies on Shingrix coming back into the fourth quarter? And what level of Shingrix revenues might be required to get there, or do you feel comfortable enough to get to the bottom end of the range irrespective of what Shingrix does, during the fourth quarter? Thank you..

Thanks Keyur. So let's come to Hal first. And then over to Iain for a bit more specifics on, the guidance on Shingrix contributions..

Okay. Well, thank you very much for the question, Keyur.

Maybe backing up, I think it's important to note that, when we initiated the collaboration with Merck KGaA, we did it on a very large and robust Phase I data set of over 400 patients really demonstrating activity and a very well-tolerated safety profile and some encouraging response data in lung.

As we've said many times, we think it's important to do randomized controlled trials to see, whether these observed effects are real, when compared to appropriate controls. And that is really what initiated the so-called 037 study to obtain this randomized data. As you say we updated you last week that the study is not expanding.

And we'll be continuing with 300-patient sample size. And while I know, I can't really answer any of your questions more specifically. I will say that we need to await the final data, to ensure the integrity of the trial. And it's important to wait to discuss any results of the study, until we have a full data set including data on PFS and OS.

So I realize that leaves you with some questions. But that's really the extent to which I can comment at this point..

Thanks Hal.

Iain?.

Yeah. So Keyur just to be absolutely clear, it's my opinion that I do the best curtsy by a long, long way in this group, being the only guy that wears a scarf in this place anyway. Anyway moving on from that, to the more important point in Shingrix, look, we really encouraged by the progress that we've seen through September.

And happily that's continued into October. That recovery in an adult -- older adult immunization rates, has been extremely important in terms of how we formed the guidance for the full year. We don't necessarily need to grow immensely beyond where we are. But we do need to sustain the recovery that we've seen. Now September was a great month.

I think it was probably the best single month that we had in Shingrix.

Overall growth year-to-date 6%, obviously below the number that we had guided to for Shingrix, but provided that we can sustain the recovery that we've seen through September, we're also very encouraged by the weekly prescription data and immunization days that we see so far through the month of October, then that certainly should take us to the lower end of our guidance range..

Thanks. And just to complement that, I think fundamentally we're absolutely convinced that Shingrix will be a great growth driver for the company, for years to come. And if ever we want to be reminded of the opportunities and growth prospects in the Vaccines segment, this is definitely the year to reinforce that.

So next question please?.

Thank you. Your next question comes from Graham Parry from Bank of America. You are live in the call Graham. Please go ahead..

Great. Thanks for taking my questions.

So firstly, would it be possible to quantify the BLENREP inventory? And pension restructuring benefits on adjusted operating income and margins in the quarter? So, would you still have been coming in around the sort of consensus level, without those in there? And then secondly, your guide now assumes R&D mid- to high single-digit increase.

So I think at the start of the year you were flagging similar growth to 2019 for both, 2020 and 2021. That would have been about a 13% increase in R&D. And it's obviously benefited from some of this BLENREP inventory write-back.

So could you just help us understand, should we be expecting a sharp upward inflection in R&D in 2021, as the one-off benefit go away and you continue to invest in the pipeline? Thank you..

So I think both of those to Iain. But just to reiterate our number one priority is still to keep strengthening the pipeline. So we do expect to see a strong increase, but perhaps next year. But perhaps Iain you could put some, shape around that..

Yeah. Absolutely, so Graham thanks for your question. BLENREP the capitalization of pre-approval inventory was just north of £60 million in that factor.

When you turn more broadly to R&D expense, the main point to I think reiterating here and Hal can go into more detail is, that we've kept all our programs very much on track to the extent that we'd experienced any slight delays earlier in the year on the back of the pandemic. Those have been largely recovered.

We've still got a little bit to do on gepotidacin but those are very much back on track again.

And what Hal and the team have continued to do is, realize fully the efficiencies and synergies we expected from the TESARO acquisition and continue to deliver benefits and savings through the R&D just in terms of how we prioritize and manage spend within that. Reflecting on next year our guidance would remain absolutely consistent.

We'd expect to see double-digit growth in R&D expenditure next year as we continue to invest in those priority programs across the R&D pipeline and made progress in that regard. .

Hal I don't I wonder whether you would like to add anything in terms of the sort of overall governance and sort of progress of the pipeline because the other thing to note Graham would be that with – and you have seen it we're slightly down in both Vaccines and Consumer Healthcare R&D through integration and cost control.

But Hal perhaps you could add some more color around the governance aspects of spend. .

Yes Well thanks Graham. We're making a lot of great progress I think as Emma highlighted in her last comments on the last slide. And in particular highlighting that BLENREP started three pivotal studies making very nice progress on ICOS adding a second Phase II sort of head and neck study.

The two COVID trials that we're doing in the Pharma side have been highlighted and they're going well three vaccine trials including moving the RSV to Phase III. We've added 10 new molecules vaccine to pharma assets into the pipeline. But importantly, we're also using a very high bar to advance things. We're using a high bar for interpreting data.

And based on that we actually removed eight assets as well. We're tightening up our focus on research in areas that we think are most promising, making a lot of great progress on the human genetics functional genomics side and research, but really have reduced a little bit of spend in that in the research area.

But overall, I'm very encouraged by the progress we're making on the pipeline and we'll be continuing to move aggressively to the -- to even strengthen it further. .

Thanks Hal, next question please..

Thank you. Your next question comes from Tim Anderson from Wolfe Research. You are live in the call Tim. Please go ahead..

I want to go back to bintrafusp if I can for Hal.

Hal would you agree that there's two very different equal interpretations to the recent update one is that, you saw enough of a signal on the interim that you didn't feel you need to upsize the trial to hit survival; and the other would be the opposite which is that, it's not worth upsizing the trial because that interim only showed a weak signal.

Just to clarify will there be a milestone paid to your partner? And then second question is another pipeline question and it's on the ICOS agonist data coming up in first half 2021. You have a second-line lung trial randomized ICOS plus docetaxel versus docetaxel alone. Just your updated thinking on the odds of success with that trial. .

Okay. So just to confirm that there's been no milestone paid to date on the basis of the data to date. Doesn't mean there couldn't be one in the future.

But Hal do you want to make any further comments on bintrafusp and also on ICOS please?.

Yes. Tim thanks for your question. Our goal is to really be the partner of choice and be an outstanding partner when we work with another company and we've committed to Merck KGaA to have them be the lead on discussing how to interpret all this.

So I sense the frustration and I would typically comment more to be honest with you, but I think it's best said that we should await the data from the trial before making any comments. So sorry for not being more transparent about that. In terms of your question about the ENTRÉE lung study the ICOS study.

From memory that's about 105-patient study the design as you described. And it is a Phase II where we'll be looking at all the classic sort of end points you might expect. I think it will be important because that will be the first randomized data that really gives us a sense of the incremental activity that ICOS could engender there.

And so I am cautiously optimistic that, that promotional activity and it would certainly be a huge boost to the program and drive subsequent study designs and probably thinking about where the molecule fits in the medicine. .

Thanks Hal. Next question, please..

Thank you. Your next question comes from the line of James Gordon from JPMorgan. You are live in the call James. Please go ahead..

Hello. It's James Gordon from JPMorgan. Thanks for taking question. Two questions please. If coming back to the same point. Just one more on TGF-beta which would be -- I noted the comment on not giving specifics about what you saw at the interim that there hasn't been a milestone paid.

But can you just say more generally how is GSK thinking about investing in this mechanism in other frontline cancer trials? So could this be an area where we're going to see much more investment over the next few years and you're going to go broader, or do you still see this as just as much as a bet when you first started or entered into this partnership? So any increased confidence to go broader, would be the first question.

And then, the second question is pipeline news flow specifically dostarlimab. So based on the slides, dostarlimab and dapro, again the non-COVID-19 NCEs we're going to have Phase III data in 2021. And I know you recently renegotiated the deal on dostarlimab, so it allows you to partner Zejula with other PDx agents other than dosta.

So, just how much potential does dosta have? Is this something that is a big focus? Should we think this will be one of the key readouts for 2021, or is there other assets that you're much more excited about than dostarlimab?.

Hal, both to you. .

Okay. Let me -- so let me go with the dostarlimab first. We're excited about having dostarlimab. It obviously is part of the PD-1/PD-L1 class, which of course has transformed oncology and probably as a class will be the greatest biggest medicine maybe ever. So, we're excited to have one. We think that it's q 6-week dosing.

It's actually dosed at a higher level than other PD-1s, could be an attractive attribute. I think the greatest opportunity for us with dostarlimab is to be able to combine it particularly with our pipeline reagents. We have the DREAMM-4 study with bela maf with a PD-1 inhibitor.

We have of course the opportunity to combine PD-1 inhibition with aparib whether that be in lung or in ovarian with the first trial. We certainly have opportunities to combine dostarlimab with pipeline reagents that are earlier on like CD96 and STING and ICOS and other agents.

So it is a nice complement to our pipeline and we're very excited about its activity. Of course, it's also active in endometrial cancer, both in the second line and we've got the frontline study going. We are hoping that we can have a tumor-agnostic approval at some point with the data beyond endometrial with colon et cetera.

So, we think it has a lot of potential and that's in part why we renegotiated as you described and give us a lot of flexibility on niraparib as well. Sorry, the other question was -- I didn't write it down..

Bintrafusp, in broader studies. .

Yes. So, for bintrafusp, we were very excited about the preclinical rationale for inhibiting TGF-beta the bifunctional nature of the protein to hit PD-L1 and target the protein to the tumor is attractive. The Phase I data as I comment on was very large and robust and seem to have signals of activity and a well-tolerated profile.

And as we get more data, we'll make data-driven decisions about where to invest. I can't really say more than that. But since we got incremental data, we will be sharing that and sharing where that leads us to invest in subsequently..

Thank you. Next question please..

Thank you. Your next question comes from the line of Steve Scala from Cowen. You are live in the call, Steve.. Please go ahead..

Thank you. First, do you think the inflection in the two-drug regimens that you speak to is already reflected in Dovato numbers, or is that yet to come? So that's the first question. Second question is I would like to ask about the recent thinking on the dividend. I know it's a Board decision.

But 25% of the Board is on this call and another 25% are former CFOs of drug companies. So, I would think that half the Board can't find appealing paying out the majority of free cash flow to cover the dividend.

Emma, would you disagree that a good portion of the Board likely thinks that a change in dividend policy would be in the best interest of building the company? Thank you..

Thank you. So, we'll come to David in a moment on 2DRs and the growth prospects for our HIV business also including the upcoming pipeline. On the dividend Steve, I'm afraid I'm going to reconfirm there's absolutely no change to the Board's position on capital allocation or dividend policy. Obviously, we're working towards separation of the group.

We've been clear on what the dividend is going to be for the Consumer Healthcare business in contract with Pfizer. And as we get closer to the separation and the confirming on that, we'll update with a full Board views in terms of distribution for that, but no further comment on that at this stage. David, over to you for HIV. .

Yes. Thanks Steve. It is true. I mean we're pleased with the performance of two-drug regimens across the world, and particularly Dovato, very strong in Europe, where it's now rolled out everywhere and we're seeing rapid pickup.

And as I said in my remarks, in the U.S., we've seen a very clear inflection in the NBRx and particularly in the switch since we got the TANGO data included in the label in the summer. So, 2DR NBRx is running at about just over 9%. TRx is running around 5%. So some of it's in the numbers but I think still quite a lot more to come in the U.S.

in particular. And then of course there's always obviously a reasonable gap time gap in NBRx coming through into the TRx. But the trend there, I think it is just symptomatic of all the data whether it's the clinical data, the real-world data, the experience that physicians now have.

We are seeing very good momentum and I think that will come through more and more strongly in TRx in the numbers..

Thanks, David.

Next question please?.

Thank you. Your next question comes from Andrew Baum from Citi. You are live in the call, Andrew. Please go ahead..

Andrew Baum:.

I'm surprised that we haven't seen any activity from GSK particularly in hematology given the investment that you're making in the space and the obvious synergies that could be with the late-stage products within that area.

So the question is, what am I missing? There still are late-stage hematology assets right for BD some of which could be accretive immediately. Is this the valuation does it make sense for you? Is it you're looking for internal gating in order to determine the strategy? Is it concerns about the future of U.S.

reimbursement? What am I missing here?.

Well it's an important topic and I'm not sure that you're missing anything because we are absolutely clear in recognizing your observations that our number one priority continues to be strengthening the pipeline and it's our number one priority for capital allocation including business development.

We keep -- whether it's for internal assets or external ones as Hal has alluded to we keep the bar high. We want to make sure they're obviously in line and fueling the strategy that we've laid out for biopharma and have the right kind of discipline around returns.

But we certainly see it as a priority for a review and that's exactly why last quarter we built up a deal with Vir, which clearly we see as having significant potential. And we've announced this year that if it's successful with data later this year could be in market next year for something with really significant sales global demand.

But we also continue to look at technology platforms as evidenced by the deal we struck with CureVac around multiple options in terms of vaccines development. So continue to watch this space and we continue to be prioritizing this as an area for team focus and energy. So I think we now have time to move to one last question. .

Yes. Your last question comes from Kerry Holford from Berenberg. You are live in the call. Kerry, please go ahead..

Thank you. Two questions please. Firstly, on the COVID antibody you spoke about the potential for an extended half life. I wonder if you could provide us with any more detail here.

Are we talking weeks, months? Do you think one shot could cover a whole winter season for example? I know we haven't seen full data but any feeling around your comments there would be helpful. And then on Zejula, you talked about the progress being made in the first-line ovarian market.

But did that indication contribute much to sales in the quarter and is continuing to be slow? And I guess when can we expect -- when do you think we should expect a more significant ramp in sales in that setting? Thank you..

Thanks, Kerry. So we'll come to Luke on Zejula, but then I'd like to come back to Hal please to finish up with the comments on the prospects and possibilities for the Vir antibody. But Luke, first to you on Zejula. .

Sure. Thanks, Emma and thanks, Kerry. I just -- one thing I put in context it's really interesting when you look at the bulking surgeries in the U.S. I mean it's not interesting. I think it's fair. They dropped by about 35% in April and May and they've steadily recovered through June and July. But they're still around 10% below the levels of February.

So that's obviously having an effect on patient flows. If we look and it's really in the U.S. because we don't -- well when we look in the quarter we didn't have the label of first line in Europe. But if you look at our spread of patients in the U.S.

for Zejula about 1/3 of them are in first line now; a split between treatment and maintenance about 1/3 of patients on treatment and about 2/3 of maintenance. But yes around 1/3 of sales are now coming from first line. If you look at our share growth that is -- and your point is accurate.

Our growth has come from taking it away from olaparib within the class. Hopefully, as we now move through and start to at some point see some stabilization in the COVID environment we can begin to see the overall class growth in first line and the number of people on watch and wait be reduced. .

And that 70% on watch and wait is really the opportunity here as well as we hope in due course expanding Zejula beyond ovarian. So Hal back to you the Vir antibody. .

Yes. Thanks Kerry. The Vir antibody is actually very, very special very unique for a number of reasons. As Luke mentioned in the presentation, I think it's important to highlight that this was found through exploration of antibodies from patients with SARS-CoV-1.

And the argument and the rationale for choosing such an approach was that if over this period of time the SARS virus that resulted in COVID-19 has a neutralizing antibody to both that the epitope the antibody's binding tube is likely very important for its infectivity and therefore significantly reduce chances of mutating around that.

So the 2DR regions we think are incredibly important and why we think there's going to be very limited resistance to a single monoclonal.

And that's particularly important given some of the Lilly data where I think it was somewhere between 6% and 8% of the patients had resistant clones than the many, many clones that are emerging as through the genetic drift and even the D614G mutation that's becoming more probably due to a fitness advantage.

In addition to that, it being highly neutralizing, it actually has a modified Fc receptor that not only gives it an extended half-life to your point, which we think we're not exactly sure how long that will be, but it will be most likely substantially longer somewhere probably between two, three maybe even four months of duration considerably more than what you'd expect from a typical antibody, because of this modification, which has been done on other antibodies that have been in the clinic.

So we're reasonably confident it will extend half-life. But in addition, there's a modification of the effector function, so that in addition to being neutralizing the antibody through this increased effector function should be able to bind and destroy cells that are infected with the virus, and that's very unique.

That's not something you would see with the other antibodies we don't think. And so this could give us greater efficacy maybe allowing us to even use lower doses, et cetera. So we think the Fc modification not only extends half-life, but the effector function may be very important.

So combined with that the lower dose that's being explored compared to other monoclonal antibodies a single monoclonal nature and the ability most likely to effectively neutralize the resistant strains is unique. And lastly, I'll just mention that we do see lung accumulation of the antibody.

Whether that's due to some of these modifications in the Fc or other attributes isn't clear. But the antibody also does seem to preferentially go distribution-wise into the lung, which we think will give it again another advantage. So we're very excited about this program and think it could really offer a significant solution for COVID.

And hopefully, we'll have data soon to support that..

So a concluding reason for optimism, which I'd add.

So the resilient performance that we've delivered and the fact that we're on track to be within our guidance range, despite particularly challenging circumstances, we're encouraged by commercial execution across multiple growth drivers and optimistic for both the near-term recovery and long-term prospects for vaccines.

We're seeing strong progress on our strategic imperatives, whether that be in pipeline particularly including COVID solutions or indeed in terms of the separation preparation, which is very much firmly on track and we think gives exciting options for returns to shareholders in the coming years.

So, with that, thank you all very much for joining us and we look forward to speaking and seeing you soon..

Thank you Emma, and thank you to all your speakers. And thank you everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of your day..