Good afternoon, ladies and gentlemen, and welcome to the Analyst Call for the GSK First Quarter 2022 Results. I will now hand you over to Nick Stone, Head of Global Investor Relations, who will introduce today's session..

Thank you, operator. Hello, everyone. Welcome to our Q1 2022 conference call and webcast for investors and analysts. The presentation was posted to gsk.com, and it was also sent by e-mail to our distribution list earlier today. Please turn to Slide 2.

This is the usual Safe Harbor Statement, and we will be making comments on our performance using constant exchange rates, or CER, unless otherwise stated. Please turn to Slide 3. This is today's agenda, where we will plan to cover all aspects of our Q1 2022 results.

The presentation will last approximately 25 minutes with a 30 or 35 minutes for questions. [Operator Instructions] Today, our speakers are Emma Walmsley, Luke Miels, Deborah Waterhouse, Brian McNamara and Iain Mackay. The Q&A portion of the call will be joined by Hal Barron, Roger Connor and David Redfern.

And with that, I will now hand the call over to Emma. Please turn to Slide 4..

Thanks, Nick, and hello to everyone joining today's call. Please turn to Slide 5. I'm very pleased to share our Q1 2022 results, which demonstrate a strong start to this landmark year for GSK. With double-digit sales growth, we are delivering on our financial commitments to a step change in performance.

In the first quarter, sales increased 32%, adjusted operating profit increased 39%, and adjusted EPS grew 43% to 32.8 pence per share. Sales growth was driven by excellent commercial execution and strong demand across the whole portfolio. Biopharma sales increased 40%, 15% excluding Xevudy.

And across the 3 Biopharma business areas, Specialty Medicines delivered 97% growth to £3.1 billion with strong double-digit growth across all areas particularly HIV. I was pleased to see Xevudy contribute to COVID-19 solutions at scale and excluding Xevudy, Specialty Medicines also grew 15%.

Vaccine sales increased 36% to £1.7 billion driven primarily by Shingrix, which delivered its best quarter yet, more than doubling sales as we continue our global launch program across several countries and patient demand returned. General Medicines also grew 3%, reflecting strong growth from Trelegy.

And Consumer Healthcare delivered 14% sales growth in the quarter, benefiting from strong growth across all categories, particularly respiratory health.

This is, of course, the last full quarter ahead of creating a new independent company, Haleon, with a focused strategy to deliver sustainable above-market growth and attractive returns to shareholders.

As a new stand-alone company dedicated to consumer health, Haleon is a compelling prospect with an outstanding brand portfolio and fantastic leadership team led by CEO Designate Brian McNamara. We are absolutely on track with the demerger, having very successfully raised the necessary debt and delivered all significant technical system cutovers.

Brian will share more on our progress and performance shortly, and I know he is very much looking forward to your questions. On innovation-driven transformation, we continue to advance with recent regulatory approvals in specialty medicines, particularly HIV, with the U.S. approval of Cabenuva every two months.

The label update that makes the oral lead-in period optional and the update for virologically suppressed adolescents aged 12-years and older living with HIV. In addition, the U.S. FDA also approved TriumeqPediatric, the first dispersible single-tablet regimen containing dolutegravir as a once-daily treatment for children living with HIV.

And in immunology, China approved Benlysta for active lupus nephritis. Our innovation-driven transformation continues to advance with recent regulatory approvals in specialty medicines. In particular, in HIV, we received several important label update, and Deborah will take you through these later on.

In the quarter, we continued our investment in R&D with the proposed acquisition of Sierra Oncology for $1.9 billion.

We have consistently said we are pursuing targeted business development to augment and complement our organic pipeline, great opportunities with strategic fit, and this acquisition aligns with our strategy of building a strong portfolio of new and specialty medicines alongside our vaccines portfolio.

The deal is expected to contribute to 2023 sales with adjusted EPS accretion in 2024. And in a moment, Luke will highlight why we believe momelotinib has the potential to address a critical unmet medical need in myelofibrosis patients with anemia and complement our HemOnc business.

Overall, we see these results as a very encouraging start to the year despite the reality of macroeconomic and geopolitical challenges today. We are very confident in reaffirming our full-year 2022 guidance 5% to 7% sales growth and 12% to 14% adjusted operating profit growth at CER. Turning to Slide 6.

The first quarter was another period of excellent progress across all three of our long-term strategic priorities. In innovation, in addition to the examples I just gave, we also received the U.S. and the EU regulatory submission acceptances for daprodustat, a potential best-in-class medicine for treating anemia or chronic kidney disease and the U.S.

FDA has set a PDUFA date of the 1st of February 2023. In performance, our execution actually strengthen, as you will hear from the team shortly, although flattered by the comparison to Q1 2021, underlying demand is clearly strong.

And lastly, on trust, we continue to progress our ESG leadership, executing our ambitious commitments to differentiate GSK on ESG delivery. Turning to Slide 7. As our innovation-driven transformation gains momentum, 2022 is an important year for several significant late-stage milestones.

In Q2, we expect the results for RSV older adults with an anticipated regulatory submission before the year-end, potentially putting us on a path for inclusion in the June 23 ACIP meeting.

This disease represents a significant unmet medical need, with RSV infections accounting for around 180,000 hospitalizations each year and about 14,000 deaths in the over 65 population in the U.S. alone.

In the second half, we have several late-stage readouts, including the pivotal DREAMM 3 trial readout for Blenrep in patients with third-line multiple myeloma and the Phase IIb data for bepirovirsen for patients with chronic hep-B infection.

There is a significant unmet medical need for these patients with over 300 million people living with hep-B, and the disease is responsible for over 900,000 deaths each year. This is an exciting year for our high-quality pipeline, and I'm encouraged by the progress this quarter. And with that, I will now hand it over to the team.

Luke, first over to you..

first, the natural progression of the disease where the bone marrow is progressively failing causing cytopenia, of which anemia is the most frequent; and second, the standard of care treatment for myelofibrosis is dominated by myelosuppressive JAK inhibitors. Many patients sooner or later will become transfusion-dependent.

And on the left side of Slide 11, you can see that transfusion is an independent prognostic factor with transfusion-dependent patients having significantly worse survival. This is a significant challenge with the right side showing how significant a challenge it is.

Up to 30% of patients are still not received a JAK inhibitor already require transfusion. That number goes up to 30% of patients who have already been treated with JAK inhibitors.

With momelotinib, we are excited to have an opportunity to bring a potential new medicine to GSK, which is differentiated in segment of patients with a high unmet medical need. With that, I will now hand it over to Deborah on Slide 12..

Thanks, Luke. Our Q1 performance demonstrates continued momentum towards delivering our objective of remaining innovation leaders in HIV and achieving a mid-single-digit sales CAGR to 2026. We have seen continued momentum throughout the quarter in our innovation sales, which now account for 38% of our portfolio and all regions reported growth.

Sales grew 14% during the quarter, reflecting strong confidence levels in our two drug regimens and building momentum for Cabenuva. Q1 performance benefited from favorable tender phasing in the international region and stocking patterns in the U.S., accounting for around nine percentage growth points.

Our ambition for the year remains to deliver mid-single-digit growth. Dovato continues to perform strongly, delivering £257 million of sales, representing 82% year-on-year growth. Dolutegravir-based regimens continue to hold the number one position in the share of the switch market across the U.S. and Europe.

Dovato is on track to deliver at least £1 billion of sales in 2022 with significant further growth potential beyond. Turning to our injectable portfolio. Cabenuva is our first-in-class long-acting treatment regimen for HIV. Sales doubled quarter-on-quarter, delivering £38 million and more than 6,000 people living with HIV are now taking the medicine.

The U.S. FDA approved several label updates, simplifying the patient and physician experience. The approval and launch of the every two-months dosing in the U.S. in February has driven a positive inflection in the medicine. Cabenuva or a lead-in is now optional.

We believe removing the oral leading requirement will expedite the initiation of this injectable therapy. The U.S. FDA also approved an expanded indication for Cabenuva to include virologically suppressed adolescents aged 12 and older living with HIV. Moving on to prevention. We have launched Apretude in the U.S.

Apretude is the world's first long-acting injectable for the prevention of HIV dosed every two-months. We have high levels of ambition for this medicine, and the initial launch activity building awareness and access for Apretude with positive early demand from patients and prescribers.

I'm also pleased that we have made significant progress to enable access to this medicine in resource-poor countries by announcing an extension of our partnership with the Medicines Patent Pool, which has been incredibly successful in enabling access to more than 22 million people now taking a dolutegravir-based regimen. Finally, the U.S.

FDA approved Triumeqpediatric, the first disposable single-tablet regimen containing dolutegravir, a once-daily treatment for children living with HIV.

To ensure that none of the 1.7 million children living with HIV is left behind, this approval means we are one step closer to closing the gap between the HIV treatment options available to adults and children. I will now turn it over to Brian. Please turn to Slide 13..

Thanks, Deborah. Turning to Consumer Healthcare. Before taking you through first quarter results, let me give you an update on the demerger process, where we have made significant progress as we enter the final stages of separation.

During the quarter, we launched our new company name, Haleon, hosted our first Capital Markets Day and appointed [6 members] to the designate Board. We have also secured the long-term capital structure of the business, raising bonds across a variety of maturities at attractive rates, and we established our debt facilities.

Finally, we completed the technology systems cutover, a significant milestone for us. Looking ahead, the next major steps include the publication of the equity prospectus in June with a shareholder vote in July. In the first quarter, we had a strong start to the year.

Revenue was up 14% and up 16% organically driven by robust commercial performance with broad-based growth across all our categories and regions. Strong cold and flu performance delivered a five percentage point benefit to growth and advanced sales ahead of the system cutover in April contributed a 2% uplift.

Our first quarter organic revenue growth was split 3% from price and 13% from volume and mix. This growth was also competitive with positive momentum in our overall market share with seven of the nine power brands holding or gaining share. E-commerce sales continued to see strong growth in the high teens, and this is now 9% of revenue.

Similar to consumer peers, we saw continued pressure from cost inflation. However, operating leverage and pricing combined with the delivery of the Pfizer synergies enabled us to increase operating margin by 230 basis points at constant exchange rates to 24.7% while increasing investment in A&P and R&D.

Given the very strong growth in the quarter, we remain confident in delivering full-year sales in line with our medium-term organic annual revenue guidance of 4% to 6%. Please turn to Slide 14. Taking you through our performance, starting with growth for the quarter across our categories at constant exchange rates as a segment of GSK.

In oral health, sales increased 9%, with continued strength in Sensodyne and Parodontax supported by a continued rebound in denture care. Pain relief was up double-digits with over 30% growth in Advil and Panadol positively impacted by Omicron along with a stable performance in Voltaren.

Across vitamins, minerals and supplements, 15% growth was driven by the strength in Centrum and Emergen-C, benefiting from increased capacity to meet strong consumer demand.

Respiratory sales were up over 50% driven by a strong cold and flu performance, where brands were up nearly 90%, overall delivering about a five percentage point benefit to overall growth. Digestive health and other sales were down 1%; but excluding brands divested, up 4%. In digestive health, Eno and Toms performed particularly well.

Please turn to Slide 15. The top of this slide shows how GSK reports our business by region. However, I would like to take you through the Haleon regional detail and our organic revenue growth. This is how we will report going forward and is consistent with what we shared at our Capital Markets Day.

North American sales increased 17% helped by strong growth in respiratory in the U.S., where cold and flu was ahead of 2019 levels. Additionally, during the quarter, pain relief was up over 20% driven by strong Advil sales benefited from resale stocking patterns and the Omicron wave. We also saw a strong growth in VMS particularly in emergency.

Asia Pacific was up 15% helped by COVID-related demand, with double-digit growth in Southeast Asia, India and Australia. In China, we also saw double-digit growth, with Centrum up over 20% and good growth in Caltrate and Sensodyne. In Australia, we saw a strong growth of Panadol with sales up nearly 50%.

Finally, looking at Europe, Middle East, Africa and Latin America. First quarter sales were up 14% or 10% excluding the sell-in ahead of the systems cutover and a distribution model change. This was particularly strong growth in Latin America and Central Eastern Europe. Additionally, Southern Europe saw a double-digit growth in Spain and Italy.

The strong growth in respiratory was a key factor along with good growth across a number of our power brands, including Sensodyne, Parodontax, Panadol and Centrum. All of this offset some weakness from Voltaren in the region. So overall, a very good start to the year, clearly demonstrating the strength of execution across our markets.

Looking ahead, we do expect macroeconomic pressure over the course of the year. And in the back half, we have a tougher comparator with double-digit growth in 2021. We remain confident in delivering on our in-year and medium-term guidance of 4% to 6% organic annual revenue growth.

Finally, I'm incredibly proud of our teams and the business' ability to navigate the volatile trading environment over the last couple of years while, at the same time, making strong progress towards separation. Along with everyone across the business, I’m excited about the potential of Haleon and our future as a stand-alone business from July.

I look forward to engaging with you more on Haleon as we get closer to separation and thereafter. I will hand it over to Iain..

significant increase in operating profit including the upfront income from the Gilead settlement; favorable timing of collections and profit share payments for Xevudy sales, for note, we expect to see an opposite impact in Q2; and lower seasonal increases in inventory.

These factors were partly offset by lower proceeds from disposals and higher purchases of intangible assets primarily Alector and Arrowhead as well as higher tax payments and capital expenditure. We still expect to share comparators for new GSK cash flow around the middle of the year. Turning now to guidance on Slide 22.

Today, we are reconfirming our GSK guidance for 2022. Excluding COVID Solutions, we still expect to see GSK sales growth of between 5% to 7% and adjusted operating profit growth of 12% to 14%, which continues to be predicated on the Consumer Healthcare business being demerged in July.

Our expectations for COVID solutions also remain unchanged with the overwhelming majority of sales delivered in Q1. We are assessing demand for the remainder of the year in light of the U.S. FDA changed to the emergency use authorization for Xevudy.

We have delivered a very strong start to this fiscal year, and I should share some of our considerations for the remainder of the year. We anticipated a stronger Q1 in light of the phasing of the pandemic impact in 2021. And there is also been some favorable phasing this quarter such as the timing of international tenders in HIV and in U.S.

vaccines ordering patterns. In light of those Q1 dynamics and prior year performance, we expect quarter two and three to deliver lower sales growth with a favorable Q4 comparator also informing 2022 phasing.

At the half year, we would expect to be slightly ahead of full-year revenue guidance with second half will be more heavily influenced by Q4 given the 2021 second half comparators. On dividends, we have declared a 14 pence per share for the first quarter.

In summary, the strong start to the year and the momentum we have give us confidence in delivering our guidance while also delivering the separation into two new companies. And with that, operator, we will now move to Q& A. Thank you..

Great, thank you. [Operator Instructions] We already received a few questions, and the first one is coming from the line of Graham Parry from Bank of America Merrill Lynch..

Hey, thanks for taking my questions. So I just wanted to follow up on Shingrix and if you could just quantify the benefit of inventory movements in the U.S. as the retail channel restocked and where inventory levels were at the start of Q2.

Could we see any unwind there in Q2? And then ex-U.S., is there any bolus effect in Q1 or expected through the rest of the year as new launch markets come online? And then secondly, one for Brian on Consumer.

The inflation impact on input costs that you are seeing and any potential wage inflation going forward, could that impact on your margin expectation at all? And could cost of living, affordability issues start to see consumers downgrade from the premium brands in OTC and oral that GSK sales and go more towards cheaper generic or store brands?.

Thanks, Graham. Well, the cost is an important occasion for us, so I'm going to offer the first question there with great pleasure to Brian to answer. And then we will go back come back to Iain to give a bit more detail on the Shingrix phasing. I think you already made some comments, but you might want to add..

Thanks for the question, Graham, to the question on inflation impact and input costs. I think as I laid out at Capital Markets Day, we are exposed to the same inflation costs that many of our consumer peers are seeing, but we are less exposed structurally.

So if you look at the commodity and commodity related costs, it is less than 10% of our overall sales. So we are seeing those cost increases, but I feel really good about our margin delivery in Q1.

And the margin delivery was driven by a combination of the continued delivery of the Pfizer synergies along with operating leverage behind the strong sales growth.

Now it is also just important to note as you look at that, operating delivery, margin delivery in Q1, we are yet to see the full standing up of the Haleon costs we shared at Capital Markets Day of £175 million to £200 million. They haven't ramped up yet in Q1.

So for the outlook on the year, nothing has changed from the margin building blocks we provided for 2022 we laid out at Capital Markets Day and in our medium-term guidance of moderate margin expansion. And we are managing all the other costs. And as we said, we manage it with a combination of efficiencies in the business and with pricing.

Your question on consumer behavior, I have to say today, we have not seen consumer behavior impacted in demand, and you see that in the strong volume growth that we had in Q1. We are staying very close to this, and we are seeing how consumer behavior shift.

It is also why we are very focused and conscious of where and how we take pricing across the business to make sure that we don't get ahead of that consumer behavior. The other piece is, listen, we are in everyday health, we are in consumer health care, and these products matter. And products like Sensodyne provide a real benefit to consumers.

So while premium, we tend to see consumers sticking with those products that really matter..

Right. 11% volume growth in Consumer in the quarter is really strong.

And on Shingrix?.

Yes. And thanks, Brian.

Since its your last quarter, do you want to take the question on Shingrix?.

I would love to, Iain. Thank you very much..

So Graham, thanks for your question. So look, a couple of comments I made during the presentation. We saw about four percentage points of our 15% ex-pandemic growth in Commercial Ops coming in Shingrix in terms of the U.S.

phasing and in terms of the underlying demand recovery from patients, which is incredibly encouraging, something which we are confident but nonetheless encouraging to see.

But in terms of the channel build and that phasing, if you look at inventories at the end of the first quarter inventory sitting around 1.2 million doses, it was around 1.1 million doses at the end of the fourth quarter. So it really was very much about just building that demand that we saw coming through in the first quarter, so confident in that.

In terms of looking at how we see the contribution from geographic expansion, it will build as the year goes on. But when you look at markets that make the real difference at this point in time, it is that continued underlying demand, strong demand coming from the U.S.

But also our German market in Europe plays a very important contribution now to overall Shingrix performance.

So I think I just build on some of the comments that Luke made in that regard that as we continue to expand on the back of unconstrained supply, we will see the contribution build, but key markets certainly in the current year we would expect to continue to be in the U.S. and Germany to a somewhat lesser extent..

Luke, anything you want to add at all in terms of the consumer demand dynamic?.

Yes, I think it is probably a bit of color there. I mean I think just to build on to build Iain's point, I mean, Q1 2021 was 0. 7 million doses, and Q4 2020 was 0.8 million doses. So I think if we have learned one thing about the pandemic is retail pharmacy chains in the U. S. is a pretty good judging command of Shingrix.

As Iain said, there was a large order from the pharmacy chain in the U.S., and we will unwind that in Q2. But they ordered it because they think they can sell it. On the demand side, to Emma's point, I mean the good thing is that the DTC that we have got is breaking through. Our target segments, we can see increased urgency and interest.

Also, when we look at physicians, nine out of 10 of them are very willing to prescribe the product in 60-plus years. And that is actually jumped 10% in the 60 to 64 group. That is also moving up in the 50 to 60 group as well. What is also encouraging, but again, we are not out of the woods yet, and I will explain why in a second.

We ran a survey with pharmacists where we asked them to allocate 100 points in terms of their enthusiasm to recommend vaccines to patients. So at the end of last year, they allocated 56 points to COVID-19, 10 to shingles, eight to pneumo, 21 to flu, so there is some seasonal there.

If you look at February, they allocate 39 to COVID, 23 to shingles, Shingrix, 17 to pneumococcal vaccines and 8 to flu. So that is certainly encouraging in terms of moving it up. And then when you ask them specifically on Shingrix, you are more willing to use the product, they have gone from 44% extremely willing at the end of last year to 56%.

So there is a real strengthening in terms of their enthusiasm for it. And we are now starting to see that in the Rx trend. So 42 out of 50 states we have more Rx, TRxs than the same time last year. And out of those 42, 36 are more than 10% up, and 10 of the 42 is more than 50% up.

And about half those TRxs is the first dose, which if we look at this time last year, it was about one-third, 35%. But, and this is why we are not out of woods yet, we have seen COVID cases going up in the last two weeks in the majority of states in the U.S. for two new subvariants. And that is jumping in the Northeast and Midwest.

And you have also seen the Biden administration approving booster for the 50-plus population. And then the other thing that we are watching very closely when we survey pharmacists, 45% of them have a very, very hard time hiring technicians and keeping them, and 40% say it is very different.

And this is our number one reason for people not going through the shop. It is just the availability of staff. So as Emma said, there is good underlying trends, but we just need to watch, and that is why we are not changing that now..

There is probably one other detail to add because I suspect we will get this question later. So when you look at the volume through the retail chain versus through the health care provider's office or the practitioner's office.

If you think about the third quarter of 2021, we saw 47% going through retail, 53% through the practitioner's office at the end of the first quarter or for the first quarter, we have seen that start moving back to the more historical pre COVID trend that we have seen for Shingrix with about 56% going through the retail chain and 44% going through practitioners' office.

And so that, again, I think it plays to exactly the survey data that Luke mentioned. So it is encouraging to see that as well but just keeping a very close eye on how we see the ability of those retail chains to administer when we see competing forces coming through..

Great. Well, we will move on to the next question. We just know that is a really key one. And as you can hear, there is a lot of vigilance, agility and optimism remains for this great asset for us before the next one comes. Next question please..

Thank you. Our next question is coming from the line of James Gordon from JPMorgan..

Hello James Gordon from JPMorgan. Thanks for taking two questions, both pipeline, please. First one is on Vaccines. So older adult RSV Phase III readout approaches. My question is latest thoughts on the competitive positioning and two bits within that.

One about dose frequency, is annual vaccination now the base case in which the adjuvant made of but make a big difference in terms of allowing multiyear dose intervals. So how you are thinking about that? And also just competitive delays or whether that is a big boost for you.

I have seen Pfizer significantly enlarged their trial in a moment, means they are going to report this quarter. And I saw J&J have started the trial with what looks to be a new viral vector maybe due to blood clot safety concerns.

So might you be the only one that applies to ACIP next year? So how are you thinking about that? And then the other question was about pipeline in oncology. So the Sierra deal, which looks like an attractive option for Jakafi refractory patients. But I know there are quite a few other mechanisms out there in late-stage development like Bcl-2.

How are you thinking it is going to stack up in refractory? Is it like one big segment you have identified that you are going to go for or how we should segment the market? And longer term, is this just a refractory product? Or do you think you might be able to combine this with some of the other mechanisms, and it could be a frontline product as well?.

Okay. Well, we will come to Hal in a moment both in terms of the trials, I mean, we already confirmed our expectations to have those results but on that and then your comments on oncology.

But first of all, perhaps, Roger, you could comment on our overall sort of ambitions and confidence in older adults and any further reflections on questions like dose frequency as well..

Jim, thanks very much for the question. Obviously, we see the data from our RSV adult trials. Exciting time within vaccines. Obviously, the disease burden and the world is waiting for a vaccine in this space, a momentum to hospitalization burden that exists.

One thing to understand about that hospitalization is that the greatest burden comes from people that suffer from comorbidities in the older adult population.

I mentioned that because when you look at our unique technology platform, which is the adjuvant combined with the antigen, we believe that is where we could see some differentiation in terms of performance. We have seen this in Shingrix. We know this platform well.

We know that there is an opportunity perform and create a higher efficacy in that older oral population. And also in that at-risk group, the comorbidity group within older adult as well. So we will have to see the data, but that is where we really believe that we can make a difference. I think it builds off the Phase II data.

That is why we are confident we see our Phase II in terms of neutralizing antibody increase. But also the impact on T cells, which, again, our belief is that, that has not linked to severe disease outcomes, we believe that is the potential differentiation as well.

In terms of adjuvant and duration of protection, we think the biggest goal that we have at the start is to protect the whole year and ensure that we cover the season. That is going to be important.

And then we will obviously continue to monitor and see whether there is a duration of protection benefit greater or more than that season, and the trial is designed to monitor that as well. But we will see that over time. I think that is important.

What I would emphasize is that we are getting ready for this launch and investing to be ready as well not just from a commercial perspective with Luke but also from a manufacturing perspective also to make sure that we are ready for what could be a differentiated vaccine. And we are on track to see that data in the first half of this year..

Right. Thanks.

So Hal, do you want to pick up any further comments on that and then also on CRO?.

Yes. No, I think, Roger, you have hit all the points there, so nothing to add unless, James, you have additional thoughts on that question. So momelotinib, I think it is a very exciting molecule for a very significant unmet medical need.

I think the question you specifically asked about Bcl-2 other concomitant meds, I think it is important to really highlight what Luke said and why we are so excited about that molecule.

What Sierra Oncology was able to do based on some pretty interesting preclinical data showing that not only is this a very effective JAK1/2 inhibitor, but it has a unique property that will, I think, differentiate it amongst other therapies for myelofibrosis.

And that is its inhibition of the so-called ACVR1 or ALK2 to the active and like receptor two kinase. And the science behind that is that by blocking that receptor, you are reducing hepcidin levels, which are involved in iron storage in the liver.

And as you know and has been highlighted, anemia, not only because of the disease but also because of JAK1/2 inhibition which occurs with Jakafi, this sort of unique aspect of its mechanism, both a JAK1/2 inhibitor plus this ALK2, provides a very unique and differentiated profile.

So it would likely be differentiated amongst all JAK inhibitors and possibly the drug of choice to combine with other things. And so we are looking forward to seeing its life cycle management in the future..

Great. Thanks, next question please..

The next question is coming from Laura Sutcliffe from UBS..

Hello, thank you. Just a follow-up to James' question on the RSV vaccine, please. You have obviously mentioned that you might be able to get the data to an ACIP meeting mid next year.

But how do you think ACIP going to handle a discussion around how often your product should be given if you don't have much data on that at the time, and I think the relevant part of your trial will still be underway? It just seems unlikely they can make a recommendation without actually saying when you should have it.

And then secondly, on Consumer, you mentioned pain release benefiting from Omicron in the quarter. That doesn't sound sustainable, so perhaps just your view on the evolution of that sales line for the rest of the year. Thanks..

Thanks.

Brian, do you want to pick up on pain relief and then have any further comments on pain management?.

Yes. Great. So thanks for the question. So Omicron impacts our business in two ways. First, the Omicron systems are consistent with cold and flu, so that drove the growth in the cold and flu category that you saw. And as you know, the cold and flu category grew significantly versus 2021 when we had very little cold and flu.

But this year was also above 2019 levels. Second, in times of higher cold and flu incidents, we also see increased demand of systemic pain relief, especially brands like Panadol, which treat fever and symptoms.

And Panadol specifically had a very strong Q1 both from treating those cold and flu symptoms but also behind our Take Care campaign, which help people understand how Panadol could safely alleviate symptoms post-vaccination. Now unlike the beginning of 2020, where we saw a huge demand from COVID that was pantry loading, this is real consumption.

So consumers are buying the product and they are using the product. So I just think about it as it was a strong cold and flu season, and we will be lapping strong - that is an extension of what happened in Q4 and continued on.

So that is how I would think about it, but I feel really good about the growth of both our respiratory and pain relief in the context of that market, because I feel we were very competitive in our growth rates..

Great. Hal, any brief comments on ACIP. Obviously, the work lies ahead..

Yes.

I think the key thing is that, of course, we will be looking at whether this vaccine can be seen as super seasonal by the duration of protection, which we have ongoing pivotal data that will assess its efficacy over not just this one-year time period where we will obviously have data for ACIP, but to your point, over the ensuing years, and we have studied at the three-years that are looking at the impact of this.

So we will be able to generate the data. I think it is important to also note that the duration of efficacy during a season can give some hints as to whether one might be able to see a super seasonal effect. But to your specific question, with one season's worth of data, that is what we will have at ACIP..

Great. Thanks, next question please..

The next question is coming from the line of Simon Mather from BNP Paribas..

Thank you. I have got two questions I will follow through, one for Brian and then one for Emma.

Just in terms of OTC, could you maybe help us understand, you discussed stocking in the first quarter, should we expect that to unwind in Q2? And kind of related, and please excuse my ignorance, when you transition from the Orange GSK Emblem to a green Haleon, should we expect that to have an impact on revenues at all or is that just purely academic? And then secondly, on pharma, one for Luke, really, just on oncology.

Talking about obviously impacts of COVID-19, I guess we have similar impact in the prior year period. I'm just wondering what potentially we could - when we could see an inflection there. Any data points because, obviously, your guidance is for, I think, £7 billion peak sales and -- excuse the noise.

Just whether or not we are going to get an interim readout with the GSI that could potentially give us more visibility on Blenrep. Thank you..

Thanks. You can cut in and out a little bit. So I will ask Brian, first of all, to comment on your stopping a technical question. By the way, obviously, philosophically, the concept of the demerger is to unlock tremendous growth for two new companies, so I will give you that. But I will let Brian talk it.

And then I think you were talking about oncology in the second question. It cut out for me a bit. But in which case, perhaps we can ask Luke briefly to talk about commercial performance and how briefly on the emerging oncology pipeline. It is an emerging business for us.

Numbers you referred to are obviously, on a non-risk-adjusted basis, but we do have some exciting prospects coming through. But Brian first..

Yes. Thanks for the question. First, on your question on stocking in the quarter. So one thing we will not repeat and will come out of quarter two, which is the forward buy from the system cutover. So purely two points of growth that would have happened in Q2 came into Q1, so we will see that unwind in Q2.

The other comments on inventory stocking patterns are, honestly, the strong demand ending last year, inventory levels were a bit lower at the beginning of the year, so those inventories are now up. So that is not something that would necessarily unwind as we look at the - as the year goes on.

But certainly next year in Q1, we have that inventory build that happened. But it is just normal kind of stocking patterns given the high demand across the business. Your question about orange to green, by the way, I just want to say I love the color orange, but I do like green better. There is really no impact.

There is a slight difference in the parameter in the Haleon numbers. And what you will see at Capital Markets Day we shared the historical financial information under that parameter.

And to be a - and in the appendix of that presentation was a detailed list of what those changes are, very small, so it doesn't have a significant impact on the reporting, but the numbers move around just slightly..

Okay. Great.

Luke, do you want to talk about oncology momentum and then how long the pipeline is for GSI?.

Sure. So I think I heard your question correctly. I will just go through the products and then finish on Blenrep as a segue to how on the pipeline rate there. I mean I think with Zejula we have shown you the 29% suppression. I think another set of numbers which are really illustrative of the challenge for the class actually is if you look at IQVIA U.S.

path initiations across all lines, if you look at Q1 2020, it was 1,629. If you look at Q1 2021, it was 1, 487. And the most recent figures we have with IQVIA Q4 2021, and they are 1,198. So those patients, sadly, those women are not presenting. They will present at some point.

I frankly thought we would have seen a recovery by now just because of the underlying biology and the symptoms, but that is still lagging. So it is difficult to predict. And of course, then there is a debulking time frame therefore they present for chemo, and then maintenance therapy. So I think it is the second half of the year at the earliest.

Look, on the encouraging side, though, with ZEJULA, when we do see those patients described the path, we are able to match them 1:1. in terms of volumes there of scripts. So clearly, that is, I think, the sign that we are coming through in terms of the arguments there.

If you look at Jemperli, I think the RUBY first line readout in the second half of the year is quite exciting and how we will cover the CD96 potential of the combination. Clearly, we have done momelotinib, but I think to build on how answered earlier. It is not just a refractory population.

There is a first-line subgroup who are indicated for ruxolitinib but are precluded from that by NCCN guidelines because of the hemoglobin level. That is a natural group that ruxolitinib and fredatenib are challenged by.

And if you look at the mechanisms which are being explored, they are really designed to drive efficacy in that first line rather than address the underlying anemia, which we know from our market research is highly concerning for physicians. So that is why we see the opportunity there in first and second line for momelotinib.

And then finally, with Blenrep, I mean we have said this on a couple of earnings calls, we have got to do a couple of things. We need to expand usage in the community. It is dominated by the academic center even though only about one-third of the volumes there.

And to do that, ultimately, through partnering with House organization, we need to resolve the keratopathy rates that we see through a combination of dosing level, sequencing and combinations, which Hal and the team are working on. So Hal, I will hand over to you for that part..

Yes, thanks. And just briefly, just to comment on the pipeline, as you know, a little less than 4 years ago in 2018 when we made the commitment to specialty medicines, highlighting do oncology is an ideal area to get back into. Given its potential, we made a little lot of progress. I think at that time, we had a handful of things in the pipeline.

The most advanced was in Phase I. Now we have three approved drugs, hopefully a fourth one soon with momelotinib. Just to briefly comment, our focus has been within oncology on immuno-oncology and synthetic lethality of immuno-oncology. We now with the PV rig entering the clinic this month.

We have that CD96 TIGIT and the startup for reagents that we think will combine very interestingly on the CD226 acts to potentially usher in this new era of immuno-oncology that is very exciting.

Obviously, you have other reagents that are both in preclinical and in the clinic that will complement all four of those in synthetic lethality, as Luke mentioned. Zejula, a fantastic drug with the PRIMA data really, augmented by the Xi Labs PRIME data, really very encouraging, reinforcing its unique best-in-class characteristics.

We have some life cycle management going there. And synthetically, we also have a very robust pipeline in research and one in the clinic, the Map2A inhibitor that we are doing with IDEYA for MTAP-deleted tumors. So really terrific progress. I won't say more about momelotinib.

But getting back to BCMA, really pleased with its approval and the excitement in the clinic in the fourth and later lines.

We have the DREAMM-3 study that we will read out in earlier lines; DREAMM-7 and DREAMM-8, that is exploring whether it could be actually superior to VELCADE and DARZALEX in two different studies, leveraging extending dosing intervals, altering the holding patterns and looking for synergy with pomalidomide in studies like Algonquin and where we saw some pretty significant response rates of greater than 90% when given with Palm Dex.

And that, combined with, as you put in your question, the idea of using gamma secretase inhibition to increase expression of BCMA on the plasma cells to further optimize the regimen by reducing the dose, which hopefully will maintain efficacy and potentially reduce ocular toxin.

We are going to have some preliminary data shared at ASCO with more advanced and mature data later in the year..

Thanks. We are going to - because I know there is still a lot of questions waiting through, so we are going to run to 1:15. But let’s take the next question first please..

Great, thank you. [Operator Instructions] And the next question is coming from the line of Tim Anderson, Wolfe Research..

Thank you. A couple of questions, please. On Shingrix, at maturity, so yours down the road, I'm wondering how you expect sales will split out between U.S. and rest of world. If I look at a product like Prevnar, it is about 50/50 U.S. If I look at Carticel, it is only one-third U.S., ex-U.S. is two-third, so that is quite different.

So I'm wondering what Shingrix will look like years down the road from now, more like a Prevnar or GARDASIL or something else. And second question is on otilimab updated level of confidence in the upcoming readout and commercial opportunity. Last time, Hal talked about the program. I think in Q4 quite bullish.

But today, went through key readouts on Slide 7. It was not part of prepared remarks despite being Phase III. And I'm wondering if you can tell us how you are thinking about that product..

Great. Well, let's come to Hal first on that. I wasn't reading everything on the slide. And then perhaps, Luke, you can comment on the profile of Shingrix. The geographic expansion has been and will continue to be a key contributor, but some additional comments from you on that would be good.

But Hal first on oti?.

Yes. Tim, thanks for the question. Let me try to answer that. I think that when you look at oti, it is really part of a package with CCL17.

What we stated in Q4 and I think remain confident is that in rheumatoid arthritis, although there are a number of different therapies, the biggest unmet medical need in rheumatoid arthritis patients is the reduction in pain, which results in a pretty significant number of patients switching drugs or looking for new opportunities.

That, combined with the increasing safety concerns with some of the other reagents out there, we think, represents an opportunity. Otilimab is a unique mechanism.

It is important to remember that the Phase IIb was actually failed to meet its primary endpoint, but we did see encouraging trends in some of the endpoints that we think are clinically meaningful that relate to symptoms that patients have like pain. And so that is why we move that forward.

But I think when you think about the fact that the pain signal seemed to be a little bit out of proportion to the anti-inflammatory effects that when you inhibit GCSF, when you look at what the transcription profile, it looks like when you do that in the monocyte, one of the strongest signals we get is the CCL17 protein level changes.

And those things combined enabled us to both move forward in Phase III but also initiate a program with the antibodies to CCL17, which has finished its Phase Ib randomized section for osteoarthritis pain. And so we are thinking of that as a package, and we should have data by the end of the year.

And we are hoping that there will be a new opportunity for patients to have their pain reduced by some pathways in GM-CSF for CCL17 more data later this year..

Thanks, Hal.

Luke?.

Thanks, Tim. Initially, Previ, I mean, I think the U.S. is going to continue to be very dominant. I mean we have gone from 18% this time last year to about 30% ex U.S. But there is still a large volume of patients that we can dose in the U.S.

If you go more than five-years out, it starts to look more like HBV as you see markets like China and Brazil and the larger emerging markets pick up. And that is true sort of at stage, initially, it is very much an out-of-pocket or concentrated immunocompromised reimbursed population.

And as we get further out in the plan, we will switch to a combination of volume and tendering. Clearly, we are watching very closely Pfizer and Moderna, and our aim is by the time that they reach the market in 2026, we would have got the bulk of the U.S. and European patients vaccinated.

And you know the efficacy profile of this product is quite striking in eight-years plus. So that is how it will look. It just depends on the time point that you assess the distribution between the U.S. and the rest of the world..

Thank you. Next question please..

The next question is coming from the line of Kerry Holford from Exane. Please go ahead..

Hi From Berenberg, actually. Two questions, please. Firstly, on M&A, following the recent Sierra acquisition, I'm just interested to hear what appetite capacity you now have some further M&A ownership particularly in the context of lower valuations rather in the market and tough IPO conditions.

And also in the context of that, can we expect you to continue to focus on oncology or are you still looking across other therapeutic areas? And then finally, just a quick follow-up on RSC.

When that Phase III study is complete, can we expect you to provide efficacy detail within a press release or might you just message at a very high level, it works, it didn't work? Thank you..

Thanks, Kerry. Well, first of all, on BD, we have both appetite and capacity.

I think we have been extremely consistent in emphasizing that our number one priority continues to be the strengthening and the execution of the pipeline, that we expect to complement that with business development as well as driving forward our organic portfolio, obviously delighted with the latest news on Sierra.

If you take a step back, this is across our vaccines and specialty portfolio. We want to pursue things that are in line with our strategy, in line with our key therapy areas and obviously with due financial discipline depending on the stage of it, whether it is IR, NPV or with the latest stuff CFROI. So a lot of focus there.

I mean just if you think about it, even in the first quarter, obviously, we have made some moves in oncology. But in this quarter, we contributed 1.3 billion from the business development partnership with ViiV. We went into the clinic actually with our two Qvar mRNA, unmodified assets, both on flu and on COVID and will come in later with the others.

And we have seen all the progress we are making on two-drug regimens and super excited, hopefully, later in the year to see some first data out on the combos with Halozyme and BD. So yes, we will continue to do more, including in sort of structured partnerships.

And that obviously is one of the benefits - the strategic benefits of the demerger is the continued strengthening of our balance sheet to do so but with all due discipline.

Hal, is there anything that you want to comment on in terms of data plans when the results come in, in RSV?.

Well, I mean we are looking forward to completing the study and getting the data, interpreting the data and, ideally, sharing the data externally. The headline data, like we typically do, but it is often a case-by-case basis, and we are going to have to take a look at all of that before deciding exactly what was in the press release typically..

Thanks. Next question please..

The next question is coming from the line of Peter Welford from Jefferies. Please go ahead sir..

Hi, thanks. Two fairly quick ones.

Firstly, just on osteoarthritis, RSV rather And just again, just following up on the timing of the data, given what we see with the RSV cases, which are now significantly coming down to almost zero, I think, both Europe and the U.S., can you just talk about have you got all the events you need for the analysis already and now it is just a case of analysis or are you still actually waiting for some of the events to occur? And I guess, how should we think about in regards to your confidence then of getting the readout in 2Q? And then just one, which I think is fully more consumer than anything else.

But with regards to Russia and Ukraine, there was a comment about there were some provisions taken in the quarter.

Can you just talk what was the impact, if any, on the Consumer margin? I guess, I'm thinking, was that a factor that we should consider actually that was potentially a negative on the margin this quarter given I think the Consumer business is more extensively exposed to Russia than perhaps Glaxo is? And maybe if you could just talk a little bit about cash collection as well, please, in Russia particularly and whether or not you have had to take or have seen any decrease in the ability to get cash collection at all so far.

Thank you..

Great, thanks. Well, lots of detail on the questions on Russia, which I will ask Iain to cover. I mean it is one for the group and slightly more for Consumer than GSK, but I wouldn't make that too wide a difference. And Iain will comment on that.

Hal, anything to add a tool on the older Redact trial?.

No. Of course, as you know, these are event-driven analyses, but we remain on track, as we have said, to read out by the end of Q2..

Right, thanks. Iain..

Yes. Thanks, Emma. Thanks for the question, Peter. So on Russia for GSK, if you like Biopharma and GSK, less than 1% revenues, less than 1% adjusted operating profit. In terms of provisions in the quarter, consequently, you can imagine that there are no relevance from a materiality perspective.

The vast majority of our receivables in Russia are insured and subject absolutely to our compliance with any sanctions, at least the willingness to continue to pay the bills is coming through clearly from customers whilst recognizing that the continued reshaping and prioritization of the businesses both from a Biopharma and from a Consumer Healthcare perspective.

And the data that I have shared and the facts I have shared is equally triple across both consumer and GSK. So at this stage, in the proceedings, well covered from an insurance perspective, willingness of customers to the extent they can pay with clear compliance with sanctions still very, very clear.

And to the extent that we have taken provisions in the quarter, they are not material either for GSK or for Haleon..

Thank you. Next question please..

The next question is coming from the line of Iain Simpson from Barclays. Please go ahead sir..

Thank you very much. A couple of questions from me, if I may. I mean I understand that you have made the point about tough comps in the second half of this year.

But if I look back to the performance in 2020 and try and think about the two-year stack and where you sit versus pre-pandemic levels, the comps aren't all that tough, so they are a couple of percent tougher maybe for the full-year versus the Q1. And you clearly had a very strong Q1 print.

So I'm just trying to think about your guidance of being sort of between 4% and 6% for the full-year.

Is there an element of you just wanting to be conservative there given how limited visibility is and how much we have seen things change globally in the last few months? And then my second question, when I think about your margin, again, clearly a strong start to the year.

But how should I think about the phasing of that stand-alone cost building as we go through the year? You have said you have done some systems transfer, but at what point does that stand-alone cost really start to kick in? Thank you very much..

Great. Well, both questions for Brian. Just as a reminder, it is only Q1 in terms of outlook for the year from our perspective.

But Brian, do you want to?.

Yes, absolutely. Thanks, Iain. And again, I just want to reinforce, I do feel very good about our start of the year and the performance given the organic sales growth pretty broad-based across category, regions and across power brands. And I talked about the 2% forward buy and the impact of cold and flu.

It is early in the year, and we are managing through a very uncertain geopolitical and macroeconomic environment. So like I said, I'm very confident in our 4% to 6% guidance for the year. But at this point, I think it would be premature to say anything else. On your comps, it is quarter-by-quarter, can be up and down, as we know.

If you think two-years ago in Q1, we were up 14%; last year, minus 9%; this year, plus 16%, and that is a bit of the up and down in cold and flu and the forward buys.

And we look at the back half, we know in Q4 is we had a cold and flu season that was similar to what we are seeing in Q1 of this year, and that is where my comment on the comps really come from. On the margin, again, strong start to the year and feel good about how we have been able to navigate a very tough economic environment.

But as I said, the £175 million to £200 million of cost to run Haleon as an independent company aren't fully ramped up. They are getting more ramped up in Q2. And then as we become an independent company, you expect us to be pretty much fully in place.

But as we think about the back half and, again, nothing has changed from the building blocks we shared in Capital Markets Day for 2022 or in the medium-term guidance of moderate margin expansion..

Fantastic. So obviously, we are all looking forward to the next steps in the deployment ahead of the demerger. Next question please..

Next question coming from the line of Mark Purcell from Morgan Stanley. Please go ahead sir..

Yes, thanks very much. Just going back to two topics. Firstly, on RSV, can you help us understand what would be considered a positive readout from RSV trial? J&J set a benchmark gas with the Cypress data.

So is that what we should be thinking about otherwise what sort of benchmark should we be thinking about? And then sort of secondly on Shingrix, follow-up to Tim's question, where are we at the moment in Germany relative to the U.S. in terms of uptake? And how should we think about the progress of other ex U.S.

countries compared to Germany maybe using that as a proxy? Luke, you sort of talked to how you felt that you captured the European market in five-years, so just trying to understand the progress there and where we are with upgrades such as the liquid formulation and looking at trials in immunocompromised adults above 18 years of age as well to build the market further..

Okay. Great. So Hal, could you first, please, just quickly on RSV trial data. And then Luke, over to you, please..

Yes. Thanks, Mark, for the question. As we have said previously, it is both hard to predict efficacy and it is hard to predict efficacy relative to competitors without any data.

But as we look at our own immunogenicity data, the aggregate packages that have been presented by other companies, and I should say, and in discussions with clinicians, we are pretty confident that effects that are more than 50% are probably clinically meaningful and effect.

Greater than 70% is a very good response, and it will be, we think, a very successful vaccine. And should we get efficacy above 80% that is truly outstanding..

Right.

Luke?.

Sure. So Mark, I mean if you look at Germany, it is about 133 of the 160. And I mean we are at early stages with Germany. I think what's attractive about Germany is you have got heavy levels of support from the six funds, so there is not a high out-of-pocket exposure. Now that varies across the rest of Europe.

Some countries have concentrated on the immunocompromised for reimbursement. Other countries have got a cutoff in terms of age, so it is going to be more staged with those markets. And then if you look beyond Europe, we have seen a good uptake in Canada. We are just starting to get going in Australia. We will launch in Brazil later this year.

In markets like Saudi, we expect to pick up. Again, the strategy is in the initial out of pocket segment at a consistent price globally, and then we will go to tiers and tenders later in the life cycle of the product. So very much starting out.

And then China, finally, it is very much on hold right now because all vaccinations in China have to be procured through point of vaccinations, which are run by the government. And of course, right now, they are heavily focused on COVID vaccines as well as the restrictions that people have in China right now..

Great, thanks and one last question please..

And our last question is coming from the line of Simon Baker from Redburn..

Thank you very much for squeezing me in. Two questions. First one for Brian, on oral health, it is an important driver because, historically, it is grown above the four to six growth rate that you have been targeting.

So just wondering if you could provide us with some color on how the market is evolving and your share within it and any innovations you are pursuing within Sensodyne to continue that growth. And then a question for Hal, touching on something you mentioned. You talked about dostarlimab a CD96 antagonist in TIGIT.

And you do have a Phase I study trying those in triple combination, which I saw was expanded and delayed last week. This trial has been expanding. It is been pushed out about 18 months to August 2024. So any color you could give us on the reason for the expansion and the delay would be great..

Thanks. Well, so Hal, let's come first to you, and then we can fittingly finish with the questions..

Well, thanks for the question. We are very excited about our immuno-oncology portfolio. We think the CD226 axis, highlighted by TIGIT but also complemented by CD96 and, as I mentioned earlier, the addition of PV rig, is an exciting opportunity for GSK to be leaders in this new area of immuno-oncology should it end up being successful.

The programs are challenging to develop both TIGIT monotherapy, TIGIT combination, identifying doses for both of those, adding in CD96 with dostarlimab, adding CD96 with a triple. So these studies are all quite complicated to find doses and whatnot.

So the expansion of the trials are really to highlight the ability to find the right dose, make sure they are safe and look for efficacy to signals, and we are doing that across different tumor types. So it is a very robust program, but we are going to have to enroll a number of patients before we get the answers to the triple combination..

Thanks. And Brian, on oral health..

high single-digit growth on Sensodyne; double-digit growth on Parodontax; double-digit growth on Denture Care, which has a bit of a rebound from softer consumption during the pandemic. Importantly, we grew share on all three of those brands on a global basis. From an innovation perspective, we launched Sensodyne Nourish in the U.S.

and are beginning to roll that out. And Sensodyne Nourish is still providing the sensitivity benefits but also has herbal ingredients. It is in recycled toothpaste tubes and packaging and is attracting a younger consumer base into the franchise. Early days, but we are encouraged by where that will take us.

So we feel very good about our oral care franchise and the way the year started..

Great. So thank you, everybody, for the call. Obviously, a strong start to this landmark year for GSK. And we are now very excited to be in the final stages of the plan to demerge Consumer and create two companies with new chapters for growth. It is wonderful to see good momentum across the business.

Recognizing phasing patterns, the underlying strength is very much there, and we remain all extremely focused on maximizing shareholder value, patient impact and building businesses with people that can try. Thank you very much. We look forward to speaking to you all soon in coming days and weeks..

And everyone, that concludes the call for today. You may now disconnect. Thank you all for joining, and please enjoy the rest of your day..