Title

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GSK plc misses on earnings expectations. Reported EPS is $0.72 EPS, expectations were $0.76. GSK isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Nick Stone: Hello, everyone. It’s Nick Stone, Head of Investor Relations. Welcome to today’s call and webcast. The presentation was sent to our distribution list by e-mail and you can also find it on gsk.com. Please turn to Slide 2. This is the usual safe harbor statement. We will comment on our performance using constant exchange rates or CR unless stated otherwise. As a reminder following the Consumer Healthcare demerger in 2022, we’re presenting performance and growth at the continuing operations for GSK. Please turn to Slide 3. Today’s call will last approximately one hour with the presentation taking around 30 minutes and the remaining time for your questions. We request that you ask one to two questions so that everyone has a chance to participate. Turning to Slide 4, I will now hand the call over to Emma.

Emma Walmsley: Hello and a warm welcome to everybody joining this call. Today we are updating you on our performance for 2023, giving guidance for 2024, and providing you with new upgraded longer term outlooks. Please turn to the next slide. In 2021, we set out a series of commitments to shareholders, including for a step change in performance following the significant transformation in GSK’s structure, strategy, capital allocation, and culture. Since then, we’ve delivered 10 quarters of consecutive sales growth ex-COVID and our priority to invest in new vaccines and specialty medicines to reshape GSK’s portfolio is now strongly evident with around two-thirds of sales now generated from these two product areas. At the same time, we continue to strengthen our pipeline.

The majority of the late-stage assets that we highlighted in 2021 have moved forward positively. And we’ve added multiple new opportunities to this portfolio including through targeted business development where we’ve secured more than 16 acquisitions and alliances for innovative assets and new technologies. We have achieved all of this whilst maintaining a continued sharp focus on operating margins, cash flow, and capital allocation, mindful of the need to both invest for the future and to deliver attractive returns to shareholders. Next slide please. Our performance for 2023 demonstrates all of this. Sales and profits ex-COVID solutions grew double-digit levels for the year. Sales were up 14% to over £30 billion, a clear highlight being the exceptional launch of Arexvy.

Adjusted operating profit was up 16% and adjusted EPS were up 22%. All three of our product areas demonstrated good growth with sales from new products since 2017 contributing more than £11 billion in 2023. This level of performance helped deliver two upgrades to guidance in 2023 and led to the increased dividend we’ve announced today of £0.58 per share. We also sustained good progress with our trust in the ESG goals, not least reflected in our sector leadership of the S&P’s Global Corporate Sustainability Assessment. Highlights for the year included moving to Phase III for our low-carbon Ventolin inhaler program, hitting our leadership diversity ambitions two years ahead of schedule and extending rollout of our malaria vaccine to 12 new countries in Africa.

Altogether, 2023 provided us with good momentum, which we’re now carrying into this year. Next slide please. In 2024, we expect another year of meaningful growth. Sales growth of 5% to 7%, adjusted operating profit growth of 7% to 10%, and adjusted EPS growth of 6% to 9%. For the period 2021 to 2026, we now expect sales to grow more than 7% on a CAGR basis and adjusted operating profit to increase more than 11% CAGR. For 2026 to 2031 with the progress we’ve made in our portfolio, we now believe that we can deliver more than £38 billion of sales by 2031. This is an increase of £5 billion versus the estimate we gave in 2021 and continues to exclude any contributions from early-stage pipeline assets and further anticipated business development.

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We’ve also not included any potential future sales contribution from Blenrep here either. So this new outlook represents a marked sales acceleration. As in effect we now expect to reach our original 2031 goal of more than £33 billion by 2026 so five years earlier. Beyond sales, we expect a continued strong focus on margin improvements during this period, while retaining flexibility to invest in growth. Recognizing that we’ll likely face loss of exclusivity for Dolutegravir from 2028 to 2030, we’re also able to say today that we expect operating margins to be broadly stable through that three year period. Julie and I will cover these outlooks in more detail shortly. But first, we’re going to review our 2023 performance and 2024 guidance starting with comments from Luke.

Luke Miels: Thanks, Emma. Please turn to the next slide. 2023 was a great year for operating performance with strong growth across all our product areas and regions up 14% for the full year. Please turn to slide 10. In Vaccines, sales were up 24% for the year with the outstanding launch performance of Arexvy contributing more than £1.2 billion together with the strong performances from Shingrix and our meningitis portfolio. I’ll come to Arexvy in a minute, but first a few points on the rest of the portfolio and specifically prospects for growth. We continue to expect strong growth for Shingrix this year and to deliver more than £4 billion in peak year sales. In the US, our immunization rate is 35% in those people 50 years and older, which means close to 80 million people who are eligible are unvaccinated with more than four million people joining this cohort each year.

We expect 2024 growth to be driven outside the US where the vaccine is now approved in 39 countries most of which have less than 4% penetration and we’re really excited about our new partnership with Zhifei in China. Our meningitis portfolio supports a major public health need and continues to be an important contributor to growth. Bexsero and Menveo sales were up 14% and 12% in 2023. We’re also excited to be submitting our MenABCWY vaccine for approval in the US. this year. Combined this franchise is expected to deliver around £2 billion in non-risk-adjusted peak year sales. Beyond the marketed portfolio, we expect to see further progress in 2024 for our mRNA vaccine with Phase II data and flu, the development of our pneumococcal MAPS vaccine candidates and our potential HSV therapeutic vaccine.

Next slide please. As Emma said, the Arexvy launch has been exceptional and we expect good growth this year mainly driven by further penetration in the US, but also early adoption from the international rollout of the vaccine. We are currently approved in 39 countries. And in the US, our choice to emphasize our 94.6% efficacy in the comorbid population continues to resonate well. Script data shows strong brand preference and market data tells us that two out of three HCPs prefer Arexvy and we continue to have a strong position with all major pharmacies as we start 2024. Looking into this year, we have a major opportunity subject to approval and ACIP recommendation with a potential label for at-risk individuals in the 50- to 59-year-old cohort.

This is around 15 million people. And on other dynamics for this year, we know we’re facing a more competitive environment. And of course, we won’t benefit from launch docking. We’ll also start to see how seasonality affects use patents for Arexvy. But we are ready for all of this, and are ambitious for 2024. We remain very confident this vaccine can achieve more than £3 billion in peak year sales over time. Overall, looking across the vaccine portfolio we expect sales to increase high single-digit to low double-digit percent in 2024 and we’re also upgrading our vaccines outlook from 2021 to 2026 from high single digits to low double digits. Next slide please. Moving to Specialty Medicines. Here, overall sales were up 15% for the year driven by strong performance from key products in HIV, which Deborah will cover shortly respiratory immunology and oncology.

In Respiratory, our market-leading IL-5 Nucala saw strong growth across all geographies and receive severe asthma approval in China. And as we said at our recent respiratory Meet the Management event we expect pivotal COPD data for Nucala in the second half of this year. Before then, and excitingly for this class of respiratory medicines we expect first pivotal trial results for depemokimab our new 6-month IL-5, a key new growth opportunity for our respiratory business. Benlysta was also a major contributor for 2023 with sales up 19% in oncology. We are very pleased with the strong uptake for Ojjaara and we’re also seeing increasing usage of Jemperli and Zejula in patients with endometrial and ovarian cancers driven by generation of compelling data and launch of new patient valued formulations.

A quick word on Blenrep sales decreased for the year as expected but following positive headline results from a planned interim efficacy analysis of the DREAMM-7 trial we are now waiting for further overall survival data from this study and we continue to expect DREAMM-8 results later this year. Overall, we can expect another year of strong performance from our Specialty Medicines in 2024 with growth of low double-digit percent and continue to expect double-digit growth between 2021 and 2026. Please turn to slide 13. Finally our General Medicine portfolio. Sales grew 5% in 2023 and led by Trelegy which is now contributing over £2 million per year and is the world’s top-selling brand in asthma and COPD. We are now using our respiratory expertise across both vaccines and medicines with the benefit of Trelegy and Arexvy co-promotion being recognized by HCPs who want to discuss both respiratory prevention and treatment.

Overall, we expect general medicines to decrease mid-single digit percentage in 2024 and this guidance takes into account the AMCAP removal in the US, which we previously highlighted as impacting the business by up to US$700 million. We provided for around 20% of this in 2023 and continue to expect a broadly flat outlook between 2021 and 2026. I’ll now hand over to Deborah to cover HIV.

Deborah Waterhouse: Thank you, Luke. HIV sales grew 13% to £6.4 billion in 2023 driven by a notable acceleration in our oral two drug and long-acting injectable regimens. Sales from these two areas represent 55% of our portfolio compared to an exit of 46% in 2022. For the year Dovato sales grew 33% to £1.8 billion. Cabenuva grew more than 100% with sales over £700 million and Apretude contributed sales of £149 million. The growth of these products reflects strong patient demand and our deep commitment to innovation. For long-acting regimens, specifically, more than 80% of US healthcare prescribers now tell us they are convinced that these regimens will become a key part of HIV care. Based on this demand and our growth and momentum, we’re projecting a growth rate of high-single to low-double-digits in 2024.

We’re excited by the potential of our early-stage pipeline to deliver more innovative longer-acting injectable regimens. And as I said at last year’s investor event, 2024 will be an important year for us as we select regimens for four-monthly treatment and self-administered treatment as well as starting the registrational studies for our four-monthly prep. We will be presenting data on our early pipeline and our current portfolio at CROI in March. To conclude, 2023 was another positive year of performance and portfolio development. As such, we’re looking forward to 2024 and are confident that we are well on track to deliver our 2021 to 2026 sales ambition of 6% to 8%. With that, I shall hand to Julie.

Julie Brown: Thank you, Deborah, and good morning, everyone. Next slide please. Starting with the income statement with growth rates stated at CER. Sales increased 14%, excluding COVID solutions and were up 5% overall, reflecting continued strong business performance. Adjusted operating profit grew 16%, excluding COVID and 12% overall. The margin increased to 29% and driven largely by favorable product mix and operational efficiencies as well as increased royalties. COGS and SG&A grew broadly in line with sales excluding COVID. R&D costs increased due to the investment in late-stage programs in vaccines respiratory, immunology and infectious diseases with the step-up in Q4 due to reorganization costs and the acceleration of late-stage projects.

Adjusted earnings per share grew 22% excluding COVID solutions and 16% overall. And this benefited also from lower net finance expense, down 15% following debt restructuring. The effective tax rate was 15.5% in line with our guidance. Turning to the reported results. Total operating profit increased 10% to £6.7 billion driven by overall performance and favorable CCL movements. The reconciliation of total to adjusted results is included in the appendix. On currency there was an adverse 200 basis point impact on sales and 400 basis points on adjusted operating profit versus the prior year, primarily due to the strengthening of sterling against emerging market currencies. Next slide please. Moving on to the adjusted operating margin dynamics for the year.

On this slide we have shared including and excluding COVID to provide an underlying review of margin dynamics. Excluding COVID solutions, the margin improved 60 basis points at CER to 29.1%, due to improved product mix, productivity improvements and increased royalty income. Including COVID, there was a 180 basis point improvement, primarily reflecting reduced sales of lower margins Xevudy. Regarding SG&A growth was focused on investment in vaccines including disease awareness and the launch of Arexvy together with Shingrix long-acting HIV, Jemperli and Ojjaara. Royalty income also contributed to margin improvement. Next slide please. Free cash flow increased to £3.4 billion. And this despite annualizing the receipt of £0.9 billion from Gilead in 2022.

This increase was primarily driven by higher operating profit together with favorable timing of Xevudy cash flows and a lower UK pension contribution. This was partly offset by higher trade receivables from sales of Arexvy in the last quarter. Q4 CGFO performance was particularly strong delivering £3.7 billion versus £2.1 billion last year. And this increase was primarily driven by higher collections following the strong launch of Arexvy in Q3. We expect cash generated from operations to remain strong and we’re fully committed to delivering more than £10 billion by 2026. Next slide please. Slide 19 shares our net debt position and how we’ve deployed capital in the business in line with the capital allocation framework. We look to deploy funds to enhance growth and deliver attractive shareholder returns.

We started the year with net debt of £17 billion and strong free cash generation in addition to the monetization of our stake in Haleon supported £3.8 billion of investment in targeted business development and capital expenditure and £2.2 billion in returns to shareholders via the dividend. Overall this led to a further reduction in net debt to £15 billion by the end of 2023 and a net debt to adjusted EBITDA ratio of 1.5 times. Post the year-end we conducted a further sale of 300 million Haleon shares yielding proceeds of 978 million and leaving our equity holding at just over 4%. Further, we reached a successful agreement to acquire Haleon Bio subject to customary regulatory clearances and to further strengthen our respiratory portfolio.

I’ll now turn to our expectations for the coming year. Next slide please. In 2024, we expect another year of meaningful growth for GSK. We expect sales to increase between 5% and 7%, adjusted operating profit to increase between 7% and 10% and adjusted earnings per share to increase between 6% and 9%. Important to note that the cessation of Gardasil royalties negatively impacts profit growth by six percentage points within our 2024 guidance. As a reminder, our guidance is provided at CER and excludes the impact of COVID-19 solutions. Some points to note for modeling purposes. Firstly our sales composition. As Luke and Deborah have said for vaccines we expect high single-digit to low double-digit percent growth. For Specialty Medicines, we expect a low double-digit percent growth.

For HIV, sales to grow high single digit to low double-digit percent. And within General Medicines, we expect sales will decrease by a mid-single-digit percent largely as a result of the AMCAP removal in the US. We also do not anticipate any further revenue from COVID solutions and this will reduce sales growth by 1%, and operating profit growth by 2% in 2024. Secondly, turning to operating margin dynamics, we have been in an investment cycle, supporting our newly launched vaccines and medicines. And we now expect to move to a period of delivering increasing returns on our investment. In this new cycle, we expect a step down in SG&A growth, to a low single-digit percentage improving productivity and providing margin leverage, whilst remaining competitive.

We will continue to invest for growth, as established in our capital allocation framework and we will continue to build a strong R&D pipeline for the longer term. And finally we expect an increased tax rate of 17% to 2024. And I’ll now hand back to, Emma.

Emma Walmsley: Thanks, Julie. So in this final section, we’d like to provide you with a bit more detail on the key elements that we see as underpinning our performance in 2026 to 2031. We know this period is a key area of focus for investors with growth and profitability being too clear dynamics for us to manage. Next slide please. First, growth, and its most important driver portfolio development, we start from a very healthy position with a core set of marketed Vaccines and Specialty Medicines driving significant growth. With the progress we’re making particularly in vaccines and HIV, these marketed assets now support an outlook of more than 7% sales growth on a five-year CAGR basis, in 2026. These growth drivers will be supplemented by a planned set of near-term new product launches, each with peak year sales potential of £2 billion or more.

Here we have new potential vaccines for Meningitis, Influenza, Pneumococcal disease and HSV and new potential medicines for long-acting HIV treatment and prevention, a functional cure for hepatitis B Bepirovirsen, a new portfolio of anti-infective treatments including Gepotidacin, new medicines for respiratory diseases with high burden and unmet need Depemokimab and Camlipixant and in oncology further indications for JEMPERLI and potentially CD226, targeting a variety of cancer types. Altogether, we are currently planning for at least 12 major product launches in the period 2025 to 2031. With these planned launches and our current marketed growth drivers we expect to deliver more than £38 billion in risk-adjusted sales for GSK by 2031. And beyond this, so not included in that £38 billion, we continue to develop a promising early-stage pipeline.

And we will continue to pursue targeted business development. Next slide please. Of course we recognize that there is development risk and that refreshing and progressing, our pipeline is a continual process. By definition not everything will come through. Continued strong execution is needed and we’re committed to it. We forecast our sales on an RA, Risk-Adjusted and NRA, Non-Risk-Adjusted basis. As you can see here, there is significant potential for upside with successful development outcomes. Our highest adjustments are in Specialty Oncology, reflecting the development risk and the upside returns the assets we have in this space offer. Overall, our portfolio offers scale growth opportunity and has an attractive risk profile, more than 90% of those future sales come from products already approved or from planned launches of £2 billion or more most of which we plan to launch in the next four years.

Next slide please. You’ll be increasingly familiar with many of these assets following our meet the management events last year. We will, of course, continue to provide updates as we expect significant amounts of pipeline value to unlock this year in 2025 and in 2026 as this growing late-stage portfolio matures. As shown here you can see we have multibillion pound scale opportunities in all of our core product areas. These peak year sales estimates are given on a non-risk adjusted basis and all of them are at least £2 billion with many significantly higher. So let’s now turn to the second dynamic for us to manage in 2026 to 2031, a continued focus on profitability and disciplined capital allocation. So over to Julie to comment on this.

Julie Brown: Thanks Emma. And first I will cover operating margins. Since 2021 we’ve delivered an increase in margin of 290 basis points and we remain focused on delivering further margin improvements in the next three years to achieve an operating margin in excess of 31% by the end of 2026. This represents more than a 530 basis point improvement over the five years. Our margin is benefiting from the strategic shift we’ve made to invest in Vaccines and Specialty Medicines together with the significant productivity improvements across supply chain, commercial operations and global functions. This margin progression is after absorbing various headwinds including several already highlighted such as Gardasil royalties and the impact from MCAP.

These are all factored into our outlooks. Moving to the period 2026 to 2031. Whilst we do not plan to guide on operating margin beyond 2026, we do understand that investors are concerned about the period when Dolutegravir loses exclusivity. We would, therefore, like to set out our expectations for this three-year period starting in 2028 with the majority impact into 2030. Offsetting this are a number of positive factors. Firstly and very importantly, the development of new long-acting and ultra long-acting HIV treatment and prevention therapies such that by the time the loss of exclusivity starts, we would expect around 40% of our HIV business to be in long-acting therapies. Second, the mix benefit to the operating margin from growth in Vaccines and Specialty Care products, which we anticipate to be around three-quarters of revenues by 2026.

Thirdly, accelerating productivity gains notably in supply chain and in SG&A with increased use of AI and analytics to underpin and further support GSK’s profitability in this period. Taking all of this together, our expectation is for operating margins to be broadly stable through the three years where Dolutegravir loses exclusivity. Known headwinds including the impact of the IRA on certain products are also incorporated into this expectation. And finally, we will continue to have a strong focus on margin improvement and ensure our P&L is both competitive and invested for growth. We remain ambitious and we’ll seek further upside through progression of the early-stage pipeline, targeted business development and a continued drive for efficiency.

Next slide, please. Turning to capital allocation. Our first priority remains to invest in the business with capital allocated towards development of the pipeline, both organic and targeted business development. We also remain committed to delivering attractive returns to shareholders and pursuing a progressive dividend policy. We are therefore, pleased to announce, an uplift in the fourth quarter dividend to bring the total for 2023 to 58p, allowing shareholders to benefit from the upgraded performance last year and our increased confidence in the future. In addition, we are announcing today, that we expect to pay a dividend of 60p, for the year 2024 in line with our progressive policy and to be paid in equal quarterly installments. Next slide, please.

It is important that we share our progress with you, and that you’re able to track our major milestones and value unlocks, Emma referred to earlier. Last year, we set out an IR road map for investors covering the next 18 months, inclusive of four major areas: execution, pipeline, capital allocation and investor engagement. Our progress on this has been very positive and is available in our appendix. Today, we are providing you with a new and updated road map for 2024, and extending this into 2025. Outlining the milestones and potential inflection points, we expect to deliver in the next 24 months. The Phase III and regulatory decisions are highlighted and aligned to the planned major launches Emma referenced, and include expected progress from MenABCWY vaccines, depemokimab, Nucala COPD and camlipixant in respiratory gepotidacin in infectious disease together with Blenrep and Jemperli in oncology.

We hope you’ll find this useful, and we also look forward to providing you with updates at several scientific conferences this year. And we were also planning to hold two additional Meet The Management events, covering oncology in the summer, and selected early-stage pipeline assets towards the end of the year. I will now hand back to Emma to conclude.

Emma Walmsley: Thanks, Julie. So to summarize, GSK is delivering on its commitments and performing to a new standard. The excellent performance that we delivered in 2023 provides us with clear momentum, and we expect to deliver another year of meaningful growth in 2024, as we continue to focus on prevention and changing the course of disease for millions of people. Our progress means we’re also upgrading our outlook for 2026 and 2031. All of this bodes well. But equally, we also know there is much to be done. We remain very focused on delivering this potential and more at continued pace for patients, for shareholders and for our people combining science, technology and talent to get ahead of disease together. With that, I will now open up the call for the Q&A with the team.

A – Nick Stone: Thanks, Emma. We’re going to take our first question from Peter Welford. Peter, over to you please.

Q – Peter Welford: Hi. Yes. Thanks. You said one or two. So I’ll stick to two, if I may. Firstly, on Arexvy, I wonder if Luke, can you just talk a little bit about the contracting discussions that you’ve got in place for 2024, given comments from Pfizer about trying to become more competitive this year? And if you could give us any insights into the sort of levels of stocks that you have at the moment, and whether that is now a sort of sustainable level that you think going forward given the apparent lack of seasonality at least relative to flu that we’re seeing? And then the second just a quick one just on oncology. Looks though you’ve got two — over 3 billion peak year sales potentials in oncology that you’re including in the 2031 now. Just we’re curious when could we get some visibility I guess to increase the confidence in the oncology part of that £38 billion. And to be clear that it doesn’t include a return of Blenrep? Thank you.

Emma Walmsley: Right. Thanks Peter. We’ll come to Luke first on Arexvy, we’re obviously delighted with fastest run to blockbuster in four months that the company has ever done in 2023 and ambitious for the path forward. And then I’m going to ask Tony to comment on oncology. Just to confirm though Blenrep isn’t included in any of the outlook although we do have some more data to come. And as a reminder in one of the slides that I presented, this is the more heavily risk-adjusted portfolio in our outlook to 2031 and particularly, with the 226 portfolio not starting right towards the end of that period. But Tony can give you more visibility on when we’ll know what for Jemperli. But Luke first you.

Luke Miels: Yes sure. Thanks. Thanks Emma. Thanks Peter. Look stocking levels are about 20% of what we’ve sold in. And if you remember we had that initial loading with the launch as you’d expect, you need to fill the shelves. But yes, now we’re at steady state. I think I agree with you in terms of shifting away from — I think we’re increasingly confident this is not going to be a seasonal vaccine and we’re working very hard to do that. I think the third is in data that we’ll get — in the middle of the year will also help to cement that. In terms of contract, as you can imagine, I’m going to be a little bit coy there because as we’ve said on the past call, people get up early to listen to these calls. So — but I would say we’re very pleased with the launch so far and the 2023 performance.

But our mindset is this is the first round of a multi-round fight. And in 2024 of course we’ve got a third boxer jumping into the ring to make things interesting. So, we’re very focused on it. We’re very confident and I think we’ve shown that we can compete with the best and our aim is to have another good year in 2024.

Emma Walmsley: Thanks Luke. Tony for oncology?

Tony Wood: Yes. Hi Peter. So, just to reiterate, first of all, Blenrep is not in the projections. For Jemperli as you’ve called out there are two areas and the way to think about this is the continued development of value from Jemperli in areas where the underpinning genetics of the cancer support its activity, for example, building on the results that we have with RUBY and looking at other areas which MMR or MSI high status are likely to generate transformative results. In addition we’ve taken a careful look back on what we might call opportunities for which the PD-1 class is showing some effect, but adjustments in the approach would deliver potential differentiated — long-term differentiated efficacy for Jemperli that would be in the third line head and neck.

And then broadly speaking, which — and you’ll hear more about this towards the end of the year is the data that we have in the CD226 as it begin to mature and we hold mid-management session is going to be associated with exploring our combinations with TIGIT in particular and that’s a question of how those data play out in lung and other opportunities like head and neck.

Emma Walmsley: Thanks, Tony. Next question please?

Nick Stone: Okay. So we’re going to take our next question from Jo Walton at UBS. Jo, over to you, please.

Emma Walmsley: Jo?

Nick Stone: You are silent or on mute at the moment, Jo. I’ll come back to you Jo. Bear with me. We’ll take our next question from James Gordon at JPMorgan. James, over to you, please.

James Gordon: Hello. James Gordon, JPMorgan. Thanks for taking the questions. First question was just about Arexvy and about the revaccination data that I think we’re going to get in the first half. So, I remember, one year there wasn’t a revaccination benefit even though the protection had fallen quite a long way. So my question is confidence that we are going to see a strong benefit and how strong a benefit do you need to see? What would be a clinically meaningful benefit that would justify vaccinating people at two years? And is it right that the 26% assumption is that there is a strong benefit from revaccinating people? So that’s the first question please. Second question was just on the longer-term margin. So I saw the comment about broadly stable operating margin and as Dolutegravir goes away and I understand it’s partly about productivity gains.

But can you just remind us — what is the headwind, how much are you losing? So I think when you did break out before in Dolutegravir when it was really just Dolutegravir, it was a margin north of 70%. And presumably the margin will be even higher as that business has grown and you’ve got more operating leverage. So, is that right that you’ll be losing a business that’s more than 70% EBIT margin when it goes away? And is part of it that you think there’s going to be a new pipeline that’s going to come in at a similarly high margin? Or am I overestimating the profitability you lose?

Emma Walmsley: Thanks, Jim. So we’ll come to Julie to give you a response on the building blocks to the margin. But first, Tony to comment on revaccination. And just to be clear the ’26 outlooks we haven’t given the specific ’26 outlook, but RSV. We’ve given the peak year sales for RSV and overall vaccines growth upgraded outlook to ’26 as well. But this is obviously a key asset and very excited with the efficacy of more data to come. So, Tony?

Tony Wood: Yes, sure. Look, so James, just of course a reminder that the existing two-year data is what is supporting the deseasonalization of the product. I’ll talk about the plan to get to the decision point for determining the seasonality of the product. We’re on track with regards to the third season data. That is — will be presented at ACE, it’s worthwhile reminding everybody that the season is called by CDC and the determination of attack rates. So, on track for that as far as we stand at the moment and that will include boost comparison. If you ask me to make the best guess based on what we see from immunogenicity data in the 006 study and other smaller studies than I think we’re heading for a two-season vaccine again though that and the data supporting, it will be on the basis of the ASIP decision and our conversations with ASIP. So obviously go with panelists.

Emma Walmsley: Yes. And I think the other thing to say on deseasonalization. As Luke presented obviously, RSV vaccination is holding up better than flu and pneumococcal, but it still came down between October and December. And we don’t — we’ve got work to do and we will soon discover more over the coming quarter on how those efforts play forward. Julie, the margin.

Julie Brown: Thanks, Emma, and thank you for the question. In terms of the — obviously, we are conscious that people are concerned about the loss of margin from Dolutegravir. It’s not at the level of the HIV business at the 70% that you mentioned. We’ve continued to invest heavily in this franchise and build in particular the long-acting portfolio. And the reason for the confidence that we can hold it stable during that period. First of all, I’d draw attention to the 12 launches that Emma called out in her review. We’ve got some of them near term. I mean, the majority of these will be launching within the next four years. So the inflections are coming quite quickly, but we’ve got meningitis ABCWY, we’ve got the mRNA influenza.

We’ve also very importantly got HIV. We’re confident of the four months and we’ve got work going on that already. So the long-acting portfolio very importantly at the time the dolutegravir patent expiry starts, we expect to have 40% of the business already in long-acting. So that’s an important mechanism. In addition to that, as you know, we’ve got camlipixant launching depemokimab important readout coming out in the first half of this year together with the anti-infective portfolio and others that Emma mentioned. So 12 major product launches just coming out now the majority in the next four years. The other factors are the productivity gains. We’re very confident you see we’ve stepped down SG&A growth into 2024. Luke and I have worked very closely together.

We are very confident that we can leverage the great base that we’ve built. And very importantly, some of those assets that are launching particularly in respiratory, we’ve got very capable field forces in the areas where we’re launching these assets. So the leverage capability is there. And you’ve seen us leverage the margin. We’re committing to more than 500 basis points already by 2026. You’ll see is we’re never going to be satisfied. We are going to grow the top line. The £38 billion we’re saying above the £38 billion that’s a risk-adjusted number very importantly. Secondly, we continue to do business development. We’ve got the balance sheet to do it. It’s part and parcel of building the R&D pipeline further. And also finally that more than £38 billion does not include those early-stage projects that Emma alluded to in our conversation.

So we’re very confident of withstanding the DTG patent expiry.

Emma Walmsley : I mean, in the end the outlook that we’re updating today we have added £5 billion top line versus where we were in the summer of 2021, and we know there’s still more to do. So we’re confident on making further progress with a lot of ambition. Next question, please.

Nick Stone: So I’m going to come back to you Jo. So, hopefully, you can speak now.

Jo Walton : Thank you. Could I ask about U.S. patent? Patients are already beginning to see lower copays as we go into 2024. Is there any benefit that you have in terms of less charitable giving to support people on Medicare who might need your assistance or any view that you have for some of your more expensive medications that there would be an increase in volume coming through? And my second question would be to look a bit more about Shingrix in China. If we look at how Merck has dealt with their relationship with Zhifei and Gardasil, which has obviously been extremely successful, Merck is promoting as well Zhifei promoting. So given your relatively small bees in China, can you tell us what you are doing to ensure that there is a strong uptake of Shingrix in China, so that over time it will be more than the minimum amount of sales Zhifei is taking from you? Thank you.

Emma Walmsley: Thanks, Jo. Both of those questions will come to Luke. We’re after a record quarter on Shingrix again, we really do see the Zhifei there as a very important building block for the ongoing growth of this great vaccine. So to you on that? Any other thoughts?

Luke Miels : Sure. Thanks, Jo. I’ll cover to the China question first. So — we — the way the deal is structured, we still maintain the license in China and we preserve 600 head count. We are promoting the product in addition to Jive’s structure which is several orders of magnitude larger. We also partner with them in terms of profile positioning and life cycle work with Shingrix. So we’re very engaged. And I think the partnership has started very well. There’s high levels of trust. And you mentioned the Merck structure which has been in place I think 11 years, nearly 12 years now and that’s been very successful. So our aim is to replicate or even exceed that. One thing to keep in mind with revenue recognition in China next year, it’s driven by shipments.

So there will be a bolus, which is between 60% and 80%, depending on how much we shift, which will be recognized in quarter two. So that’s just one watch out. But yeah, we’re very excited about the long-term potential for Shingrix in China and the partnership and also the capacity to expand that to include RSV. In terms of Copay assistance, Inogen programs et cetera, we do have extensive programs across the business in HIV of course oncology and other areas. We’re not seeing an increase in those Jo, but we do have extensive reps that people can take advantage of. And of course, the copay has now been removed from Shingrix and RSV which is a big advantage for senior citizens.

Emma Walmsley: Thanks. Next question, please.

Nick Stone: So our next question is going to come from Simon Baker. Simon

Simon Baker: Thank you. Thank you for taking my questions. Two, if I may please. Firstly, on Arexvy. Arexvy ex US, you’ve said in the past that you expect a Shingrix-like broadly flat global pricing for Arexvy. Given that that’s now beginning to roll out, I just wonder if you could confirm if that’s still the case and give us any updates on how things are going outside in terms of those negotiations? And then secondly, and forgive my pronunciation I probably get this wrong. On the Aiolos acquisition, it’s slightly earlier than we’ve seen from your acquisitions in the past where you’ve prepared — been prepared to pay more for later-stage products. So I just wonder if you could give us an idea of whether this marks a shift in your business development approach or whether there was something particular about that T slip which to go earlier than perhaps we’ve done in the past? Thanks so much.

Emma Walmsley: Thanks very much. Well, let’s come to Luke for some globalization of Arexvy though the US will still be by far the biggest part of the business. But obviously, that’s going to be a key contributor for the future. And then Tony to comment on the Aiolos deal and our consistent approach strategically to BD, which starts with getting a very good return on the investment of that because of the sizable assets and their differentiation, which is definitely what we’re excited by here. But first to you Luke.

Luke Miels: Thanks, Simon. Yeah. I mean as I said, we’re approved in 39 countries. If you look below that and it’s very similar to what we’ve seen with Shingrix. It just takes time to assemble the arguments for the infrastructure in those countries to review the data. We know that some governments are waiting for that third season which we’ll have shortly. But if you look within that of those 89 countries, we’ve got nine that have issued recommendations and four that have voluntary reimbursement. So for example, I was in Germany yesterday, if you look at the 60-plus population, we’ve already got reimbursement through the six funds on about 24% of that population. So it’s early days. But in terms of pricing, our aim in the private market is to preserve that pricing level.

Of course, always we open if we can secure a contract because the structural nature of those contracts is such that we don’t have to do the DTC, et cetera that we need to do in the US, a smaller sales forces because the system itself will pull through those scripts, the UK being a typical example. So early days it’s been exciting. And I mentioned China before. There we’re working actively to get our exit China as quickly as possible.

Emma Walmsley: Thanks, Luke. Tony, comment on Aiolos and BD [ph].

Tony Wood: Yes, thanks. Hi, Simon. So first of all the way to think about Aiolos deal. Let me just reemphasize something to begin with. This is in the low T2 population. So it gives us access to an additional 40% of the severe asthma population for which Nucala and depemokimab aren’t addressed. Now similarly to Nucala and depemokimab. The reason we were confident to go early with the Aiolos asset is we have a very clear understanding of the PK/PD proposition there. So you can learn an awful lot with regards to projected dosing and efficacy through Phase Ib data which is the case of Aiolos and we look upon that as being a best-in-class opportunity which will appear in the market, potentially first-in-class with a Q6M profile and well matched in depemokimab.

Those features I would say intersite a continuing focus that we’ll have on BD with deals of about that scale to match our overall therapeutic area focus on in an appropriate strategic way of the factors that Emma just mentioned. For earlier deals then what you should be expecting there is a focus more on the underpinning technologies that are transforming R&D for us.

Emma Walmsley: Okay. Thank you. And obviously, extremely clear as our top priority in the capital allocation framework and as Julie laid out in her slides around allocation of capital. That’s a consistent approach we’re taking and was all part of the demerger strategy to create that balance sheet capacity for us to put a BD as the way we do R&D at GSK now, as it is across the industry. Next question please.

Nick Stone: Okay? So we’ve got about seven people with their hands raise with about 10 minutes left. So if I can ask people to keep the questions short and equally we’ll try and keep that concise. But our next question is going to come from Tim Anderson at Wolfe Research. Tim, over to you, please.

Tim Anderson: Thanks. If I could go back to Shingrix in China and just drawing the analogy to Merck’s Gardasil or even your server. The question I have is the disease awareness among the general population about shingles versus cervical cancer vaccine because Gardasil, there’s been a high consumer awareness that’s really kind of created this classic poll demand at the consumer level but I don’t have a feel for is what is it like with singles among consumers in China is the awareness – disease awareness high? Or do you have to build that? Thank you.

Emma Walmsley: Miels, straight to you.

Luke Miels: Yes. Thanks Tim. It’s relatively low. But I was in China at the stage when Gardasil did launch and awareness around HPV vaccination. It was also very low. What we found through our market research is that people are receptive to it. The main challenge we had was just navigating the 30,000 points of vaccination in China because all vaccines need to be administered in those centers. So I think we can build that awareness. And whether we can get to the level of Gardasil did. I think before COVID it was actually the number one selling product in China, so a remarkable achievement. The key thing I took away from that is one you’ve got a company that partners well with multinational over many years with extensions to that relationship. And two, they can build a market in partnership very successfully. So, yes, I’m very optimistic about the long-term outlook there with China.

Emma Walmsley: Thanks, Luke. Next question please.

Nick Stone: We take our next question from Richard Parkes of BNP Paribas. Richard, over to you, please.

Richard Parkes: Hi. Thanks for taking my question. I’ll just stick to one. I just wondered if you could just discuss the challenges to specifically growing RSV in the US market next year? It looks like about 10% of the eligible population has been vaccinated with an RSV vaccine now. And obviously, clearly that leaves a lot of room for growth given the 35% penetration you’ve achieved with Shingrix, but it’s taking you six years to get to that level. And clearly the RSV market competition is going to intensify…

Emma Walmsley: Yes.

Richard Parkes: …over the next 12 months. So given that the very strong start you’ve had I’m just wondering how challenging it will be to grow RSV, specifically, in the U.S. market and to what extent we should expect growth to be more driven by ex-US? Thank you.

Emma Walmsley: Luke.

Luke Miels: Sure, Richard. Great question. So I think the pie is going to grow. You’ve got three companies in there. The level of awareness is remarkable already. I think it’s 86% awareness for individuals in the US around RSV the willingness to prescribe and recommend on part of doctors and pharmacists is very, very positive. And your numbers are right. I mean if you look at Shingrix were 4%, 11%, 17%, 23% in those first years. So hitting 11% immediately is encouraging, but we just don’t know what the other two competitors how they’re going to behave going into the year so that’s an unknown. But again, if we look at the long-term, if you look at 65-plus individuals to a 65% and above about 72%, 73% and typically every year get a flu vaccine. So that’s the potential here and that’s why we’re very confident about our long-term £3 billion peak revenue outlook. But it will — let’s see how we go in 2024. It’s probably all I should say at this point.

Emma Walmsley: Next question, please.

Tony Wood: Worth adding the cost of the 50-plus label adds in that. The 15 million at risk eligible individuals.

Emma Walmsley: Yes. Great point.

Nick Stone: Okay. Next question is from Andrew Baum, Citi. Andrew, over to you.

Emma Walmsley: Andrew? We can’t hear you.

Andrew Baum: There we go. Sorry about that. I apologize. So two questions for Deborah on HIV. First, given how important the switch is to long-acting for both the margin and the revenues, could you talk to what are the current barriers to adoption? Is it any evidence for step editing given you’ve got 50% falling under PBMs. Is it clinical inertia? Is it access? I’m curious to understand that in terms of the risks and opportunities there? And then second I note that there’s been a pause placed on your litigation with Exavir for their cabo pro drug. Given the patent expiration on cabo and I’m thinking particularly about Apretude is there any interest in licensing this compound in order to secure the future of a once-yearly long-acting prep formulation? Thank you.

Deborah Waterhouse: Thanks, Andrew. So in terms of barriers to switch in the long-acting market actually they’re pretty typical to the barriers that you see across many long-acting injectables that are in the Medicare Part B and part is about clinic capacity. So for us that is a barrier, but we’re seeing the belief in physicians increase that long-acting is going to be favorably a bigger part of the way that they treat their HIV patient population. So we are seeing them expanding capacity to be it’s a slow journey. The second thing is the ability to get physicians offices ready and able to manage their way through the benefit verification the element of specialty pharmacy versus buy and bill. Again, we are seeing more and more uptake and more and more process flows within the clinician offices that are making this faster and slicker, but still is a learning journey as we are building a brand-new market for HIV physicians.

So I would say complexity around payer and pharmacy strengthened buying bill and the capacity to inject in the two biggest barriers and we’re seeing significant progress on all of those areas which is why we’re seeing the continued significant growth amongst long-acting injectables in both preps and in treatment mainly, because there is enormous patient demand and that just keeps on growing as awareness grows. In terms of Exivir, I’m not going to comment on any of the litigation but we have our own in-house long-acting injectable that were formulating cabotegravir to get to every four and hopefully we’ll be able to get to where we can get to every six months either with VH184 or other options. And we’ve also got in-house options that can take us to every 12 months, but we keep an eye on the whole landscape from a BD perspective of HIV.

And if there is something to do a deal or we will actually do that.

Emma Walmsley: Next question, please.

Nick Stone: Okay. Our next question is from Graham Parry at Bank of America. Over to you, Graham.

Emma Walmsley: Hi, Graham.

Graham Parry: Thanks for taking the questions. It’s — going back to Arexvy in the third season data can you just confirm that there’s no vaccine efficacy measurement to compare one and done vaccination with and every other year vaccination in either the RSV 006 or 004 trials? And if it is just immunogenicity data that you’re going to be using there. How do you go to convince them that a boost in immunogenicity in the third season would correlate with vaccine efficacy when we didn’t see that in the first season in data? And then second question just any sense of what vantage of the high-risk or comorbid population so let’s say over 80s or the comorbid population has been vaccinating with the Arexvy between now? Or has it been across a fairly broad range? Thank you.

Emma Walmsley: So very briefly Luke any comment on the penetration and then – for Tony.

Luke Miels: Yeah. It’s about 13% is the older individuals so 65-plus. It’s about 4% in the 60 to 64. That’s the only data we have at this point Graham but we will get more in Q2.

Tony Wood: And on the third season the comparison will be exactly the same as the one we took in second season Graham. So that is vaccine efficacy based on a three-year duration versus a three-year. Sorry two-year.

Nick Stone: Okay. So I’m going to try and push us a little bit over mindful of the core starting but can we take the next question from Mark Purcell at Morgan Stanley.

Mark Purcell: Yeah. Thanks very much, Nick. Just a quick one sticking on HIV. Ahead of the CROI data historically Phase II data has translated very nicely into Phase III profile. So when it comes to assessing your combination options and the 4-month formulations how confidently should we be extrapolating Phase II data into Phase III and effectively the derisking of the portfolio strategy?

Deborah Waterhouse: So just to answer that very quickly. So we’re incredibly confident in our ability to replace a significant proportion of the revenue that will be lost through the dolutegravir patents expiry. This is a big year for us. So we’ll be presenting data at CROI we’ll be starting the Phase III study for that every four month prep. We’ll be regimen selecting every four month for treatments and we’ll also be regimens selecting for our survival [ph]. So I would say we’re extremely confident in the progression of our HIV pipeline. I’m very confident in the statement that we’ve been measuring for some time that we will be able to potentially replace a significant proportion of the revenue that you’ll lose when dolutegravir dose.

Nick Stone: We’ve got two more questions. I’m going to take the next question from Kerry Holford of Berenberg. Kerry, over to you.

Kerry Holford: Hi. Thanks Nick. Just one final pipeline question. Well, recently launched product question Ojjaara. I know, it’s early days about how is the US launch progressing relative to expectations, and in which line of therapy patients predominantly using this drug? Thank you.

Emma Walmsley: Very well. Luke?

Luke Miels: I’ll go quickly. So, 750 patients since launch, 43% of them are in academic centers, 57% are in community centers. Market research is very, very encouraging. Unaided awareness is well above benchmarks, aided awareness is 99%. I’m not sure that 1%. We’ve got around 15% patient share in patients with anemia and about 25% share in the second line. If you look at the intent to prescribe one-quarter of doctors have already prescribed it, and over 64% who have not prescribed intent to prescribe over the next few months. So, very encouraging, very exciting launch.

Emma Walmsley: Great. And so last question, Nick.

Nick Stone: Last question. So, Steve Scala, TD Cowen. Over to you, Steve.

Steve Scala: Thank you. On Cabenuva, emerging resistance and 1% to 2% of people is viewed by clinicians as a real risk seems to occur in the obese population but could tarnish prospects overall. So I’m just wondering what is GSK’s position on this? And secondly, pneumococcal vaccine do you plan an efficacy study? And if not, is that because you think that is not important? Thank you.

Emma Walmsley: Well, we do think the pneumococcal vaccine is very important, so Tony can comment on that. But Deborah, I’m not sure we characterize it quite as Steve has.

Deborah Waterhouse: So you’ve got less than 1% failure on Cabenuva. There are some risk factors that all physicians are aware of and this is one of them being resistant to ropibrine is the other. And then there is a sort of relatively rare subtype, so we can clearly characterizing where people should not use the drug. It’s a very limited population. And the real-world evidence is actually showing less than 1% in fact significant failure because physicians have taken on board the multi-barrier analysis that guides where to use it. And when they use it in that population, you see very low levels of failure and very, very high satisfaction with the drug and continuity on the drug over time. So that’s why we’re seeing significant growth with Cabenuva that we are.

Emma Walmsley: Thanks. Tony?

Tony Wood: Just quickly then on pneumococcal. Obviously, we’re focused on using immunogenicity data in particular restarting the infant 24 this year alongside the data that we have in adult and starting adult 30+. In terms of our strategies with regards to vaccine efficacy and broader competitive content of that, I’ll keep that to future discussions.

Emma Walmsley: Great. So thank you very much everyone for the call. I’m very pleased who have been able to share with the team today GSK is delivering on its commitments strengthening our outlook for growth we are making great progress. We know there’s always more to do and we’re looking forward to keeping you updated. Thanks to everybody for joining the call.