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Edited Transcript of GSK.L earnings conference call or presentation 29-Apr-20 1:00pm GMT

Q1 2020 GlaxoSmithKline PLC Earnings Call

Brentford Middlesex Jun 16, 2020 (Thomson StreetEvents) -- Edited Transcript of GlaxoSmithKline PLC earnings conference call or presentation Wednesday, April 29, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David Simon Redfern

GlaxoSmithKline plc - Chief Strategy Officer

* Emma N. Walmsley

GlaxoSmithKline plc - CEO & Director

* Hal V. Barron

GlaxoSmithKline plc - Chief Scientific Officer, President of R&D and Director

* Iain James Mackay

GlaxoSmithKline plc - CFO & Executive Director

* Luke V. Miels

GlaxoSmithKline plc - President of Global Pharmaceuticals

* Roger G. Connor

GlaxoSmithKline plc - President of Global Vaccines

* Sarah Elton-Farr

GlaxoSmithKline plc - Head of IR

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Conference Call Participants

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* Andrew Simon Baum

Citigroup Inc, Research Division - Global Head of Healthcare Research and MD

* Emmanuel Douglas Papadakis

Barclays Bank PLC, Research Division - MD & Head of European Pharmaceuticals Research

* Geoffrey Craig Porges

SVB Leerink LLC, Research Division - Director of Therapeutics Research & Diversified Biopharma and Senior Research Analyst

* Graham Glyn Charles Parry

BofA Merrill Lynch, Research Division - MD and Head of Healthcare Equity Research

* James Daniel Gordon

JP Morgan Chase & Co, Research Division - Senior Analyst

* Jo Walton

Crédit Suisse AG, Research Division - MD

* Kerry Ann Holford;Berenberg

* Stephen Michael Scala

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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

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Sarah Elton-Farr, GlaxoSmithKline plc - Head of IR [2]

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Thank you. Good morning and good afternoon. Thank you for joining us for our Q1 2020 results, which were issued earlier today. You should have received our press release and can view the presentation on GSK's website. For those not able to view, the webcast slides that accompanies today's call are located on the Investors section of the GSK website.

Before we begin, please refer to Slide 2 of our presentation for our cautionary statements. Our speakers today are Chief Executive Officer, Emma Walmsley; Luke Miels, President, Global Pharmaceuticals; and Iain Mackay, Chief Financial Officer. We have a broader team available for Q&A.

(Operator Instructions) And with that, I will hand the call over to Emma.

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [3]

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Thanks, Sef, and welcome, everybody, to today's call. First and most importantly, I very much hope that all of you and the people around you are safe and well, and we appreciate you joining us today. We are facing an extraordinary global health threat with enormous direct and indirect consequences. And alongside updating you on our Q1 performance today, I want to start by sharing how we're responding to this.

Supporting the global response for COVID-19 is at the heart of GSK's purpose as a company, and our businesses and portfolio are highly relevant and much needed. We've mobilized across the company to respond to the pandemic, and I'm pleased to report that our company is performing well and has demonstrated resilience in the face of significant pressures and uncertainty.

Our people have been outstanding, showing courage and deep commitment to ensure that our products continue to be made available to patients and the people that need them. Today, we've got over 20,000 essential workers going every day into our manufacturing and R&D sites.

We're working hard to make sure employees stay protected and supported and are investing in high-frequency communications as well as providing teams with the technology, resources and adjusted policies to support them whatever their role. We've implemented business continuity plans across all our essential operations. In our supply chains, we're closely monitoring all parts of our manufacturing network, and our teams have shown tremendous agility to respond quickly to fluctuations in demand.

For clinical trials, we've implemented proactive measures to protect study participants, staff at clinical trial sites and our employees while ensuring regulatory compliance and the scientific integrity of our studies are maintained. While recruitment for clinical trials has slowed due to disruption of the pandemic and diversion of resources to other clinical priorities, for the vast majority of our studies, we estimate we've incurred a 1- to 3-month delay. While necessary and based on our own assessments, we've also proactively paused recruitment, including the pivotal programs related to otilimab in rheumatoid arthritis and Nucala in COPD.

In the meantime, we're continuing to support enrollment of new patients into ongoing clinical studies, provided that investigators are confident they'll be able to ensure the safety of the study participants and appropriately conduct the study per the protocol. The ultimate impact, of course, across our pipeline will depend on the duration and severity of the pandemic.

From a regulatory standpoint, we have a number of products undergoing review. And at this point, we don't anticipate any significant delays to approvals as a result of the pandemic. However, the situation is dynamic and we will continue to watch it carefully and provide updates as and when appropriate.

As I've mentioned, GSK's businesses and portfolio are highly relevant to helping tackle the COVID-19 virus, whether that be respiratory products in pharma, pandemic-adjuvant technology in vaccines or needed everyday products in consumer health. We are determined to help by offering solutions using our portfolio, science, technology and resources to support the global response.

We're using 4 principles to guide our pursuit of these solutions: working in partnerships; taking a global approach while, of course, providing strong focus and practical support to our base in the U.K.; maintaining a deep commitment to access; and investing in long-term pandemic preparedness.

Our #1 focus is the development of a vaccine. This is core to the exit plan the world needs, and we're working with companies and institutions globally, including in North America, Europe and China to help find the best and most effective vaccine. Our aim is to develop multiple adjuvanted COVID-19 vaccines. GSK has long been the leader in vaccine adjuvant technology, and our expertise in this area is proven.

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

One of the most recent collaborations to be announced was with Sanofi. Together, we bring proven technologies and considerable scale. We're planning to start trials in the next few months and if successful and subject to regulatory considerations, aim to complete development and make the vaccine available by the second half of 2021. Of course, there is a lot of work to do and no guarantees, given this is an early stage of development. But we believe if we are successful, we'll be able to make hundreds of millions of doses annually by the end of next year.

Data from our other collaborations will be available in the coming months. We remain, as we always have been, committed to global access. And across this portfolio of vaccine collaborations, we'll reinvest short-term profits generated in coronavirus-related research and long-term pandemic preparedness, either through GSK internal investments or with external partners.

Alongside vaccines, we're also exploring therapeutic options. And earlier this month, we entered into a new collaboration with Vir Biotechnology. Together, we'll use Vir's proprietary monoclonal antibody platform technology to identify and accelerate new antiviral antibodies that could be used for therapeutic or preventative options for COVID-19 or future coronavirus outbreaks.

Our first priority is to accelerate 2 very promising antibody candidates that target COVID-19 directly into Phase II clinical trials within the next 3 to 5 months. The Vir platform is highly complementary with our R&D approach to focus on the science of immunology. Additionally and more broadly, we're screening GSK-marketed and pipeline assets for antiviral activity or potential use in prevention or treatment of symptoms related to COVID-19. So all in all, you can see we're pursuing a broad set of initiatives as part of our response and commitment to being part of the solution.

So let me now move to our Q1 performance. We've seen a very strong start to the year with our performance reflecting good underlying execution, the addition of the Pfizer Consumer Healthcare portfolio and towards the end of the quarter, a significant step-up in demand, including patient and consumer stock building for many of our products as a result of the pandemic.

Pro forma group sales growth of 10% in CER terms reflected an increase in sales in all 3 of our global businesses with a particularly strong performance again in Vaccines driven by Shingrix; and Consumer, where we saw double-digit pro forma increases in 4 of our 5 main categories. Group adjusted operating margin this quarter was 29.4%, reflecting the strong sales growth across all 3 businesses, a more favorable mix in Vaccines and the continued benefits of restructuring.

On a total basis, earnings per share were up 89% to 31.5p, and adjusted earnings per share increased 26% to 37.7p. Earnings growth benefited from a reduction in our effective tax rate in the quarter, reflecting a number of one-off items, including the revaluation of tax assets. Our free cash flow this quarter was GBP 531 million, benefiting from our strong operating performance across the business.

We've also continued to make progress on our long-term priorities of innovation, performance and trust. Sustained focus on commercial execution delivered good growth of our new products, Nucala and Trelegy in Respiratory; and our 2 drug regimens, Dovato and Juluca in HIV. Meanwhile, Shingrix also continued to perform strongly with some RAR benefits as we further accelerate supply, although short-term demand is now being impacted by slowing vaccination rates in the U.S. under containment measures.

We've also made progress on our pipeline with regulatory submissions accepted on 3 oncology assets. We're anticipating FDA approval of Zejula in the first-line maintenance setting for ovarian cancer shortly, and Luke will talk to the opportunity here in just a moment.

We've also had regulatory submissions accepted for 2 other oncology assets, belantamab mafodotin in relapsed/refractory multiple myeloma and for dostarlimab in the second-line treatment of recurrent or refractory endometrial cancer. We expect the belantamab review to complete close to the PDUFA date in August. And as we've said previously, the other events associated with belantamab are a unique adverse event that we take very seriously, and we're working with the agency to ensure its safe and effective use in the target population.

We were pleased to see our long-acting 2-drug regimen in HIV. Cabenuva received approval in Canada, and we've been engaging with FDA on the path forward for Cabenuva in the U.S. and expect to make a resubmission around midyear. Also in HIV, we filed the European approval for fostemsavir for heavily pretreated patients. And we look forward to making these important new treatment options available to patients.

In performance, we've continued to drive growth in sales and have seen an improvement in our profitability this quarter with continued good cost control. We've built up capabilities in oncology, ready to support our expected launches. In consumer, integration of the joint venture with Pfizer is progressing very well. We're on track to deliver our cost synergy targets, and 90% of leadership roles are now in place. We've also, as planned, completed the divestment of our India Nutrition business to Hindustan Unilever.

We are progressing a number of other consumers' health brand divestments. And alongside streamlining our portfolio, proceeds from these divestments will also help fund cash costs to the integration. In February, we announced our program to prepare the group for separation into 2 new companies. We've now started this important project to get us future-ready with no change to our medium-term targets and time lines.

And finally, on trust, as I've always -- already described, we focused our efforts on solutions to the pandemic and on supporting our people.

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

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Luke V. Miels, GlaxoSmithKline plc - President of Global Pharmaceuticals [4]

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Thanks, Emma, and I hope you're all well. So good news is that we've had a strong start in Pharma in 2020 with growth in our new products across the portfolio. We did see some impact from COVID-19 towards the end of the quarter in Europe and in the last 2 weeks of March in the U.S. And this was most notable in HIV, which benefited from customer stockpiling and as you'd expect, Ventolin, which saw some stock building but also increased use.

Excluding COVID-19 impacts, the underlying trends are good, and our new products continue to perform well. And to give you some examples, for Trelegy, we continue to see good growth in the class and in our share in all key markets, and we expect to get U.S. approval of asthma later this year.

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

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

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

As David can comment in Q&A, there's been a good uptake of the 2-drug regimen in HIV, benefiting from Dovato's inclusion in both U.S. and EU guidelines.

Like most companies, we did see some impact of COVID-19 towards the end of the quarter in Europe and the U.S. And I think this was seen across the portfolio and shown clearly here on the slide in the prescription data for some of our inhaled respiratory assets.

We would expect some of that to unwind during Q2, but underlying demand for our products remains strong. Our people are focused and using this time as productively as possible. We move fast to adapt and to move calls and content onto digital very quickly. And right now, I mean, our people are at home, but they're engaging with HCP. And we are active in areas like virtual speaker programs.

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

Next slide, please. Moving on to Zejula. With the strong PRIMA data that you all know, Zejula is positioned, if approved, to be the only PARP approved as a monotherapy in first line for women who do not have a BRCA mutation, which equates to about 75% to -- about 80% of women with ovarian cancer. In March, we are also pleased and proud to see Zejula included in the NCCN Guidelines as a first-line treatment option with a recommendation that covers 80% of patients in the first-line maintenance setting.

Upon approval, Zejula will be the only treatment option recommended for BRCA wild-type patients who did not receive Avastin treatment. Now watch-and-wait is still an option here but only for patients, if you look at the guidelines, with a complete response. Plus Zejula is recommended for all BRCA-mutant patients, which is at parity with Lynparza monotherapy. So we think this will put us in a competitive position once we receive approval, which, as Emma said, we expect shortly.

Preparation for launch, as you can imagine, is very active and underway. And we've fully integrated the TESARO teams, and we've got some really strong leadership in place. The sales team is fully recruited, and we're equipped to launch virtually under COVID-19 restrictions. In the short term, I think it's fair to say we do expect that COVID-19 could have an impact on the diagnosis and treatment of ovarian cancer, but we remain confident in the long term in the profile of this remarkable product.

Okay. So I'll finish on Vaccines. In quarter 1, we were really pleased to see the acceleration of Shingrix supply continue, and that drove excellent growth. I want to stress, though, that the underlying demand for this product remains very strong. That said, towards the end of the quarter, as the prescription trends illustrate, we began to see the impact of stay-at-home measures prompted by the pandemic.

Although wholesalers and distributors kept ordering stock through April, we expect to see a significant impact in the coming months. Now that being said, once the stay-at-home restrictions are lifted and patients can visit their pharmacies in person and access routine physician visits once again, we expect demand to rebound. And we're planning for that. We are planning for measures to accelerate, including driving prioritization of adult vaccinations and linking it to the upcoming Q3 flu season.

In terms of supply, we're also on track for 2020 in our capacity expansion plans, including bringing new facilities online, which remain unchanged. Our limited phased Shingrix launch in China this year remains set to commence as we move through this year, subject, of course, to appropriate market conditions. We filed Shingrix for expanded use in immunocompromised adults in Europe last year, and we're on track to file with the FDA this year.

So in conclusion, before I hand over to Iain, I'd just like to leave you with the following. So although we're seeing fluctuating demand for our products, the underlying dynamic remains strong. We're using this time as productively as possible to accelerate our digital capabilities and make changes to be more competitive. And finally, almost from the beginning of restrictions, we have been planning for a strong start when we are able to resume more normal activities.

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

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Iain James Mackay, GlaxoSmithKline plc - CFO & Executive Director [5]

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

On Slide 16 is a summary of the group's results for Q1, which is a very strong quarter with 19% reported turnover growth, reflecting the addition of the consumer joint venture with Pfizer and turnover growth of 10% on a pro forma basis. As you've heard from Emma and Luke, we continue to see strong underlying performance of the business during Q1 even in these challenging circumstances. Additionally, this quarter, we saw turnover growth impacted by COVID-19 pandemic in various areas across our businesses.

In Pharma, we saw a turnover growth of 6%, approximately 1/2 to 2/3 of which was related to pull-forward in the stocking patterns primarily in Respiratory in Europe and international and HIV in the U.S. In Consumer, turnover grew 11% pro forma, 14% excluding the impact of brands that under review or being divested, again, around 2/3 of which is related to increased COVID-19 demand, particularly in the U.S.

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

Total operating profit was up 42% with total earnings per share up 89% primarily reflecting the strong operating performance as well as an increase in the value of shares in Hindustan Unilever. On an adjusted basis, operating profit was up 24% reported and 14% pro forma, while adjusted earnings per share was up 26%, reflecting both the operating leverage as a result of higher sales and the one-off impact of a revaluation of deferred tax assets during the quarter.

We delivered GBP 531 million of free cash flow in the quarter, also reflecting the strong sales growth, improved operating performance and timing of RAR payments. And on currency, the net impact on sales was broadly flat with a 1% headwind to adjusted earnings per share.

The next slide summarizes the reconciliation of our total to adjusted results. The main adjusting items in the quarter were major restructuring focused on improving the efficiency of the supply chain with also some initial charges for the separation/preparation program we announced earlier this year. Within transaction related, the main contributor was a charge for the remeasurement of the contingent consideration liability relating to Vir primarily as a result of movements in exchange rates. And finally, the disposals column includes a gain from the revaluation of the embedded derivative in respect of GSK's exposure to movements in Hindustan Unilever share price.

My comments from here onwards are on adjusted results, unless I state otherwise. Slide 18 summarizes the Pharmaceuticals business where revenues were up 6% in Q1 as well as our new launches, which continue to perform well with encouraging trends. We saw some impact from COVID-19 towards the end of the quarter. This was primarily due to stocking and longer prescriptions being written. So we have seen an increase in demand for certain Respiratory products.

Luke's just taken you through the performance of some of our key products, so I'll just point out a couple of important considerations. Starting with Respiratory, sales were up 38% with growth from Trelegy, Nucala and Relvar/Breo across all regions. Relvar/Breo growth -- grew 32% globally, benefiting from a prior period RAR adjustment in the U.S. For outside the U.S., sales grew 33% in Europe and 16% in international.

Nucala continues to perform strongly following the launch of the at-home application with growth of 38% globally. And in HIV, revenues were up 8% with the dolutegravir franchise up 9% globally. In the U.S., dolutegravir grew 2% reflecting the shift within our portfolio towards our 2-drug regimens, where we continue to build momentum as well as customer stock-building related to COVID-19 towards the end of the quarter. Excluding the impact of customer stocking, we estimate that sales were flat year-on-year, in line with our previously stated expectations.

Within the established Pharmaceuticals portfolio, it declined 6% overall driven by U.S. adverse sales, which were down 40%, as expected given generic competition. This was offset by continued strong performance from Ventolin, of which we saw some incremental demand as a result of COVID-19. Outside Respiratory, the established Pharma portfolio declined by 2%.

Overall in Pharma, trends remain encouraging and our new products continued to perform well. As I mentioned, we estimate approximately 1/2 to 2/3 of the turnover growth of 6% in Q1 was related to pull-forward in stocking patterns. Over the balance of the year, we expect there will be volatility in demand due to COVID-19 and also a degree of unwind given the stocking impacts we saw during Q1 in Respiratory and HIV.

Turning to Pharma operating margin. As anticipated in our guidance at the full year, we saw a decline in Q1, informed by decisions we've made to invest in R&D behind priority assets, promotional activity for new launches and building specialty capability. In addition, this quarter, we also saw price impacts, including notably the impact of generic Advair as well as higher provisions for legal settlements in the quarter.

On Slide 19, we give you an overview of Vaccines performance with sales up 19% driven mainly by Shingrix as well as our meningitis vaccines. As I mentioned, we did not see any material impact on Vaccines in the quarter as a result of COVID-19. Shingrix continues to benefit from our actions to increase our supply capacity with revenues in Q1 of GBP 647 million driven by continued strong uptake in the U.S. as well as the benefit from a one-off RAR adjustment.

As Luke has covered, underlying demand for the vaccine continues to be very strong, and we're on track with our supply delivery plans for the year. However, we have recently seen a decline in Shingrix prescriptions as containment measures have limited patients' ability to access the vaccine. We expect that during Q2, we'll see a significant impact on Shingrix performance as a result. However, we see this as a relatively short-term issue and are putting the right plans in place to support increased demand once containment measures are relaxed, notably in the U.S.

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

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

Turning to Slide 20. Revenues of our new Consumer Healthcare JV on a pro forma basis were up 11% with growth significantly impacted by consumer and government responses to COVID-19. We now have a revised category of reporting structure in place to appropriately reflect and help you understand the key drivers of the combined business. And under this structure, pro forma growth was 14%, excluding brands either divested or under review.

The divestment of the India Nutrition business to Hindustan Unilever closed on the 1st of April. And we're moving forward with other divestments, which will continue through this year to refocus our portfolio and fund integration and restructuring activities within Consumer Healthcare.

Q1 was a strong quarter with good power brand growth and the benefits from the formation of the GSK-Pfizer JV becoming increasingly visible. We've also seen a significant impact in Consumer from COVID-19 in the quarter. This varied across regions with a number of markets, including the U.S. and U.K. experiencing increased demand while others, including China and India, were negatively impacted by retailer shutdowns.

We estimate around 2/3 of the overall Consumer growth in the quarter was related to increased COVID-19 consumer demand. We believe the majority of this is pantry loading, but there is some incremental consumer usage in the vitamins, minerals and supplements category and in pain and cough and cold. We'd expect much of the pantry loading to unwind through the year, particularly over the next few months.

Operating for the margin -- operating margin for the quarter was up 320 basis points mainly driven by higher sales. With integration on track, we're delivering the planned synergies and continue to maintain cost -- strong cost control while investing behind our brands.

On Slide 21, we summarize the sales and adjusted operating margin for the group. As I mentioned, our group operating margin, up 90 basis points, reflects primarily the operating leverage from strong sales growth in the quarter. However, this also reflects the high levels of resilience and agility we've demonstrated within our supply chain and the overall effectiveness of business continuity planning across the group. We're also seeing the continued benefit of restructuring and tight control of operating costs across the business.

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

The effective tax rate of 13.7% reflected the one-off noncash impact of the revaluation of deferred tax assets as a result of the cancellation by the U.K. government of a previously planned reduction in the corporation tax rate. And noncontrolling interest reflected Pfizer's share of profits of the new Consumer Healthcare JV.

We delivered cash flow of GBP 531 million in Q1, higher than expected, reflecting the strong operating performance we've seen across the business. The increased operating cash flow is accompanied by beneficial timing of RAR payments, offset by adverse working capital primarily driven by higher trade receivables. We also received a milestone income from Novartis relating to ofatumumab. And as well as the positive cash flow we delivered in Q1, we closed the quarter with strong cash balances, have an effective approach to working capital management and maintained access to extensive undrawn committed facilities.

Turning now to our outlook and guidance for this year. When we first issued our guidance, we specified that it excluded any impact of coronavirus, which, as we've discussed, has already had an impact on our performance in Q1. We presented a good set of results today with continued strong underlying performance, along with some additional demand across our businesses reflecting customer behavior and stocking patterns as a result of COVID-19.

With the dynamic and uncertain situation, there are significant risks to business performance for the remainder of the year and particularly over the next few months. In the coming months, as government-imposed containment measures remain in place, we do expect to see the impact of changes to stocking patterns and reduced demand for those products which are at patient or consumer discretion, notably vaccines, including Shingrix. We're confident the underlying demand dynamics are strong, and our focus is on supporting patient access as restrictions are relaxed.

Based on our current assessment of the impact of COVID-19, we're maintaining our full year 2020 guidance at this time. We will, of course, if needed, update guidance as more information becomes available to inform our expected financial performance for the full year. There is no change in our capital allocation priorities, investing in R&D behind priority pipeline assets and returns to shareholders.

And as noted in our earnings release, we've declared a 19p quarterly dividend in line with last year and the expectations we set out earlier this year. As mentioned, we've got strong liquidity and access to substantial undrawn committed facilities. We're focusing on business continuity, the safety and well-being of our people and delivering solutions.

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

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [6]

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Thanks, Iain. So in summary, the business has performed strongly in the first quarter. Although, of course, we have uncertainty, especially over the next few months, we're confident we can navigate this crisis by prioritizing our people, business continuity and leading the way on solutions. At the same time, we remain very focused on delivering our long-term priorities of innovation, performance and trust and our 2020 areas of focus.

We're progressing our pipeline. We continue to drive improvements in our operating performance. We're moving at pace with the Consumer JV integration. And finally, we've started our program to prepare the group's separation into 2 new companies: one, a biopharma company focused on the science of immunology; the other dedicated to everyday consumer health. These 2 companies' purposes, priorities and capabilities have never seemed more relevant.

Ultimately, we remain confident in the resilience and sustainability of GSK's business, our ability to deliver on our strategic goals and that we can be part of the solution for the COVID-19 pandemic.

We're now joined for Q&A by Hal, Brian, David and Roger. And so with that, operator, this team is ready to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question comes from the line of James Gordon, JPMorgan.

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James Daniel Gordon, JP Morgan Chase & Co, Research Division - Senior Analyst [2]

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James Gordon, JPMorgan. Two questions, both on Vaccine. The first one was about Vaccines' recent performance. If I heard correctly, Pharma consumer did get the COVID boost in Q1, I think 4% and 8%, and the Vaccines growth rate was clean. But then the Vaccines pressure probably only really started right at the very end of the quarter in a way. So could you talk about what the -- you sort of saw at the end of Q1, so what was the exit rate for that same division performance? Or can you talk about what you've seen for April? How much deceleration have you seen already? And is the U.S. prescription trend for Shingrix much of a guide? Or is it a lot more benign than that?

And then the second question, also Vaccines with flu. So we speculate that the government might want to mandate or much more strongly encourage people to get flu vaccinations this year and for the next few years because they don't want to deal with flu and COVID at the same time in all the people. But if that happens, is GSK placed to capitalize on much of that? Can you really scale up your flu vaccines? Or is that much more challenging because I think yours is egg-based and I know Sanofi's is cell based. So is your vaccine for flu sustainable? Or can you participate in that also?

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [3]

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Thanks. So I'm going to pass this to Luke because it's related to commercial and frontline demand. But headline is, you're right, great demand and a clean performance from Vaccines in Q1. But definitely, as both Iain and Luke mentioned, we're expecting a slowdown in Q2 just because of both health care capacity and patients' enthusiasm for the -- all consumers' enthusiasm for going outside. But we are expecting a rebound and it's not least linked to the flu demand, in fact. Although you should anticipate reasonably no significant incremental supply on flu from us. But Luke, do you want to talk through the dynamics there?

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Luke V. Miels, GlaxoSmithKline plc - President of Global Pharmaceuticals [4]

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

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

Before I go through specifically individual vaccines and the dynamics there, if you take a medium- to longer-term picture, I think we'd all agree that the world is, in a way, seeing a very unpleasant experiment where you don't have vaccine coverage for quite an aggressive pathogen. So I think when people reflect on this overall and physicians, their confidence to suggest vaccination to patients should be increased than it was before COVID-19 emerged.

Now if you look in the U.S. -- actually, I'll go to Europe first. So Europe, we saw a big drop-off in vaccines. If you look at Spain and Italy, it dropped off. But we're already seeing signs of the early shoots of a recovery led by pediatric vaccines, and that's very clear. Governments are signaling that they want these vaccines recruit very quickly, and the U.S. is along with that.

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

So our expectation is that when people can go back out there, they're going to seek these doses out. And what's interesting is we have 2 ordering points in April for the major wholesalers. And the first one in April covered about 80% of the April sales, and that was filled. So this actually helps us restock and clear some back orders.

If you look at the rest of the business, it was interesting. So pediatric vaccines are really being prioritized. You don't see a big drop in visits. So Pediarix ship-outs went down about 40%, but we do see a bigger impact in Bexsero, for example. Now normally, Q1 is our lowest month, but the volumes went down in terms of shipping to practices and wholesalers by about 80%. And Boostrix and Advair are about 70%.

So there is an impact there. It makes sense. Wellness visits are down by about 2/3. But I think, ultimately, we're in a position to capture these back. I think some of these orders were also driven by physicians being careful financially. And I think that's the other important thing to remember, which is once these restrictions are lifted, these physicians are going to seek to recover these patients. They've got practices to run, staff to pay. So we think there's going to be a surge in activity after the restrictions are lifted. And as I said, early signs of Spain, Italy would indicate that's true.

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Operator [5]

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

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Stephen Michael Scala, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [6]

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I have 2 questions. First, just to be clear, is the Shingrix 2020 guidance, which I think is about flat to slightly up with 2019, still intact? And then second, GSK has 96 recruiting trials on clinicaltrials.gov. That number is down by only 12 in the last 5 weeks. These facts don't seem to fit with your cautionary comments on trials overall. So can you clarify these 2 points?

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [7]

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Sure. So I'll come to Hal to comment on the overall trials. And you're right, Steve, that the vast majority of our trials are not significantly impacted today, but Hal will comment in more details. And just to be clear, on the Shingrix guidance, what we guided was a maintained run rate plus a bit of the Q4 sales at the end of last year, which should still be certainly not flat year-on-year.

So now -- and that guidance at the moment is unchanged. There's no update to that for -- we obviously had a strong Q1. We're really pleased with the progress we're making on supply. We do expect Q2 to be tougher because of the drop in rates under containment, but we are -- with -- the underlying demand is very strong, and our supply is on track. So we think we would be targeting a bounce back as containment is sort of relieved. So that will be -- no changes there in overall outlook at this stage. Obviously, we'll update you as we get more information.

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

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Hal V. Barron, GlaxoSmithKline plc - Chief Scientific Officer, President of R&D and Director [8]

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Yes. Well, thanks for the question. I think the simple answer is that data is consistent with what we said that we haven't really terminated only a few programs. So most programs continued to enroll, albeit some of them less robustly than had been previously anticipated. So as Emma mentioned, 1 to 3 months delay for the vast majority. A few have been significantly impacted more than that, and a couple have been terminated or put on pause. But I think that data is very consistent with the impact we're seeing, which is nontrivial. But because of the importance of the programs that we have ongoing and the ability for us to come up with somewhat novel ways of doing these trials, we're confident that the impact is modest.

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Operator [9]

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Next question is from the line of Geoffrey Porges of SVB Leerink.

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Geoffrey Craig Porges, SVB Leerink LLC, Research Division - Director of Therapeutics Research & Diversified Biopharma and Senior Research Analyst [10]

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And congratulations, by the way, on doing all of this and also delivering good results. So Hal, just on, first of all, the COVID vaccine efforts, you must be taking a close look at these programs now. Do you -- are you confident that you have a surrogate for protection yet? And could you just talk about the scale of safety that you think you will need for a general-use vaccine?

And then, Luke, could you just talk about the upcoming pharmaceutical launches you have? Obviously, Zejula, belantamab, are you intending to launch, first of all? And secondly, what kind of degree of your typical effectiveness are you expecting given the way that you're going to have to introduce them more or less on a virtual basis?

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [11]

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

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Luke V. Miels, GlaxoSmithKline plc - President of Global Pharmaceuticals [12]

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Sure. So short answer is PRIMA will go ahead virtually. I think we can do that quite effectively and been very thoughtful about that. And we've actually started that process with the NCCN Guidelines as well.

With BCMA, ideally, we'll wait because it's a novel agent. It's new. So we would -- on hold back until the restrictions were lifted. Hope that answers your question, Geoff.

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

That being said, there are some very, very interesting outliers, where you can see some physicians really, really go with this medium. And we're seeing calls in people. We normally might have only seen somewhere for 10 or 15 minutes drawing their calls out to 35 minutes. Now that might be because they don't have much to do because they're not seeing many patients. But interestingly, even in some of the more busy physicians like pulmonologists right now, we're seeing longer calls. So I think it's going to be very stratified by the individual physicians, what they prefer. The bulk of value, though, is still going to be derived from face-to-face rep calls and HCP event.

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [13]

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Thanks, Luke. Roger?

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Roger G. Connor, GlaxoSmithKline plc - President of Global Vaccines [14]

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Listen, thanks for the question. I think from a vaccines point of view, as Emma has mentioned, collaborations, we believe, are going to be key to, we think, finding a vaccine solution. We've got 7 partnerships in place. And I think it's a busy few months ahead as we start to see the data readout in those various candidates.

I'd say on your specific questions, I think it's too early to say if there is a surrogate. But obviously, we'll be in discussions with the regulator about that. In terms of the level of safety testing as well, that's another regulatory discussion that we'll have as we looked ahead in what are quite aggressive accelerated time lines for this vaccine development compared to what would normally be considered.

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

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Operator [15]

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

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Andrew Simon Baum, Citigroup Inc, Research Division - Global Head of Healthcare Research and MD [16]

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I was listening carefully to how, Emma, you described GSK taking very seriously the -- I can't remember if you said ophthalmic, but you referenced the adverse events associated with belantamab. Perhaps you could share with us, now that the FDA has advanced discussions with you, the type of monitoring restrictions you might expect in the label. I'm more focused on the earlier lines of therapy than the third line given the commercial opportunity. But how restrictive they may be, that would be helpful.

And then second, on your HIV franchise, I would have imagined switching patients is going to be increasingly problematic if they don't present in person. So perhaps you all could talk to maybe Juluca in the current environment -- or Dovato rather in the current environment.

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [17]

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

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Hal V. Barron, GlaxoSmithKline plc - Chief Scientific Officer, President of R&D and Director [18]

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Yes. Thanks, Andrew. I want to be careful. Our discussions with regulatory agencies are confidential and therefore, I'm not going to comment on the ongoing discussions. But I think a couple of things are important. Remember, the data in this heavily pretreated refractory/relapsed patient population from DREAMM-2 was very, very robust, and we see the benefit outweighing the adverse event experience, particularly the ocular ones in the program.

What we have noticed, and I've discussed with you and all of you on the call several times before, is that these ocular adverse events are unique. And although they were well managed in the clinical programs, it's important to us to make sure that myeloma experts and eye care professionals in the real world are able to work together to ensure that the drug's used safely in patients. And of course, we're open to any approach that ensures patient safety is well handled.

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

And lastly, the one combination that I've mentioned, and this is part of an ongoing proof-of-concept study, is -- I think, Andrew, you're aware of this study, but the really interesting data with the gamma secretase inhibitor is a small number of patients and much support from preclinical data looking at inhibiting gamma secretase to prevent the clipping of the BCMA off the plasma cell. And in CAR-T therapy, this has resulted in a very high response rate and again, a small number of patients. And we're cautiously optimistic that, that combination may even be a third avenue by which we can lower the dose and in addition, manage the ocular adverse events.

So we're -- again, continue to believe the benefits seen in the 2.5 mg per kg 3 week dose in DREAMM-2 outweighs the adverse events, but we take those seriously and are looking at ways to optimize how the drugs move in the real world.

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [19]

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

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David Simon Redfern, GlaxoSmithKline plc - Chief Strategy Officer [20]

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

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

But the underlying performance, I think, was still strong, particularly with 2DRs of GBP 186 million. We're pleased with the progress on Dovato and Juluca. Dovato now recommended and preferred in the guidelines in the U.S. and in Europe. But you're absolutely right, Andrew. I mean there's definitely less switching. It was down about 60% in the U.S. I think it's probably down about 40% right now as physicians adjust for new patient prescriptions online and they're not coming in and being revisited.

So that will all kind of lock in the market shares for the moment. Probably mean we'll sell a bit more Triumeq and Tivicay, and Dovato will stay stable. But hopefully, once patients get revisited, that will start to revamp. But there is definitely an impact of the switching in the short term on the 2DRs.

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Operator [21]

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Next question is from the line of Jo Walton of Crédit Suisse.

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Jo Walton, Crédit Suisse AG, Research Division - MD [22]

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If I can return to Vaccines and in particular, your COVID vaccine work, are you largely related to helping other people with adjuvants and then doing manufacturing of the resulting vaccine? Just wondering where you have this sort of spare capacity. We know how difficult it is to add capacity for something like Shingrix then yet between you and Sanofi, you seem to be able to promise hundreds of millions of doses. So just some sort of help on how that comes about. And if you could give us some sense of -- if you're planning on this being an annual or every-few-year vaccine or whether you think it's likely to be effectively a one-and-done even if it's a couple of shots within that?

And secondly, if I can just push you on Shingrix, the level of the RAR that came in there versus the incremental supply. Clearly, if we were just to take 4x the first quarter, we'd be way higher than consensus for the year. I'm just wondering how big the RAR component was?

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [23]

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Yes. I think the RAR, and correct if I'm wrong, was GPB 50 for the quarter? Is that right, Iain?

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Iain James Mackay, GlaxoSmithKline plc - CFO & Executive Director [24]

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In the quarter, it's GPB 50, yes.

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [25]

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In the quarter, it was GPB 50, 5-0. And obviously, and there's no change, as we said earlier, to our overall outlook for the year on Shingrix. We had a great Q1, Q2. It's expected to look a bit different. But again, we're working on the rebound and supply is very much on track with what we've been aiming for.

And a completely understandable question in terms of how come we can -- a vaccine -- this normally takes 10 years. It's 18 months and you're in this kind of capacity provision. I'll ask Roger to explain the very significant differences. And by the way, it's one of the reasons why -- when the question we were trying to answer is, how do you get to a vaccine that works at scale, the best probability of success as fast as possible with COVID is a very different scenario in a pandemic crisis than with the new technology of Shingrix.

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

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Roger G. Connor, GlaxoSmithKline plc - President of Global Vaccines [26]

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Exactly. Listen, thanks very much for the question. I think to be clear, the partnerships that we have in place are adjuvant partnerships. So we're obviously providing our adjuvant, which, for those who don't know, is a separate vial of product that we deliver and is in preclinical and then moving into clinical testing. I think it's important to know that, that adjuvant technology already exists. It's a proven adjuvant that we have supplied before. It's our adjuvant system #3. So the supply chain actually already exists for it and is a discrete supply chain.

It's quite different technically from Shingrix, completely different technologies. So the 2 aren't interchangeable. And we keep some redundant capacity in it for these very reasons, for pandemic preparedness on flu. So the supply chain is there now. We still have expansion to do.

So to reach the levels that we believe that will be required for the partnerships that we have and for the populations involved, we believe that we will have to expand. And that will take time, but we're not starting from 0 like some other vaccines will have to. So that's -- I think that's important. Shingrix is also a very much more complex bulk process and also supply chain as well. So I think that's a difference.

On the seasonality question as well, I think it's too soon to tell, who knows. But the fact that we will be part of a number of different vaccines hopefully means that if that does become seasonal, we will be part of that solution as well.

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Operator [27]

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Next question is from the line of Emmanuel Papadakis of Barclays.

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Emmanuel Douglas Papadakis, Barclays Bank PLC, Research Division - MD & Head of European Pharmaceuticals Research [28]

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Maybe wanted to just get your perspectives on the data you reported earlier this month in terms of the nasal products opportunity. It seemed, somewhat at face value, inferior to the incumbent competitor in that space. But perhaps you could just give us some early thoughts in terms of the commercial potential, the degree to which that's synergistic on your current business in severe asthma and timing for that ramp, if any.

And then perhaps the second question, just coming back to HIV cabotegravir because you said you're going to refile in the summer. Any color you can give us now in terms of the class response? Timing could be on the market. And indeed, assuming we're back in a semi-normalized world, the speed of launch we might anticipate?

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [29]

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

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David Simon Redfern, GlaxoSmithKline plc - Chief Strategy Officer [30]

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Yes. Thanks, Emmanuel. I mean we are -- we had discussions with the FDA on Cab. And as we said today, we expect to resubmit in the middle of the year. We do expect it to be a Type II, so that can take up to 6 months for the FDA to review. So on that basis, if all goes well, we would expect to hear the back end of this year or the early part of next year. And just remember, this is entirely related to CMC and particularly data on the specific quality control. It's not related to the clinical or safety data.

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [31]

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And Luke?

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Luke V. Miels, GlaxoSmithKline plc - President of Global Pharmaceuticals [32]

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Yes, sure. So Emmanuel, great question. I think the key thing to zone in here, if you compare our study SYNAPSE versus SINUS-24 and 52 with dupilumab, the key area to look here is the number of previous surgeries. So for mepolizumab, Nucala, 100% of these patients had, had at least one previous surgery, whereas with dupi in SINUS-24, it was around 69%. And in SINUS-52, it was 58%. And similar rates for the placebo in both those arms, if you look at 3 or more previous surgeries. So very, very resistant disease, complex disease. 1 in 4 mepo patients had previous surgeries -- 3 or more previous surgeries, where that was 23% and 15%, respectively, in SINUS-24 and 52.

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

In terms of the opportunity, I would say, if you look about 5 years out, it's probably GBP 80 million to GBP 100 million of the opportunity So it's a nice add-on. It reinforces the product, but it's not transformational in itself.

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Operator [33]

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

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Kerry Ann Holford;Berenberg, [34]

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A couple of questions for me, please. Firstly, on SG&A, some of your global peers reported SG&A figures that were lower than previously -- than the previous run rate. As what happened with you in this quarter, but is this something we should anticipate being more apparent into Q2? Have you seen a significant decrease in your marketing spend, travel budgets? And the LIBOR, is that simply being reinvested into digital and telemarketing?

And then secondly, thinking about utilization, particularly in the U.S., how do you think about the risk of your business and the rising U.S. unemployment? And could the effective negative payer mix shift be a significant risk to you this year, if not next? And I wonder if you would comment on which of your products may be most at risk?

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [35]

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Thanks, Kerry. Well, I'm going to ask Luke to comment, although it's very much in the bucket of sort of unknown, although clearly unemployment figures are significant. But in terms of direct impact, and I'm not sure we're going to give a lot of details on which products, but Luke can talk a bit about the shifting mix.

And just in terms of SG&A, I think half of that growth came from either one-off legal or TESARO. Is that right, Iain?

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Iain James Mackay, GlaxoSmithKline plc - CFO & Executive Director [36]

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Yes, that's right. So -- yes, correct.

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [37]

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And clearly, our goal is to invest behind our new launches and oncology preparedness and make sure that noncustomer-facing costs just keep coming down. And obviously, we're going to make savings in travel like everybody is. And as Q2 experiences what it does, we'd expect that to stay a lot in control. But exactly, I said, we're very invested in making sure we have fast openings as markets do open up. And the investment in digital is ongoing. And obviously, we're not making COVID-related redundancies.

But Luke, do you want to talk a little about -- thoughts on...

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Luke V. Miels, GlaxoSmithKline plc - President of Global Pharmaceuticals [38]

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Sure, yes. Yes. Thanks, Emma, and thanks, Kerry. I mean you can imagine, we're looking at this very, very closely. As Emma said, it's very hard to predict. But if I could just lay out our thinking, and I'll just take you through the products after that.

So as you know, if you get laid off in the U.S., you have the option of COBRA to bridge your commercial insurance. Some people are going to go into the Obamacare health exchanges and people can enroll in those. And then unfortunately, some people may fall into the Medicaid category or that may be expanded. What's interesting is Congress did provide subsidies for COBRA in 2008, but they don't seem to be signaling that they're going to do this in 2020.

And also, let's not forget that employees who are furloughed, they lose their salary, but so far, not their health insurance. And there's good examples with Disney and other companies like that, that are doing that. So we're trying to calculate where everyone will land, and it's really hard at this stage. I mean the baseline, if you look at right now, we think it's about a reduction of 9 million so far. So that's it's roughly where we think it is.

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

Now in terms of the products, the ones which have the higher commercial component, Breo, Advair, Flovent and Ventolin. So they're the ones which obviously, we'll watch closely. Nucala is a bit lower. I mean there may be some impact on biologics because they're a bit more expensive. But again, these patients tend to have severe disease as well as Trelegy and Anoro are mostly Part D, so they're in a good spot as is Incruse.

Vaccines, we think they're going to behave differently. Again, these are single events or double events. So from a cash flow point of view, not as challenging as a chronic medication. And we think that if you look at pediatrics with the existing government-private partnerships in place, they won't be disrupted.

In terms of Shingrix, again, 2 times 150 is in reach for many people versus chronic medications. So again, I think we're confident on the mid- to long term there.

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

So I hope that answers your question. So short answer is some of the Respiratory products are more exposed, but they're ones which are under pressure anyway. The ones that we need to grow aggressively like Trelegy and the vaccines in Nucala are less exposed than Zejula, of course.

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Operator [39]

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Our last question comes from the line of Graham Parry, Bank of America.

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Graham Glyn Charles Parry, BofA Merrill Lynch, Research Division - MD and Head of Healthcare Equity Research [40]

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So just firstly, on Shingrix, just wanted to square a couple of comments. So you said the full year guide is unchanged, but Q1 was running quite a long way, well above the fourth quarter plus a bit rate. So is that level conservative in the Q1 -- sorry, in the full year guidance in Q1 capacity, though, indicative of what you think you can actually produce through the year? And you also said you expect an impact in 2Q but also fact that the April orders are being filled. So again, is that just sort of anticipating some sort of drop-off down in April?

And then secondly, in your comments around COVID impact, you specifically mentioned supply chain manufacturing as a COVID risk. And I'd say that's an area that most of the companies have been perhaps more robust in their statements on. Is this because of their particular difference in GSK supply chain vulnerability or just a different communication style in terms of communicating with the market?

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [41]

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

The signals from wholesalers in the first 2 ordering dates of April are positive signals on the underlying demand, but that is going to flow through, but it's a signal of the confidence of a bounce back. So we do think the curve will be differently shaped, and we'll obviously update you as we go through the year and results come through.

And in terms of supply chain, I certainly wouldn't want to be signaling any specific concern. You may be right in some of the different company styles in communications. We think we've got a very robust supply chain, and we're really pleased with the way our 70-plus factories have mobilized to fluctuating demand. We just want to make sure that we are responsibly signaling the potential risk with a lot of uncertainty in the world. And this may be related to third-party suppliers or indeed government actions that one can imagine in the external environment, perhaps more fundamentally than internally. But no specific concerns that we're looking to flow.

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Iain James Mackay, GlaxoSmithKline plc - CFO & Executive Director [42]

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

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Emma N. Walmsley, GlaxoSmithKline plc - CEO & Director [43]

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

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Operator [44]

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