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GSK Annual Report With Details
GSK Annual Report With Details
for hepatitis C
induced thrombocytopaenia
(USA)
QuadrivalenI u vaccine
for seasonal inuenza
prophylaxis (USA)
raxibacumab or IreaImenI
& prophylaxis of anthrax
inhalation (USA)
Sorilux for scalp psoriasis
(USA)
Votrient for sarcoma (USA
& EU)
albigluIide or Iype II
diabetes
Anoro
for COPD
dabraenib or meIasIaIic
melanoma
doluIegravir
for HIV
Relvar/Breo
for metastatic
melanoma
Anoro
for COPD
albigluIide or Iype II
diabetes
dabraenib or meIasIaIic
melanoma
doluIegravir
for HIV
drisapersen
for Duchenne
muscular dystrophy
Patrome (IPX066
) for
Parkinsons disease
migalasIaI
for
hepatitis C induced
thrombocytopaenia
Relvar/Breo
for metastatic
melanoma
Tykerb for adjuvant breast
cancer
Votrient for sarcoma
mepolizumab or severe
asthma
sirukumab
for
rheumatoid arthritis
approvals in USA or
EU since January 2012
key medicines led
since January 2012
Phase III assets
delivered key data
during 2011 and 2012
new rst Phase III
starts since January
2012
8 6 14 2
medicines in Phase III
development or
registration terminated
0
We have a full and diverse product development pipeline
41 GSK Annual Report 2012
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Phase III/registration Pharmaceuticals and Vaccines pipeline summary
Therapeutic area Compound Indication Phase III Filed Approved
Biopharmaceuticals Arzerra (ofatumumab)
Arzerra (ofatumumab)
rheumatoid arthritis
albiglutide type 2 diabetes
raxibacumab inhalation anthrax
Cardiovascular & metabolic darapladib atherosclerosis
Immuno-inammation vercirnon (1605786)
Crohn's disease
Infectious diseases Relenza i.v. (zanamivir)
inuenza
Neurosciences Patrome (IPX066
) Parkinson's disease
Oncology
trametinib + dabrafenib metastatic melanoma, adjuvant therapy
Tyverb/Tykerb (lapatinib) breast cancer, adjuvant therapy
Tyverb/Tykerb (lapatinib) gastric cancer
Tyverb/Tykerb (lapatinib) head & neck squamous cell carcinoma (resectable disease)
Votrient (pazopanib) ovarian cancer, maintenance therapy
Votrient (pazopanib) renal cell cancer, adjuvant therapy
dabrafenib metastatic melanoma
trametinib
metastatic melanoma
trametinib
+ uticasone furoate)
COPD mortality outcomes
umeclidinium (573719) COPD
vilanterol
COPD
Relvar/Breo
(vilanterol
+ uticasone furoate)
asthma
Relvar/Breo
(vilanterol
+ uticasone furoate)
COPD
Anoro (umeclidinium + vilanterol
) COPD
Paediatric vaccines MMR measles, mumps, rubella prophylaxis
Mosquirix (Malaria RTS,S) malaria prophylaxis (Plasmodium falciparum)
MenHibrix (Hib-MenCY-TT) Neisseria meningitis groups C & Y & Haemophilus inuenzae
type b disease prophylaxis
treatment of melanoma
MAGE-A3 immunotherapeutic
Fabry disease
Dermatology alitretinoin
+ abacavir sulphate
+ lamivudine
HIV infections xed dose combination
dolutegravir
HIV infections
Sir Crispin Davis stepped down from the Committee on 31 December 2012.
James Murdoch retired from the Board on 3 May 2012 and Larry Culp resigned
from the Board on 30 September 2012.
In addition to the six scheduled meetings, the Committee also met
on a quorate basis on four occasions, principally to approve the
formal grant and, based on performance, the vesting of long-term
incentive awards in accordance with GSKs remuneration policy.
Committee meetings usually begin with a closed session, during
which only members of the Committee, the Company Secretary and
the external adviser are present. Other individuals may also be
invited to attend Committee meetings during the year. Executives
and other Committee attendees are not involved in any decisions,
and are not present at any discussions, regarding their own
remuneration.
Other attendees at Committee meetings include:
Attendee
Regular
attendee
Attends
as required
CEO
CFO
Head of Human Resources
Head of Reward
Company Secretary Secretary to the
Committee
Committee Adviser Deloitte LLP
Adviser to the Committee
The Committee has access to external advice as required. Deloitte
LLP (Deloitte) has been appointed by the Committee to provide it
with independent advice on executive remuneration. During the
year, Deloitte provided independent commentary on matters under
consideration by the Committee and updates on best practice,
legislative requirements and market practice.
Deloitte also provided other consulting, tax and assurance services
to GSK during the year, but did not provide advice on executive
remuneration matters other than for the Committee.
The Committee conducted a formal review of Deloittes
performance in July 2011 against an established set of criteria that
enabled a full consideration of the Committees needs.
Deloitte is a member of the Remuneration Consultants Group and,
as such, voluntarily operates under the code of conduct in relation
to executive remuneration consulting in the UK. The code of
conduct can be found at www.remunerationconsultantsgroup.com.
Towers Watson and Pay Governance provided additional market
data to the Committee.
Commitment to shareholders
The Committee engages in regular dialogue with shareholders and
holds annual meetings with GSKs largest investors to discuss and
take feedback on its remuneration policy and governance matters.
In particular, the Committee discusses any signicant changes to the
policy or the measures used to assess performance.
The annual meetings were held in November 2012. Sir Crispin Davis
shared progress on remuneration matters in the last 12 months and
proposals for 2013. Sir Christopher Gent, Chairman, updated
attendees on corporate governance developments. Tom de Swaan
was also in attendance.
At the companys AGM in May 2012, the resolution to approve
the Remuneration Report was passed, with 95.7% of the votes cast
in favour.
124 GSK Annual Report 2012
Principal activities and matters addressed during 2012
The Committees principal activities and matters addressed during 2012 are set out below:
Remuneration
Items specic to:
Month Overall Annual bonus LTIs Governance and other matters
January Approve Executives 2012
remuneration, including
salaries of CEO, CFO and
Chairman, R&D
Remuneration environment
update
Review and approve
Executives 2011
bonuses
Approve bonus
calculation principles
Set CEO 2012 bonus
objectives
Review LTI measures and
targets for 2012
Set Committees agenda
for 2012
Review draft Remuneration
Report
February Overview of bonuses for
employees below CET
Review LTI performance
targets and outcomes and
approve 2009 LTI award
vesting
Set 2012-2014 LTI award
targets
March Grant 2012 LTI awards to
Executives and below
Approve Deferred Annual
Bonus Plan elections and
matching awards
Approve Remuneration
Report
May Review CIA clawback
draft requirements
Consider review of
annual bonus plan
Review of voting outcomes
on 2011 Remuneration
Report
Review of UK Government
remuneration consultations
July Review CIA nal clawback
arrangements
Approve remuneration for
new CET appointee
Review of general market
developments
Review of CEOs and CFOs
pay competitiveness
Grant interim 2012 LTI
awards (below Executives)
Review AGM feedback
October Review of Chairmans fees
Agree 2013 salary review
process for Executives
Review of CFOs pay
competitiveness
Review of 2012 bonus
approval process for
Executives
Approve changes to LTI
plans to give effect to
CIAs executive nancial
recoupment plan
Review of UK Government
remuneration proposals
Planning Committee work
for 2013
November Annual meetings with investors
December Review Executives
remuneration market data
and competitiveness
Consider feedback from
annual meetings with
investors
Annual Committee
evaluation results 2012
Remuneration report
125 GSK Annual Report 2012
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Executive Director terms and conditions
Executive Director contracts
The policy set out below provides the framework for contracts for
Executive Directors.
Policy
Notice period on
termination by
employing company
or Executive
12 calendar months
Termination payment 1 x annual salary
payable on termination by the company
Vesting of LTIs Rules of relevant incentive plan, as
approved by shareholders
Pension Based on existing arrangements and
terms of relevant pension plan
Non-compete clause 12 months from termination
notice date
*
* The ability to impose a 12-month non-compete period (and a non-solicitation
restriction) on an Executive is considered important by the company to have the
ability to protect the Groups intellectual property and staff. In light of this, the
Committee believes that it would not be appropriate to provide for mitigation
in the contracts.
The contracts for new Executives will not normally include a bonus
element in any termination payment.
The terms of the contracts seek to balance commercial imperatives
and best practice. Where the company considers it important that
an individual does not work elsewhere during his or her notice
period, it may make a compensatory payment in respect of bonus
for the period of restraint.
The following table sets out the details of the Executive Directors
service contracts:
Current Directors Date of contract Effective date Expiry date
Sir Andrew Witty 18 June 2008 22 May 2008 31 August 2024
Simon Dingemans 8 September 2010 4 January 2011 30 April 2028
Dr Moncef Slaoui 21 December 2010 21 December 2010 1 August 2019
No termination payments will be made in respect of any part of a
notice period extending beyond the contract expiry date.
Other entitlements
In addition to the contractual provisions outlined above, in the event
that Dr Moncef Slaouis service agreement is terminated by his
employing company, the following will apply:
in the case of outstanding awards due under the GlaxoSmithKline
Annual Investment Plan (which was closed to new deferrals with
effect from the rst quarter of 2006), provided that his
agreement is terminated other than for cause, Dr Moncef Slaoui
must exercise any Bonus Investment Rights within six months of
termination to receive any deferred amounts, and any income and
gains, and
in line with the policy applicable to US senior executives,
Dr Moncef Slaoui may become eligible, at a future date, to receive
continuing medical and dental insurance after retirement.
Outside appointments for Executives
The Board encourages Executives to hold one external directorship
once they have become established in their role to broaden their
experience and development, and help increase the pool of
candidates for non-executive directors.
Any outside appointments are considered by the Nominations
Committee to ensure they would not cause a conict of interest
and are then approved by the Chairman on behalf of the Board.
It is the companys policy that remuneration earned from such
appointments may be kept by the individual Executive.
Chairman and other Non-Executive Directors
How their fees are set
The company aims to provide the Chairman and other Non-
Executive Directors with fees that are competitive with those paid
by other companies of equivalent size and complexity, subject to
the limits contained in GSKs Articles of Association.
The Chairman and the CEO are responsible for evaluating and
making recommendations to the Board on the fees payable to
the Non-Executive Directors.
Review of the Chairmans fees
Sir Christopher Gent took up the role of Chairman in January 2005,
since when his fees have only been increased once, in March 2008,
when they were increased from 575,000 to 675,000. Under this
arrangement, Sir Christopher received 20% of his fees as shares,
which are deferred until he steps down from the Board.
In 2012, following a review of Sir Christopher Gents performance
and independently sourced data, the Board decided to increase the
Chairmans fees from 675,000 to 710,000. The change took
effect from 1 January 2013. At the request of the Chairman, the
increase of 35,000 is being delivered in GSK shares. Therefore
170,000 (or approximately 24%) of Sir Christophers total fee per
annum is now delivered in shares.
Review of Non-Executive Director fees
Non-Executive Director fees were last increased in March 2008.
Since then there has been an increase in the time commitment,
demands and responsibility placed on non-executive directors. The
fees were reviewed in July 2011, and although a market shortfall
was noted, it was decided that fees would not be increased at that
time.
Following a further review of independently sourced data in 2012,
the Board agreed that it was appropriate to increase the standard
annual fee by 10,000 to 85,000, with effect from 1 January 2013
(25% of fees will continue to be delivered as shares deferred until
the Non-Executive Director steps down from the Board). There
were no increases to the supplemental fees.
The Non-Executive Directors fees applying from 1 January 2013 are
as follows:
Per annum
Standard annual cash retainer fee 85,000
Supplemental fees
Chairman of the Audit & Risk Committee 80,000
Senior Independent Director
and Scientic/Medical Experts 30,000
Chairmen of the Remuneration and Corporate
Responsibility Committees
20,000
Non-Executive Director undertaking 7,500
intercontinental travel to meetings per meeting
4,577
4,577
665
5,242
5,055
5,055
521
5,576
Other non-current assets
(Note 22)
194
330
524
158
682
176
257
433
92
525
194 4,907 5,101 823 5,924 176 5,312 5,488 613 6,101
The following table shows the age of such nancial assets which are past due and for which no provision for bad or doubtful debts has
been made:
2012
m
2011
m
Past due by 130 days 118 191
Past due by 3190 days 129 92
Past due by 91180 days 100 80
Past due by 181365 days 71 60
Past due by more than 365 days 41 81
459 504
Amounts past due by greater than 90 days and for which no provision for bad or doubtful debts has been made total 212 million
(2011 221 million). Of this balance 99 million (2011 136 million) relates to receivables due from state hospital authorities in Greece,
Ireland, Italy, Portugal and Spain. The total receivables due from state hospital authorities in these countries (current and past due, net of
provisions) is 257 million (2011 293 million).
(c) Trade and other payables, Other provisions and Other non-current liabilities in scope of IAS 39
The following table reconciles nancial instruments within Trade and other payables, Other provisions and Other non-current liabilities
which fall within the scope of IAS 39 to the relevant balance sheet amounts. The nancial liabilities are predominantly non-interest bearing.
Accrued wages and salaries are included within nancial liabilities. Other liabilities include payments on account, tax and social security
payables and provisions which do not arise from contractual obligations to deliver cash or another nancial asset, which are outside the
scope of IAS 39. At 31 December 2011, no nancial liabilities were measured at fair value through prot or loss.
2012 2011
At fair value
through
prot or loss
m
Other
liabilities
m
Financial
instruments
m
Other
m
Total
m
Financial
instruments
m
Other
m
Total
m
Trade and other payables (Note 27) (7,485) (7,485) (569) (8,054) (6,951) (408) (7,359)
Other provisions (Note 29) (157) (157) (1,235) (1,392) (62) (3,572) (3,634)
Other non-current liabilities (Note 30) (709) (88) (797) (635) (1,432) (92) (534) (626)
(709) (7,730) (8,439) (2,439) (10,878) (7,105) (4,514) (11,619)
200 GSK Annual Report 2012
41 Financial instruments and related disclosures continued
(d) Derivative nancial instruments and hedging programmes
The following table sets out the fair values of derivatives held by GSK.
2012
Fair value
2011
Fair value
Assets
m
Liabilities
m
Assets
m
Liabilities
m
Fair value hedges Interest rate swaps
(principal amount 920 million (2011 968 million)) 54 84
Net investment hedges Foreign exchange contracts
(principal amount 7,529 million (2011 4,260 million)) 25 (8) 23
Cash ow hedges Foreign exchange contracts
(principal amount 242 million (2011 nil) 1
Derivatives designated as at fair value through prot or loss 80 (8) 107
Foreign exchange contracts
(principal amount 10,270 million (2011 13,280 million)) 18 (53) 44 (172)
Embedded and other derivatives 5 (4) 4 (5)
Derivatives classied as held for trading under IAS 39 23 (57) 48 (177)
Total derivative instruments 103 (65) 155 (177)
Analysed as:
Current 49 (63) 70 (175)
Non-current 54 (2) 85 (2)
Total 103 (65) 155 (177)
Foreign exchange contracts classied as held for trading under IAS 39
The principal amount on foreign exchange contracts is the absolute total of outstanding positions at the balance sheet date. The Groups
foreign exchange contracts are for periods of 12 months or less. At 31 December 2012, the Group held outstanding foreign exchange
contracts consisting primarily of currency swaps with a net liability fair value of 35 million (2011 128 million net liability) which represent
hedges of inter-company loans and deposits, external debt and legal provisions, that are not designated as accounting hedges. Fair value
movements are taken to the income statement in the period to offset the exchange gains and losses on the related inter-company lending
and borrowing, external debt and legal provisions.
Fair value hedges
The Group has designated a series of interest rate swaps as a fair value hedge. The risk being hedged is the variability of the fair value of
the bond arising from interest rate uctuations. Gains and losses on fair value hedges are disclosed in Note 12, Finance expense.
The carrying value of bonds in a designated hedging relationship on page 197 includes 970 million (2011 1,046 million) that is deemed
a hedged item in a fair value hedge relationship.
Net investment hedges
During the year, certain foreign exchange contracts were designated as net investment hedges in respect of the foreign currency translation
risk arising on consolidation of the Groups net investment in its European (Euro) and Japanese (Yen) foreign operations as shown in the
table above.
The carrying value of bonds in a designated hedging relationship on page 197 includes 2,309 million (2011 4,861 million) that is
deemed a hedging instrument in a net investment hedge relationship.
Cash ow hedges
During December 2012, the Group entered into a non-deliverable foreign exchange contract which it designated as a cash ow hedge of
a foreign exchange exposure arising on the recognition of a liability denominated in Indian Rupee in the Groups consolidated nancial
statements.
At 31 December 2011, the Group had no designated cash ow hedges.
Notes to the nancial statements
201 GSK Annual Report 2012
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41 Financial instruments and related disclosures continued
(e) Debt interest rate repricing table
The following table sets out the exposure of the Group to interest rates on debt, including commercial paper, before and after the effect
of interest rate swaps. The maturity analysis of xed rate debt is stated by contractual maturity and of oating rate debt by interest rate
repricing dates. For the purpose of this table, debt is dened as all classes of borrowings other than obligations under nance leases.
2012 2011
Debt
m
Effect of
interest
rate swaps
m
Total
m
Debt
m
Effect of
interest
rate swaps
m
Total
m
Floating and xed rate debt less than one year (3,604) (970) (4,574) (2,664) (1,046) (3,710)
Between one and two years (970) 970 (1,611) (1,611)
Between two and three years (1,907) (1,907) (1,046) 1,046
Between three and four years (1,326) (1,326)
Between four and ve years (2,232) (2,232)
Between ve and ten years (2,897) (2,897) (2,806) (2,806)
Greater than ten years (6,616) (6,616) (5,353) (5,353)
Total (18,226) (18,226) (14,806) (14,806)
Original issuance prole:
Fixed rate interest (16,155) 970 (15,185) (14,639) 1,046 (13,593)
Floating rate interest (2,064) (970) (3,034) (166) (1,046) (1,212)
Total interest bearing (18,219) (18,219) (14,805) (14,805)
Non-interest bearing (7) (7) (1) (1)
(18,226) (18,226) (14,806) (14,806)
The Group holds interest rate swaps, designated as fair value hedges, to convert 970 million of xed rate debt with a maturity between
one and two years (2011 1,046 million with a maturity between two and three years) into a oating rate exposure.
(f) Sensitivity analysis
Foreign exchange and interest rate sensitivity analysis has been prepared on the assumption that the amount of net debt, the ratio of xed
to oating interest rates of the debt and derivatives portfolio and the proportion of nancial instruments in foreign currencies are all
constant and on the basis of the hedge designations as at 31 December. Financial instruments affected by market risk include cash and
cash equivalents, borrowings, trade receivables and payables and derivative nancial instruments.
The following analyses are intended to illustrate the sensitivity of such nancial instruments to changes in foreign exchange and interest rates.
Foreign exchange sensitivity
The table below shows on an indicative basis the Groups sensitivity to foreign exchange rates on its US dollar, Euro and Yen nancial
instruments.
These three currencies are the major foreign currencies in which GSKs nancial instruments are denominated. GSK has considered
movements in these currencies and has concluded that a 10 cent or 10 yen movement in rates against Sterling is reasonable.
In this analysis, nancial instruments are only considered sensitive to foreign exchange rates where they are not in the functional currency
of the entity that holds them. Obligations under nance leases, inter-company loans that are fully hedged to maturity and certain
non-derivative nancial instruments not in net debt are excluded as they do not present a material exposure. Foreign exchange sensitivity
on Group assets and liabilities other than nancial instruments is not included in the calculation.
The movement in the income statement in the table below relates primarily to hedging instruments for legal provisions and to trade
receivables and payables. Whilst the hedging instruments provide economic hedges, the related remeasurement of provisions is not
included in the calculation.
2012 2011
Income statement impact of non-functional currency foreign exchange exposures
Increase in
income
m
Increase in
income
m
10 cent appreciation of the US dollar (2011: 10 cent) 41 137
10 cent appreciation of the Euro (2011: 10 cent) 29 16
10 yen appreciation of the Yen (2011: 20 yen) 1
An equivalent depreciation in the above currencies would cause the following increase/(decrease) in income (36) million, (25) million and
nil for US dollar, Euro and Yen exchange rates respectively (2011 (129) million, (14) million and (1) million).
202 GSK Annual Report 2012
41 Financial instruments and related disclosures continued
The movements in equity in the table below relate to hedging instruments (foreign exchange derivatives and external debt) designated as a
net investment hedge to hedge the Group assets denominated in Euro and Yen.
2012 2011
Equity impact of non-functional currency foreign exchange exposures
(Decrease) in
equity
m
(Decrease) in
equity
m
10 cent appreciation of the US dollar (2011: 10 cent)
10 cent appreciation of the Euro (2011: 10 cent) (814) (760)
10 yen appreciation of the Yen (2011: 20 yen) (49)
An equivalent depreciation in the above currencies would cause the following increase in equity: nil, 691 million and 42 million for
US dollar, Euro and Yen exchange rates respectively (2011 nil, 702 million and nil).
The table below presents the Groups sensitivity to foreign exchange rates based on the composition of net debt as shown in Note 32
adjusting for the effects of foreign exchange derivatives that are not part of net debt but affect future foreign currency cash ows.
2012 2011
Net debt impact of non-functional foreign currency exchange exposures
(Increase)/
decrease in
net debt
m
(Increase)/
decrease in
net debt
m
10 cent appreciation of the US dollar (2011: 10 cent) (460) (392)
10 cent appreciation of the Euro (2011: 10 cent) 248 21
10 yen appreciation of the Yen (2011: 20 yen) 15 70
An equivalent depreciation in the above currencies would cause the following (increase)/decrease in net debt: 407 million, (211) million
and (13) million for US dollar, Euro and Yen exchange rates respectively (2011 344 million, (29) million and (50) million).
Interest rate sensitivity
The table below shows on an indicative basis the Groups sensitivity to interest rates on its oating rate Sterling, US dollar and Euro nancial
instruments, being the currencies in which GSK has historically issued debt and held investments. GSK has considered movements in these
interest rates over the last three years and has concluded that a 1% (100 basis points) increase is a reasonable benchmark. Debt with a
maturity of less than one year is oating rate for this calculation. Interest rate movements on derivative nancial instruments designated as
fair value hedges are deemed to have an immaterial effect on the Group Income Statement due to compensating amounts in the carrying
value of debt. A 1% (100 basis points) movement in interest rates is not deemed to have a material effect on equity.
2012 2011
Income statement impact of interest rate movements
Increase/
(decrease) in
income
m
Increase/
(decrease) in
income
m
1% (100 basis points) increase in Sterling interest rates (2011: 1%) 5 7
1% (100 basis points) increase in US dollar interest rates (2011: 1%) 12
1% (100 basis points) increase in Euro interest rates (2011: 1%) (12) (15)
These interest rates could not be decreased by 1% (100 basis points) as they are currently less than 1.0%. The maximum increase/(decrease) in
income would therefore be limited to (2) million, nil and nil for Sterling, US dollar and Euro interest rates respectively (2011 (5) million,
(1) million and 14 million).
(g) Contractual cash ows for non-derivative nancial liabilities and derivative instruments
The following tables provides an analysis of the anticipated contractual cash ows including interest payable for the Groups non-derivative
nancial liabilities on an undiscounted basis. The impact of interest rate swaps has been excluded. For the purpose of this table, debt is dened
as all classes of borrowings except for obligations under nance leases. Interest is calculated based on debt held at 31 December without taking
account of future issuance. Floating rate interest is estimated using the prevailing interest rate at the balance sheet date. Cash ows in foreign
currencies are translated using spot rates at 31 December. Contractual cash ows in respect of operating lease vacant space provisions are
excluded from the table below as they are included in the Commitments under non-cancellable operating leases table in Note 39 Commitments.
At 31 December 2012
Debt
m
Interest on
debt
m
Obligations
under nance
leases
m
Finance charge
on obligations
under nance
leases
m
Trade payables
and other
liabilities not
in net debt
m
Total
m
Due in less than one year (3,607) (690) (27) (3) (7,485) (11,812)
Between one and two years (920) (633) (19) (2) (129) (1,703)
Between two and three years (1,914) (610) (15) (2) (10) (2,551)
Between three and four years (558) (8) (1) (34) (601)
Between four and ve years (2,243) (549) (2) (60) (2,854)
Between ve and ten years (2,914) (1,967) (5) (1) (583) (5,470)
Greater than ten years (6,704) (5,200) (853) (12,757)
Gross contractual cash ows (18,302) (10,207) (76) (9) (9,154) (37,748)
Notes to the nancial statements
203 GSK Annual Report 2012
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41 Financial instruments and related disclosures continued
Contractual cash ows for non-derivative nancial liabilities and derivative instruments
At 31 December 2011
Debt
m
Interest on
debt
m
Obligations
under nance
leases
m
Finance charge
on obligations
under nance
leases
m
Trade payables
and other
liabilities not
in net debt
m
Total
m
Due in less than one year (2,665) (750) (34) (3) (6,730) (10,182)
Between one and two years (1,613) (636) (24) (3) (223) (2,499)
Between two and three years (968) (558) (15) (3) (59) (1,603)
Between three and four years (1,333) (515) (11) (1) (61) (1,921)
Between four and ve years (463) (3) (1) (5) (472)
Between ve and ten years (2,816) (1,784) (8) (22) (4,630)
Greater than ten years (5,422) (4,785) (5) (10,212)
Gross contractual cash ows (14,817) (9,491) (95) (11) (7,105) (31,519)
The increase in contractual cash ows for non-derivative nancial liabilities of 6.2 billion over the year results in part from the issuance in
2012 of 4.5 billion of new US and European Medium Term Notes and their future interest cash ows and the issuance of 1.7 billion of
short-term commercial paper, offset by the repayment of 2.5 billion of European Medium Term Notes which matured in 2012. Contingent
consideration liabilities arising on business acquisitions in 2012 add a further 1.6 billion of undiscounted expected future cash ows.
The following table below provides an analysis of the anticipated contractual cash ows for the Groups derivative instruments, excluding
embedded derivatives and equity options which are not material, using undiscounted cash ows. Cash ows in foreign currencies are
translated using spot rates at 31 December. The gross cash ows of foreign exchange contracts are presented for the purposes of
this table, though, in practice, the Group uses standard settlement arrangements to reduce its liquidity requirements on these instruments.
The amounts receivable and payable in less than one year have increased compared to 31 December 2011 due to higher levels of hedging
of inter-company loans and external debt. This is reected in the increased principal amounts shown in the table below.
2012 2011
Receivables
m
Payables
m
Receivables
m
Payables
m
Due in less than one year 17,822 (18,047) 17,141 (17,209)
Between one and two years 20 (2) 38 (4)
Between two and three years 19 (2)
Gross contractual cash ows 17,842 (18,049) 17,198 (17,215)
42 Employee share schemes
The Group operates share option schemes, whereby options are granted to employees to acquire shares or ADS in GlaxoSmithKline plc at
the grant price, savings-related share option schemes and share award schemes. In addition, GSK operates the Performance Share Plan,
whereby awards are granted to employees to acquire shares or ADS in GlaxoSmithKline plc at no cost, subject to the achievement by the
Group of specied performance targets and the Share Value Plan, whereby awards are granted to employees to acquire shares or ADS in
GlaxoSmithKline plc at no cost after a three year vesting period. The granting of restricted share awards has replaced the granting of options
to employees as the cost of the scheme more readily equates to the potential gain to be made by the employee.
Grants under share option schemes are normally exercisable between three and ten years from the date of grant. Grants of restricted shares
and share awards are normally exercisable at the end of the three year vesting/performance period. Grants under savings-related share
option schemes are normally exercisable after three years saving. Grants under share option schemes and awards under the Performance
Share Plan are normally granted to employees to acquire shares or ADS in GSK plc but in some circumstances will be settled in cash. Options
under the share option schemes were granted at the market price ruling at the date of grant. In accordance with UK practice, the majority
of options under the savings-related share option schemes are granted at a price 20% below the market price ruling at the date of grant.
Share options awarded to the Directors and, with effect from the 2004 grant, the CET are subject to performance criteria.
Option pricing
For the purposes of valuing options and awards to arrive at the share based payment charge, the Black-Scholes option pricing model has
been used. The assumptions used in the model for 2010, 2011 and 2012 are as follows:
2012 2011 2010
Risk-free interest rate 0.1% 0.5% 0.5% 1.9% 0.8% 1.9%
Dividend yield* 5.2% 5.8% 5.3%
Volatility 18% 23% 24% 28% 26% 29%
Expected lives of options granted under:
Share option schemes 4 years 5 years 5 years
Savings-related share option and share award schemes 3-4 years 3-4 years 3-4 years
Weighted average share price for grants in the year:
Shares 14.35 11.90 12.04
ADS $45.57 $39.10 $37.29
* 0% for those plans where dividends are reinvested.
204 GSK Annual Report 2012
42 Employee share schemes continued
Volatility is determined based on the three and ve year share price history where appropriate. The fair value of performance share plan
grants take into account market conditions. Expected lives of options were determined based on weighted average historic exercises
of options.
Options outstanding
Share option
schemes shares
Share option
schemes ADS
Savings-related
share option schemes
Number
000
Weighted
exercise
price
Weighted
fair
value
Number
000
Weighted
exercise
price
Weighted
fair
value
Number
000
Weighted
exercise
price
Weighted
fair
value
At 1 January 2010 124,019 14.32 73,419 $46.88 8,065 9.77
Options granted 11,257 12.04 1.19 7,384 $37.29 $3.95
Options exercised (3,625) 11.86 (916) $36.59 (1,310) 10.45
Options lapsed (21,551) 15.10 (7,776) $49.62 (800) 10.02
At 31 December 2010 110,100 14.02 72,111 $45.73 5,955 9.59
Options granted
Options exercised (14,618) 11.97 (3,883) $38.61 (4,068) 9.55
Options lapsed (35,112) 17.27 (23,338) $51.21 (317) 9.70
At 31 December 2011 60,370 12.62 44,890 $43.50 1,570 9.68
Options granted 4,210 11.59 1.76
Options exercised (12,473) 11.97 (9,698) $39.33 (1,230) 9.67
Options lapsed (5,168) 13.28 (4,593) $45.99 (89) 9.82
At 31 December 2012 42,729 12.72 30,599 $44.36 4,461 11.48
Range of exercise prices on
options outstanding at year end 10.76 14.93 $33.42 $58.00 9.51 11.59
Weighted average market
price on exercise 14.24 $45.26 13.93
Weighted average remaining
contractual life 4.4 years 4.2 years 3.2 years
Options outstanding
at 31 December 2012
Share option
schemes shares
Share option
schemes ADS
Savings-related
share option schemes
Year of grant
Number
000
Weighted
exercise
price
Latest
exercise
date
Number
000
Weighted
exercise
price
Latest
exercise
date
Number
000
Weighted
exercise
price
Latest
exercise
date
2003 7,774 12.67 14.12.13 5,119 $43.77 14.12.13
2004 2,537 11.22 03.12.14 3,150 $43.31 02.12.14
2005 94 13.22 01.11.15 265 $47.28 31.10.15
2006 5,236 14.69 27.11.16 3,943 $51.30 28.07.16
2007 6,074 14.82 25.07.17 4,331 $57.48 25.07.17
2008 4,432 11.49 27.07.18 4,074 $45.02 03.11.18
2009 7,089 11.76 22.07.19 3,554 $33.76 21.07.19 261 9.72 22.04.13
2010 9,493 12.03 21.07.20 6,163 $37.28 21.07.20
2011
2012 4,200 11.59 02.05.16
Total 42,729 12.72 30,599 $44.36 4,461 11.48
Options normally become exercisable from three years from the date of grant but may, under certain circumstances, vest earlier as set out
within the various scheme rules.
There has been no change in the effective exercise price of any outstanding options during the year.
Options exercisable
Share option
schemes - shares
Share option
schemes - ADS
Savings-related
share option schemes
Number
000
Weighted
exercise
price
Number
000
Weighted
exercise
price
Number
000
Weighted
exercise
price
At 31 December 2010 81,362 14.80 53,831 $48.26 175 10.50
At 31 December 2011 42,432 12.92 33,143 $46.33
At 31 December 2012 33,930 12.90 24,706 $46.10 261 9.72
Notes to the nancial statements
205 GSK Annual Report 2012
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42 Employee share schemes continued
GlaxoSmithKline share award schemes
Performance Share Plan
The Group operates a Performance Share Plan whereby awards are granted to Directors and senior executives at no cost. The percentage of
each award that vests is based upon the performance of the Group over a dened measurement period with dividends reinvested during
the same period. For awards granted from 2011 onwards to Directors and members of the CET, the performance conditions are based on four
equally weighted measures over a three year performance period. The rst measure is based on the achievement of adjusted free cash ow
targets. The second measure is based on relative TSR performance against a comparator group. The remaining two measures are based on
business-specic performance measures on business diversication and R&D new product performance. For details on the calculation of
these measures, see the Remuneration Report on pages 109 to 136.
For awards granted in 2009 and 2010 to Directors and members of the CET, 40% of the award is based on the achievement of adjusted
free cash ow targets over a three year measurement period. The remaining 60% of the award is based on relative TSR performance against
a comparator group as described on pages 115 and 117. Half of the TSR element of each award is measured over three years and half over
four years. Awards granted to Directors and members of the CET prior to 2009 are subject to a single performance condition which
compares GSKs TSR over the period with the TSR of companies in the comparator group over the same period.
For those awards made to all other eligible employees prior to 2009 the performance conditions consist of two parts, each of which applies
to 50% of the award. The rst part of the performance condition compares GSKs EPS growth to the increase in the UK Retail Prices Index
over the three year measurement period. The second part of the performance condition compares GSKs TSR over the period with the TSR
of companies in the comparator group over the same period. For awards granted from 2009 onwards, the rst part of the performance
condition continues to be based on EPS. The second part of the performance condition is based on strategic or operational business
measures, over a three year measurement period, specic to the employees business area.
Number of shares and ADS issuable
Shares
Number (000)
Weighted
fair value
ADS
Number (000)
Weighted
fair value
At 1 January 2010 7,606 3,732
Awards granted 3,812 9.13 1,624 $29.91
Awards exercised (440) (386)
Awards cancelled (2,085) (1,357)
At 31 December 2010 8,893 3,613
Awards granted 4,712 9.66 1,740 $31.65
Awards exercised (660) (315)
Awards cancelled (2,404) (1,112)
At 31 December 2011 10,541 3,926
Awards granted 4,797 11.43 1,645 $37.63
Awards exercised (1,388) (485)
Awards cancelled (1,794) (710)
At 31 December 2012 12,156 4,376
During the year 529,000 shares and 225,000 ADS were awarded through dividends reinvested. These are included above.
Share Value Plan
The Group operates a Share Value Plan whereby awards are granted, in the form of shares, to certain employees at no cost. The awards vest
after three years. There are no performance criteria attached.
Shares
Number (000)
Weighted
fair value
ADS
Number (000)
Weighted
fair value
At 1 January 2010 14,235 11,309
Awards granted 5,844 10.04 4,355 $31.30
Awards exercised (4,993) (3,939)
Awards cancelled (834) (747)
At 31 December 2010 14,252 10,978
Awards granted 10,923 9.78 7,481 $32.02
Awards exercised (4,677) (3,698)
Awards cancelled (1,040) (680)
At 31 December 2011 19,458 14,081
Awards granted 11,411 11.96 7,595 $38.51
Awards exercised (4,650) (3,410)
Awards cancelled (901) (478)
At 31 December 2012 25,318 17,788
206 GSK Annual Report 2012
42 Employee share schemes continued
Deferred Investment Award Plan
The Group operates a Deferred Investment Award Plan whereby awards are granted, in the form of notional shares, to certain senior
executives at no cost. Awards typically vest over a three-year period commencing on the fourth anniversary from date of grant with
50% of the award initially vesting and then 25% in each of the subsequent two years. There are no performance criteria attached.
Number of shares and ADS issuable
Shares
Number (000)
Weighted
fair value
ADS
Number (000)
Weighted
fair value
At 1 January 2010 549 209
Awards granted 290 12.20 96 $36.85
Awards exercised (72) (9)
Awards cancelled (23) (16)
At 31 December 2010 744 280
Awards granted 114 12.54 50 $42.98
Awards exercised (77) (19)
Awards cancelled (19) (16)
At 31 December 2011 762 295
Awards granted 106 13.97 4 $45.60
Awards exercised (220) (26)
Awards cancelled (85) (86)
At 31 December 2012 563 187
During the year 46,000 additional shares and 14,000 additional ADS were awarded through dividends reinvested.
Employee Share Ownership Plan Trusts
The Group sponsors Employee Share Ownership Plan (ESOP) Trusts to acquire and hold shares in GlaxoSmithKline plc to satisfy awards
made under employee incentive plans and options granted under employee share option schemes. The trustees of the ESOP Trusts
purchase shares on the open market with nance provided by the Group by way of loans or contributions. Costs of running the ESOP
Trusts are charged to the income statement. Shares held by the ESOP Trusts are deducted from other reserves and held at the value of
proceeds receivable from employees on exercise. If there is deemed to be a permanent diminution in value this is reected by a transfer to
retained earnings. The Trusts also acquire and hold shares to meet notional dividends re-invested on deferred awards under the SmithKline
Beecham Mid-Term Incentive Plan. The trustees have waived their rights to dividends on the shares held by the ESOP Trusts.
Shares held for share award schemes 2012 2011
Number of shares (000) 75,066 60,358
m m
Nominal value 19 15
Carrying value 390 296
Market value 1,002 887
Shares held for share option schemes 2012 2011
Number of shares (000) 139 30,565
m m
Nominal value 8
Carrying value 1 196
Market value 2 450
Notes to the nancial statements
207 GSK Annual Report 2012
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43 Principal Group companies
The following represent the principal subsidiary and associated undertakings of the GlaxoSmithKline Group at 31 December 2012. Details
are given of the principal country of operation, the location of the headquarters, the business sector and the business activities. The equity
share capital of these undertakings is wholly owned by the Group except where its percentage interest is shown otherwise. All companies
are incorporated in their principal country of operation except where stated.
Europe Location Subsidiary Sector Activity %
England Brentford GlaxoSmithKline Holdings Limited * Ph,CH h
Brentford GlaxoSmithKline Holdings (One) Limited * Ph,CH h
Brentford GlaxoSmithKline Services Unlimited * Ph,CH s
Brentford GlaxoSmithKline Mercury Limited * Ph h
Brentford GlaxoSmithKline Finance plc Ph,CH f
Brentford GlaxoSmithKline Capital plc Ph,CH f
Brentford SmithKline Beecham Limited Ph,CH d e h m p r
Brentford Wellcome Limited Ph,CH h
Brentford Glaxo Group Limited Ph h
Brentford Glaxo Operations UK Limited Ph p
Brentford GlaxoSmithKline Export Limited Ph e
Brentford GlaxoSmithKline Research & Development Limited Ph d r
Brentford GlaxoSmithKline UK Limited Ph m p
Brentford Glaxochem Pte Ltd (i) Ph h
Brentford Setrst Limited Ph,CH h
Brentford The Wellcome Foundation Limited Ph p
Cambridge Domantis Limited Ph d r
Brentford ViiV Healthcare Limited Ph h 77
Brentford ViiV Healthcare UK Limited Ph m s 77
Brentford ViiV Healthcare Trading Services UK Limited Ph e f 77
Austria Vienna GlaxoSmithKline Pharma GmbH Ph m
Belgium Wavre GlaxoSmithKline Pharmaceuticals S.A. Ph m
Rixensart GlaxoSmithKline Biologicals S.A. Ph d e m p r
Czech Republic Prague GlaxoSmithKline s.r.o. Ph,CH m
Denmark Brndby GlaxoSmithKline Consumer Healthcare A/S CH e m
Brndby GlaxoSmithKline Pharma A/S Ph m
Finland Espoo GlaxoSmithKline Oy Ph m
France Marly le Roi Groupe GlaxoSmithKline S.A.S. Ph h
Marly le Roi Laboratoire GlaxoSmithKline S.A.S. Ph m r d
Marly le Roi Glaxo Wellcome Production S.A.S. Ph p
Marly le Roi GlaxoSmithKline Sante Grand Public S.A.S. CH m
Marly le Roi ViiV Healthcare S.A.S. Ph m 77
St. Amand Les Eaux GlaxoSmithKline Biologicals S.A.S. Ph p
Germany Buehl GlaxoSmithKline Consumer Healthcare GmbH & Co. KG CH h m s
Munich GlaxoSmithKline GmbH & Co. KG Ph d h m s
Greece Athens GlaxoSmithKline A.E.B.E Ph,CH m
Hungary Budapest GlaxoSmithKline Medicine and Healthcare Products Limited Ph,CH e m
Italy Verona GlaxoSmithKline S.p.A. Ph d h m
Milan GlaxoSmithKline Consumer Healthcare S.p.A. CH m
Verona GlaxoSmithKline Manufacturing S.p.A. Ph p
Luxembourg Mamer GlaxoSmithKline International (Luxembourg) S.A.R.L Ph,CH f h
Netherlands Zeist GlaxoSmithKline B.V. Ph m
Zeist GlaxoSmithKline Consumer Healthcare B.V. CH m
Norway Oslo GlaxoSmithKline AS Ph m
Poland Poznan GlaxoSmithKline Pharmaceuticals S.A. Ph p
Poznan GSK Services Sp.z o.o. Ph m s
Warsaw GlaxoSmithKline Consumer Healthcare Sp.z o.o. CH m e
Portugal Alges GlaxoSmithKline-Produtos Farmaceuticos, Limitada Ph m
208 GSK Annual Report 2012
43 Principal Group companies continued
Europe Location Subsidiary Sector Activity %
Republic of Carrigaline SmithKline Beecham (Cork) Limited (ii) Ph d p r
Ireland Cork GlaxoSmithKline Trading Services Limited (ii) Ph e
Dublin GlaxoSmithKline Consumer Healthcare (Ireland) Limited (ii) CH m
Dublin GlaxoSmithKline (Ireland) Limited (ii) Ph m
Dungarvan Stafford Miller (Ireland) Limited (ii) CH p
Dungarvan GlaxoSmithKline Dungarvan Limited (ii) CH p
Sligo Stiefel Laboratories (Ireland) Limited (ii) Ph p
Romania Brasov Europharm Holding S.A. Ph,CH s
Bucharest GlaxoSmithKline (GSK) S.R.L. Ph m r s
Russian Moscow GlaxoSmithKline Trading ZAO Ph m
Federation Moscow GlaxoSmithKline Healthcare ZAO CH m
Spain Madrid GlaxoSmithKline S.A. Ph m
Madrid GlaxoSmithKline Consumer Healthcare S.A. CH m
Aranda de Duero Glaxo Wellcome, S.A. Ph p
Sweden Solna GlaxoSmithKline AB Ph m
Switzerland Muenchenbuchsee GlaxoSmithKline AG Ph m
USA
USA Research Triangle Park Stiefel Laboratories, Inc. Ph m p
Marietta Corixa Corporation Ph p r
Philadelphia GlaxoSmithKline LLC Ph,CH d e m p r s
Pittsburgh GlaxoSmithKline Consumer Healthcare, L.P. CH m p 88
Pittsburgh Block Drug Company, Inc. CH m
Wilmington GlaxoSmithKline Holdings (Americas) Inc. Ph,CH h
Wilmington GlaxoSmithKline Capital Inc. Ph,CH f
Cambridge Sirtris Pharmaceuticals Inc. Ph r
Research Triangle Park ViiV Healthcare Company Ph m 77
Rockville Human Genome Sciences, Inc. Ph d m p r
Americas
Bermuda Hamilton GlaxoSmithKline Insurance Ltd Ph,CH i
Canada Mississauga GlaxoSmithKline Inc. Ph m p r
Mississauga GlaxoSmithKline Consumer Healthcare Inc. CH m
Laval ID Biomedical Corporation of Quebec Ph d e p r
Mexico Mexico City GlaxoSmithKline Mexico S.A. de C.V. Ph,CH e m p s
Asia Pacic
Australia Boronia GlaxoSmithKline Australia Pty Ltd Ph,CH d e m p r
China Beijing GlaxoSmithKline (China) Investment Co. Ltd Ph,CH d h m r s
Hong Kong GlaxoSmithKline Limited Ph,CH m
Shanghai GlaxoSmithKline Biologicals (Shanghai) Ltd Ph m p
Tianjin Sino-American Tianjin Smith Kline & French Laboratories Ltd CH e m p 55
India Mumbai GlaxoSmithKline Pharmaceuticals Limited Ph m p 51
New Delhi GlaxoSmithKline Consumer Healthcare Limited (iii) CH d e m p r s 43
Malaysia Petaling Jaya GlaxoSmithKline Pharmaceutical Sdn Bhd Ph m
Selangor GlaxoSmithKline Consumer Healthcare Sdn Bhd CH m
New Zealand Auckland GlaxoSmithKline NZ Limited Ph,CH d m
Pakistan Karachi GlaxoSmithKline Pakistan Limited Ph,CH e m p r 83
Philippines Makati GlaxoSmithKline Philippines Inc Ph,CH d e m
Singapore Singapore Glaxo Wellcome Manufacturing Pte Ltd Ph d e p r s
Singapore GlaxoSmithKline Pte Ltd Ph,CH d e m s
South Korea Seoul GlaxoSmithKline Korea Limited Ph ,CH m
Thailand Bangkok GlaxoSmithKline (Thailand) Limited Ph,CH m
Notes to the nancial statements
209 GSK Annual Report 2012
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43 Principal Group companies continued
Japan Location Subsidiary Sector Activity %
Japan Tokyo GlaxoSmithKline K.K. Ph,CH d m p
Latin America
Argentina Buenos Aires GlaxoSmithKline Argentina S.A. Ph,CH e m p r
Buenos Aires Laboratorios Phoenix Sociedad Anonima Industrial
Comercial y Financiera Ph d e m p
Brazil Rio de Janeiro GlaxoSmithKline Brasil Limitada Ph,CH d e m p
Colombia Bogota GlaxoSmithKline Colombia S.A. Ph,CH m
Venezuela Caracas GlaxoSmithKline Venezuela, C.A. Ph,CH m
Middle East & Africa
Egypt Cairo GlaxoSmithKline S.A.E Ph,CH e m p 91
Nigeria Lagos GlaxoSmithKline Consumer Nigeria plc Ph,CH e m p 46
South Africa Johannesburg GlaxoSmithKline South Africa (Pty) Limited Ph,CH e m p
Turkey Istanbul GlaxoSmithKline Ilaclari Sanayi ve Ticaret A.S. Ph,CH m
Middle East & Africa Associate
South Africa Johannesburg Aspen Pharmacare Holdings Limited (iv) Ph,CH m p r 19
(i) Incorporated in Singapore.
(ii) Exempt from the provisions of section 7 of the Companies (Amendment) Act 1986 (Ireland).
(iii) Consolidated as a subsidiary undertaking in accordance with section 1162 (4)(a) of the Companies Act 2006 on the grounds
of dominant inuence. On 5 February 2013, the Groups shareholding increased to 72.5% following the completion of an open
offer undertaken by GlaxoSmithKline Pte. Ltd.
(iv) Equity accounted on the grounds of signicant inuence.
* Directly held wholly owned subsidiary of GlaxoSmithKline plc.
Key
Business sector: Ph Pharmaceuticals, CH Consumer Healthcare
Business activity: d development, e exporting, f nance, h holding company, i insurance, m marketing, p production, r research,
s service
Full details of all Group subsidiary and associated undertakings will be attached to the companys Annual Return to be led with the
Registrar of Companies. Each of GlaxoSmithKline Capital Inc. and GlaxoSmithKline Capital plc is a wholly-owned nance subsidiary of
the company, and the company has fully and unconditionally guaranteed the securities issued by each of GlaxoSmithKline Capital Inc.
and GlaxoSmithKline Capital plc.
210 GSK Annual Report 2012
44 Legal proceedings
The Group is involved in signicant legal and administrative
proceedings, principally product liability, intellectual property, tax,
anti-trust and governmental investigations, as well as related private
litigation. The Group makes provision for these proceedings on a
regular basis as summarised in Note 2, Accounting principles and
policies and Note 29, Other provisions. The Group may become
involved in signicant legal proceedings in respect of which it is not
possible to make a reliable estimate of the expected nancial effect,
if any, that could result from ultimate resolution of the proceedings.
In these cases, appropriate disclosures about such cases would be
included but no provision would be made.
With respect to each of the legal proceedings described below,
other than those for which a provision has been made, the Group
is unable to make a reliable estimate of the expected nancial effect
at this stage. The Group does not believe that information about
the amount sought by the plaintiffs, if that is known, would be
meaningful with respect to those legal proceedings. This is due
to a number of factors, including, but not limited to, the stage
of proceedings, the entitlement of parties to appeal a decision
and clarity as to theories of liability, damages and governing
law. Intellectual property claims include challenges to the validity
and enforceability of the Groups patents on various products or
processes as well as assertions of non-infringement of those patents.
A loss in any of these cases could result in loss of patent protection
for the product at issue. The consequences of any such loss could be
a signicant decrease in sales of that product and could materially
affect future results of operations for the Group.
Legal expenses incurred and provisions related to legal claims are
charged to selling, general and administration costs. Provisions are
made, after taking appropriate legal and other specialist advice,
where an outow of resources is considered probable and a
reliable estimate can be made of the likely outcome of the dispute.
In respect of product liability claims related to certain products,
there is sufcient history of claims made and settlements to enable
management to make a reliable estimate of the provision required
to cover unasserted claims. At 31 December 2012, the Groups
aggregate provision for legal and other disputes (not including
tax matters described in Note 14, Taxation) was 0.5 billion.
The ultimate liability for legal claims may vary from the amounts
provided and is dependent upon the outcome of litigation
proceedings, investigations and possible settlement negotiations.
The Groups position could change over time, and, therefore,
there can be no assurance that any losses that result from the
outcome of any legal proceedings will not exceed by a material
amount, the amount of the provisions reported in the Groups
nancial accounts. If this were to happen, it could have a material
adverse impact on the results of operation of the Group in the
reporting period in which the judgments are incurred or the
settlements entered into. The most signicant of these matters
are described below.
Intellectual property
Advair/Seretide
A number of companies have challenged the Groups patents
covering Advair/Seretide (salmeterol/uticasone propionate)
in certain European jurisdictions, including in the UK, Belgium,
France, Germany, Ireland and the Netherlands. On 23 February
2010, in actions brought by Mylan Pharmaceuticals, Inc., Hexal
Pharmaceuticals (Hexal), Neolab Ltd. and Ivax International,
the Federal Court in Munich revoked the Groups German
Seretide combination patent for lack of inventive step.
In the Netherlands, in an action brought by Sandoz Pharmaceuticals
(Sandoz) and Hexal, the District Court of The Hague on 26 January
2011 revoked the Supplementary Protection Certicate (SPC) which
extends protection for the product until September 2013.
A revocation action against the basic patent covering the Seretide
combination in Ireland was led in the High Court in Dublin on
behalf of Ivax in July 2008. The High Court handed down a decision
on 26 June 2009 nding the patent invalid for obviousness. The
Group led an appeal of this decision in October 2009. No trial
date has been set for the appeal.
There are currently no generic salmeterol/uticasone proportionate
xed combination products in the UK, Belgium, France, Germany,
Ireland or the Netherlands.
On 4 July 2011, the Group entered into a settlement agreement with
Sandoz pursuant to which the parties resolved all pending litigation
relating to the Groups combination patents for Seretide in Europe.
The settlement agreement provides that the Group will not pursue
legal action under its combination patents against Sandoz to block
its launch of a generic salmeterol/uticasone propionate product in
any European country. Sandoz has not received regulatory approval
for a salmeterol/uticasone proportionate product in any European
country as of this date.
Argatroban
In December 2007, Encysive Pharmaceuticals Inc. (Encysive),
Mitsubishi Kasei Corporation (Mitsubishi) and the Group led an
action in the United States District Court for the Southern District
of New York against Barr Laboratories, Inc. (Barr) for infringement
of Mitsubishis pharmaceutical composition patent covering
argatroban. Pursuant to a licence from Mitsubishi, Encysive
developed argatroban for the treatment of heparin-induced
thrombocytopenia and holds the New Drug Application approved
by the US Food and Drug Administration (FDA). Encysive licensed
the US marketing rights for argatroban to the Group. The Mitsubishi
patent expires in June 2014. Barr (now Teva Pharmaceuticals, Inc.
(Teva)) led an Abbreviated New Drug Application (ANDA) with
the FDA with a certication of invalidity, unenforceability and
non-infringement of the Mitsubishi patent. On 17 June 2010, the
Group and its partners prevailed against Teva, with the trial judge
ruling that Mitsubishis patent covering the formulation for injectable
argatroban was infringed and not invalid. On 2 August 2011, the
United States Court of Appeal for the Federal Circuit afrmed the
decision. As a result of the Courts decision, Teva is precluded from
launching its generic product until 20 June 2014.
On 30 March 2012, the Group led suit in the US District Court for
the District of New Jersey to enjoin Hikma Pharmaceuticals (Hikma)
from launching a generic argatroban product. Pzer (which had
acquired Encysive) and Mitsubishi were joined in the suit as the
Groups licensors. A trial was held on 10 July 2012. On 31 July
2012, the court found the patent valid, but not infringed. Hikma
announced that it was launching its product on 13 December 2012.
Arzerra/Benlysta/Cabilly patents
On 17 February 2010, the Group led a declaratory action in the
United States District Court for the Northern District of California for
a declaration that US Patent No. 6,331,415 (known as the Cabilly II
patent), which is owned jointly by Genentech, Inc. and the City of
Hope, is invalid, unenforceable, or not infringed by the Groups
product Arzerra (ofatumumab), which is approved by the FDA for
refractory chronic lymphocytic leukaemia (CLL). Genentech and the
City of Hope counterclaimed for infringement. The suit subsequently
was transferred to the United States District Court for the Middle
District of California.
Notes to the nancial statements
211 GSK Annual Report 2012
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44 Legal proceedings continued
On 12 April 2011, after obtaining a third Cabilly patent (the Cabilly
III patent), Genentech led suit against the Group in the United
States District Court for the Middle District of California alleging
that the Group and Lonza, the manufacturer of Arzerra, infringed
the Cabilly III patent by making and selling Arzerra. The Group is
contractually required to defend and indemnify Lonza for claims
related to Arzerra under the Cabilly patents. Genentech also sued
the Group and Human Genome Sciences, Inc. (HGS) claiming
infringement by the making and selling of Benlysta under the
Cabilly II and III patents. HGS, the Groups prior licensor for Benlysta,
was acquired by the Group in 2012.
The Group settled its litigation with Genentech over the Cabilly II
and Cabilly III patents relating to Arzerra in May 2012 and relating
to Benlysta in December 2012. The Group has obtained a
worldwide, royalty-bearing license with regard to both products.
On 23 March 2010, Genentech and Biogen Idec led suit against
the Group in the United States District Court for the Southern
District of California alleging that the Groups sale of Arzerra
induces and contributes to infringement of their patent that claims
the treatment of CLL with an anti-CD-20 monoclonal antibody.
The Group counterclaimed that the patent is invalid or not
infringed. On 18 October 2011, the District Court issued a ruling
that construed the claims in a manner such that Arzerra would
not infringe the patent. Genentech and Biogen Idec stipulated
to a judgment of no infringement, and led an appeal of the claim
construction issue to the United States Court of Appeals for the
Federal Circuit on 5 December 2011. The appeal was heard on
8 November 2012. A decision has not yet been rendered.
Avodart/Jalyn
On 29 November 2010, Banner Pharmacaps, Inc. (Banner) notied
the Group that it had led an ANDA to market a generic version of
Avodart (dutasteride). Banners notication contained a Paragraph
IV certication alleging that two patents expiring in 2013 and one
patent expiring in 2015 (the 467 patent) covering the compound
dutasteride were invalid or not infringed by Banners proposed
generic dutasteride product.
The Group subsequently received similar notices from Anchen
Pharmaceuticals (Anchen), Roxane Laboratories (Roxanne),
Watson Laboratories, Inc. (Watson), Mylan Pharmaceuticals, Inc.
(Mylan), and Apotex, Inc. (Apotex) each variously challenging
either the 467 patent or all 3 patents.
The Group led suit against Banner and Anchen in the United States
District Court for the District of Delaware on 13 January 2011 for
infringement of the Avodart patents. As a consequence, a stay
against FDA approval of Banners and Anchens products will be
in effect until the earlier of May 2013 or a decision adverse to the
Group. A separate complaint was led against Roxane and Watson
in the same court on 17 June 2011. On 8 September 2011, the
Group led suit against Mylan and Impax. On 31 August 2012,
the Group led suit against Apotex. Thirty-month stays against
FDA approval of these subsequent generic products will extend
past the Anchen/Banner stay of May 2013.
Except for the August, 2012 suit against Apotex, all of the cases for
Avodart and Jalyn (described below) have been consolidated with
the original case against Anchen and Banner. A trial was held on
28 January 2013. A decision has not yet been rendered.
In May, 2010, the Group settled an earlier patent challenge against
Avodart by Teva Pharmaceuticals, Inc. (Teva). Under the terms of
the settlement, Teva will be permitted to launch its generic
dutasteride product in the fourth quarter of 2015 or earlier under
certain circumstances. Tevas generic dutasteride product was
approved by the FDA on 21 December 2010.
On 29 December 2010, Anchen notied the Group that it had led
an ANDA for Jalyn with a Paragraph IV certication alleging that the
467 patent, which expires in 2015, was invalid, unenforceable or
not infringed. Jalyn, a combination of dutasteride and tamsulosin, is
covered by the same three patents that cover Avodart. Subsequently,
the Group received similar notices from Impax Laboratories, Inc. and
Watson challenging one or more of the patents covering Jalyn. The
Group sued all the ANDA applicants for Jalyn in the United States
District Court for the District of Delaware. These cases have been
consolidated for trial with the Avodart cases. On 17 January 2013,
the Group and Anchen settled the litigation on terms that would
allow Anchen to enter the market for Jalyn in the fourth quarter
of 2015 or earlier under certain circumstances. A trial was held on
28 January 2013 with the remaining defendants. A decision has
not yet been rendered.
Benlysta
In September, 2012, the UK Court of Appeal refused an appeal by
Eli Lilly and Company (Eli Lilly) asserting that Human Genome
Sciences, Inc. (HGS) UK Patent No. EP0939804 for Benlysta was
invalid on the grounds that it lacked the necessary information
required to work the invention described in the claims which covered
antibodies (the antibody claim insufciency argument). The UK
High Court and the UK Supreme Court previously had decided that
the patent was valid on all other grounds. The initial revocation was
brought by Eli Lilly in 2006 on the patent which claims the cytokine
BLyS and any antibody that binds to BLyS, such as Benlysta
(belimumab). Eli Lilly has petitioned the UK Supreme Court to hear
an appeal on its antibody claim insufciency argument. The decision
of the UK Supreme Court whether to grant the appeal is pending.
Eli Lilly has also requested a declaration that any Supplementary
Protection Certicate (SPC) led by HGS to extend its UK patent
based upon Eli Lillys anti-BLys mAb will be invalid. On 3 August
2012, a decision was issued by the UK Court of Appeal to refer
questions to the Court of Justice of the European Union (CJEU)
relating to whether the product is protected by a basic patent in
force. The judge ordered that the remaining issues, which are not
included in the referral, should go to a fact-nding trial at the UK
High Court. A trial date has been set for July 2013 at the UK High
Court. The CJEU reference is likely to be heard in early 2014.
On 2 November 2011, Eli Lilly brought an action in the UK Patents
Court for revocation of a European patent owned by Biogen Idec
covering the use of an antibody against B Lymphocyte Stimulatory
(also known as BLyS) for the treatment of autoimmune diseases.
The Group is exclusively licensed under this patent and is responsible
for defending the action. In March 2012, a similar action was
brought by Lilly against the equivalent Biogen Idec patent in Ireland.
The European patent was also challenged in parallel proceedings by
Merck Serono at the European Patent Ofce. On 20 October 2012,
the Biogen patent was revoked by the Technical Board of Appeal at
the EPO, which automatically rendered the various national patents
invalid and the cases moot. This proceeding is now closed because
the European patent was revoked in parallel proceedings by the
European Patent Ofce. The revocation action will have no direct
effect on the ability of the Group to market Benlysta, or on the
validity of the other patents which cover Benlysta.
212 GSK Annual Report 2012
44 Legal proceedings continued
Epzicom
On 30 November 2007, the Group received notice that Teva
Pharmaceuticals USA, Inc. (Teva) had led an ANDA with a
Paragraph IV certication for Epzicom (the combination of
lamivudine and abacavir). The certication challenged only the
patent covering the hemisulfate salt of abacavir, which expires in
2018. The Group did not sue Teva under this patent. On 27 June
2011, ViiV Healthcare received notice that Teva had amended its
ANDA for Epzicom to contain a Paragraph IV certication for two
additional patents listed in the Orange Book, alleging the patents
were invalid, unenforceable or not infringed. The patents challenged
in this new certication relate to a method of treating HIV using the
combination (expiring in 2016), and a certain crystal form of
lamivudine (expiring in 2016). On 5 August 2011, ViiV Healthcare
led suit against Teva under the combination patent in the United
States District Court for the District of Delaware. A stay is in place
against FDA approval of Tevas ANDA until the earlier of December
2013 or a decision adverse to ViiV Healthcare in the matter. The
District Court has consolidated discovery in the Epzicom case with
ViiV Healthcares patent infringement suit against Lupin Ltd relating
to Trizivir, as both cases involve the same patent covering the
combination of lamivudine and abacavir. Trial is scheduled for either
23 September 2013 or, if the judge decides to join the case with
the Trizivir matter, for trial on 24 June 2013.
Lexiva
On 23 April 2012, Ranbaxy Laboratories Limited (Ranbaxy) notied
ViiV Healthcare that it had led a Paragraph IV certication alleging
that a patent claiming a polymorphic form of fosamprenavir calcium,
the active ingredient in Lexiva, was invalid or not infringed. The patent
expires in 2020. ViiV Healthcare did not sue under this patent.
On 30 July 2012, Mylan Pharmaceuticals, Inc. (Mylan) notied
ViiV Healthcare that it had led an ANDA for Lexiva with a
Paragraph IV certication asserting that patents claiming (i) the
active ingredient (expiring in 2018) and (ii) a polymorphic form of
the active ingredient (expiring 2020), are invalid, unenforceable,
or not infringed. Mylan is the second generic to le an ANDA for
Lexiva, but the rst generic company to challenge the basic
compound patent on the active ingredient.
On 23 August 2012, ViiV Healthcare and its licensor, Vertex
Pharmaceuticals Incorporated, led a patent infringement suit
against Mylan on the patent claiming the active ingredient (but
not the patent claiming the polymorph) in the US District Court
for the District of Delaware. Mylan subsequently led a declaratory
judgment action against ViiV Healthcare alleging that the polymorph
patent is invalid and not infringed. ViiV Healthcare stipulated to
noninfringement of the patent claiming the polymorph. Trial is
scheduled for 17 May 2014 for infringement of the basic active
ingredient patent for Lexiva.
On 18 October 2012, Ranbaxy led a Petition for Inter Parties
Review in the US Patent & Trademark Ofce (USPTO) alleging that
the basic compound patent covering the active ingredient is invalid.
This is a collateral attack on the patent and will run in parallel to the
court challenge. ViiV Healthcare has responded to the USPTO and
has asserted that the petition should not be granted.
Lovaza
In March 2009, the Group received notice that Teva Pharmaceuticals
USA, Inc. (Teva), Par Pharmaceuticals, Inc. (Par), and Apotex Inc.
(Apotex) had led ANDAs with a Paragraph IV certication alleging
that two patents covering Lovaza (omega-3-acid ethyl esters) are
invalid, unenforceable, or not infringed. The patents expire in March
2013 and April 2017. The Group is the licensee under these patents
and has marketing rights in the USA and Puerto Rico. Pronova
BioPharma Norge AS (Pronova), the owner of the patents, sued
Teva, Par and Apotex in the United States District Court for the
District of Delaware. The Group was not a party to these suits.
On 30 March 2011, Pronova entered into an agreement with
Apotex to settle their patent litigation in the USA related to Lovaza.
The settlement grants Apotex a licence to enter the US market with
a generic version of Lovaza in the rst quarter of 2015. Other terms
of the settlement are condential.
A trial involving Teva and Par was held in March and April 2011.
On 28 May 2012, the United States District Court for the District of
Delaware ruled in Pronovas favour, nding Pronovas patent claims
are valid and would be infringed by Teva and Par. The court enjoined
FDA approval of Tevas and Pars products until 2017. Par and Teva
appealed to the Court of Appeals for the Federal Circuit on
27 June 2012. Brieng was completed on 15 January 2013,
and the parties await a hearing.
Pronova and the Group also have received Paragraph IV notices
from Endo Pharmaceuticals (Endo), Mylan Pharmaceuticals, Inc.
(Mylan), Sandoz, Inc. (Sandoz) and Strides Arcolab, Ltd. (Strides)
advising that they have submitted ANDAs to the FDA for a generic
form of Lovaza. Pronova has chosen not to assert its patents against
Endo, Mylan, Sandoz and Strides while awaiting the ruling in the
litigation against Teva and Par in the United States District Court
for the District of Delaware.
Trizivir
On 18 May 2011, ViiV Healthcare received notice that Lupin Ltd.
(Lupin) had led an ANDA containing a Paragraph IV certication
for Trizivir (the triple combination of lamivudine, AZT and abacavir)
alleging that three patents listed in the Orange Book for Trizivir are
either invalid, unenforceable or not infringed. These patents relate
to a method of treating HIV using the triple combination (expiring
in 2016), the hemisulfate salt of abacavir (expiring in 2018), and a
certain crystal form of lamivudine (expiring in 2016). On 29 June
2011, ViiV Healthcare led suit against Lupin under the patent
covering the triple combination in the United States District Court
for the District of Delaware. On 31 October 2011, the District Court
consolidated the case for discovery with ViiV Healthcares patent
infringement suit involving Teva Pharmaceuticals USA, Inc. and
Epzicom pending in the same court. A stay is in place against FDA
approval of Lupins ANDA until the earlier of November 2013 or a
decision adverse to ViiV Healthcare in the matter. Trial is scheduled
to begin on 24 June 2013.
Veramyst
On 9 November 2011, the Group received notice that Sandoz, Inc.
had led an ANDA with a Paragraph IV certication for Veramyst
(uticasone furoate) Nasal Spray, challenging the three patents listed
in the Orange Book for Veramyst as invalid, unenforceable, or not
infringed. All three patents expire in 2021. On 23 December 2011,
the Group led suit against Sandoz in the United States District
Court for the District of Delaware on all three patents. A stay against
FDA approval of Sandozs generic product will be in place until the
earlier of a court decision adverse to the Group or May 2014.
Trial is scheduled to begin on 2 December 2013.
Notes to the nancial statements
213 GSK Annual Report 2012
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44 Legal proceedings continued
Product liability
Pre-clinical and clinical trials are conducted during the development
of potential products to determine the safety and efcacy of
products for use by humans following approval by regulatory
bodies. Notwithstanding these efforts, when drugs and vaccines
are introduced into the marketplace, unanticipated safety issues
may become, or be believed by some to be, evident. The Group
is currently a defendant in a number of product liability lawsuits
related to the Groups Pharmaceutical and Consumer Healthcare
products. The most signicant of those matters are described below.
The Group has been able to make a reliable estimate of the expected
nancial effect of the matters discussed in this category and has
included a provision for the matters below in the provision for legal
and other disputes, as also noted in Note 29, Other provisions.
Avandia
The Group has been named in product liability lawsuits on behalf
of individuals asserting personal injury claims arising out of the use
of Avandia. The federal cases led against the Group are part of a
multi-district litigation proceeding pending in the United States
District Court for the Eastern District of Pennsylvania. Cases have
also been led in a number of state courts. Cases led in state court
in Philadelphia have been coordinated in the Mass Tort Program;
cases in state court in California have been coordinated in Los
Angeles. Additionally, there are a number of purported class actions
seeking economic damages on behalf of third party payers and
consumers asserting claims arising under various state and federal
laws, including the Racketeer Inuenced and Corrupt Organizations
Act (RICO), state unfair trade practices and/or consumer protection
laws. In addition, three subrogation actions initiated by United
Health Group, Inc. and Humana have been brought against the
Group. On 28 June 2012, the United States Court of Appeals for
the Third Circuit ruled that Medicare Advantage organisations such
as United Health Group and Humana Medical Plan have a federal
cause of action under the Medicare Act. On 5 December 2012,
the Group led a petition for certiorari with the US Supreme Court
seeking review of the Third Circuits decision. On 13 December
2012, Humana asked the District Court to certify its action as a class
action on behalf of Medicare Advantage organisations; the Group
has opposed this motion.
As of February 2013, the Group has reached agreements to settle
the substantial majority of federal and state cases pending in the
USA. Eleven purported class actions on Avandia are pending in
Canada. The Group has reached an agreement in principle to
resolve the single purported consumer class action in Israel.
Paxil and Paxil CR
The Group has received numerous lawsuits and claims alleging that
use of Paxil (paroxetine) has caused a variety of injuries. Most of
these lawsuits in recent years have alleged that the use of Paxil
during pregnancy resulted in the birth of a child with birth defects
or health issues. Other lawsuits and claims have alleged that patients
who took Paxil committed or attempted to commit suicide or acts
of violence or that patients suffered symptoms on discontinuing
treatment with Paxil.
The Group has reached agreements to settle the substantial
majority of the US claims relating to Paxil use during pregnancy
as of February 2013, but a number of claims related to use during
pregnancy are still pending, including several scheduled for trial in
the Philadelphia Mass Tort Program. Other matters have been
dismissed without payment.
In Canada, a nationwide class action was certied in a British
Columbia lawsuit alleging cardiovascular defects in children whose
mothers had taken Paxil during pregnancy. Another purported class
action in Canada making similar allegations is pending.
Final court approval of a class settlement was received in a certied
statewide class action seeking restitution for alleged violations of
the California Unfair Competition Law relating to symptoms on
discontinuing use of Paxil.
In the UK, in late 2010, public funding was withdrawn from the
hundreds of claimants who had received funding to pursue litigation
alleging that Paxil had caused them to suffer from withdrawal
reactions and dependency. The Legal Services Commissions decision
to withdraw funding remains the subject of an appeal to a Special
Cases Review Panel by some claimants. Other claimants have
discontinued their claims.
Poligrip
Beginning in 2005, a number of product liability lawsuits and claims
were led against the Group in both state and federal courts in the
USA, including purported class actions, alleging that the zinc in
Super Poligrip causes copper depletion and permanent neurologic
injury. The federal cases were consolidated in the Denture Cream
Adhesive multi-district litigation (MDL) in the United States District
Court for the Southern District of Florida which was established in
June 2009. Both the Group and Procter & Gamble are defendants in
this litigation. Included in the MDL were four purported class actions
asserting economic loss claims under state consumer protection laws
and claims for medical monitoring, and all of the putative class
actions have now been dismissed. With two current exceptions (one
state court case in Pennsylvania, and one state court case in small
claims court in Tennessee), all of the state court cases were
consolidated in the Philadelphia Mass Tort Program (MTP). As of
31 January 2013, the vast majority of individual cases previously
pending in both the MDL and MTP have been dismissed, with fewer
than ten active cases in the MDL and three active cases in the MTP
still pending against the Group. One individual lawsuit, as well as
ve purported class actions asserting consumer fraud claims were
also led and remain pending in Canada. There are a few unled
claims in the UK and elsewhere. The Group voluntarily withdrew
all zinc-containing formulations of Super Poligrip from the market
in early 2010.
214 GSK Annual Report 2012
44 Legal proceedings continued
Sales and marketing and regulation
The Group has been able to make a reliable estimate of the
expected nancial effect of the matters discussed in this category
and has included a provision for such matters in the provision for
legal and other disputes, except as noted below. Matters for which
the Group has made a provision are also noted in Note 29,
Other provisions.
Colorado investigation
In February 2004, the Group received a subpoena from the United
States Attorneys ofce in Colorado regarding the Groups sales and
promotional practices relating to nine of its largest selling products,
for the period from January 1997 to 2004. That investigation was
later taken over by the United States Attorneys Ofce for the
District of Massachusetts and expanded to the present with respect
to Advair. On 2 July 2012, the Group announced that it had reached
an agreement with the United States Government, multiple states
and the District of Columbia to conclude the Groups most
signicant ongoing United States federal government investigations,
specically, (i) the Colorado investigation into the Groups sales and
marketing practices begun in February 2004; (ii) the United States
Department of Justices investigation of possible inappropriate use
of the nominal price exception under the Medicaid Rebate Program;
and (iii) the Department of Justices investigation of the development
and marketing of Avandia, for a settlement payment of $3 billion.
The settlement resolved criminal and civil liabilities related to these
investigations. The payment was covered by the Groups existing
provisions and funded through existing cash resources.
Under the terms of the settlement, GSK pleaded guilty to
misdemeanour violations of the US Federal Food, Drug and
Cosmetic Act related to certain aspects of the marketing of Paxil
for paediatric use and of Wellbutrin for certain uses, and for failure
to include information about the initiation or status of certain
Avandia studies in periodic and annual reports submitted to the
FDA. Additionally, as part of the agreement, the Group entered into
a Corporate Integrity Agreement (CIA) with the Ofce of Inspector
General (OIG) of the US Department of Health and Human
Services. The CIA also covers a portion of GSKs manufacturing
operations related to the Groups settlement in 2010 of events
in the early 2000s at the Groups former manufacturing facility
in Cidra, Puerto Rico.
To date, 44 states and the District of Columbia have agreed to join
the federal settlement agreement and receive all or a portion of
their share of the settlement payment under the agreement.
Avandia-related matters
As noted above, on 2 July 2012, the Group reached agreement
with the US Government, a number of states, and the District of
Columbia to resolve the federal governments Avandia investigation.
The settlement resolved claims under federal/state Medicaid
programs. On 15 November 2012, the Group agreed to pay
$90 million to settle claims by 37 states and the District of
Columbia under state consumer protection laws regarding
the marketing and promotion of Avandia.
The Attorneys General Ofces of the states of Kentucky, Louisiana,
Maryland, Mississippi, New Mexico, South Carolina, Utah, and West
Virginia have each led suit against the Group asserting various
statutory and common law claims relating to the development and
marketing of Avandia and, with regard to the state of Louisiana,
other of the Groups products. The Group is also defending an
action by the County of Santa Clara, California, which was brought
under Californias consumer protection laws seeking civil penalties
and restitution.
Average wholesale price
The United States Department of Justice (DOJ), a number of states
and putative classes of private payers have for several years been
investigating and/or bringing civil litigation regarding allegations that
numerous pharmaceutical companies, including the Group, violated
federal or state fraud and abuse laws as a result of the way average
wholesale price (AWP) and wholesale acquisition cost (WAC)
have been determined and reported for various drugs reimbursed
under the Medicare, Medicaid and other insurance programmes.
In 2005, the Group reached a $149 million civil settlement with the
federal government to resolve allegations relating to the pricing and
marketing of Zofran and Kytril (the DOJ Settlement). The Group
also amended its then-existing Corporate Integrity Agreement as a
requirement of the settlement. In 2007, the Group received nal
approval of a $70 million nationwide private payer class action
settlement relating to the Groups price reporting in a multi-district
litigation proceeding in the United States District Court for the
District of Massachusetts.
A number of states through their respective Attorneys General,
and most of the counties in New York State, led civil lawsuits in
state and federal courts against the Group and many other drug
companies claiming damages and restitution due to AWP and/or
WAC price reporting for pharmaceutical products covered by the
states Medicaid programmes. The states seek recovery on behalf
of the states as payers and, in some cases, on behalf of in-state
patients as consumers.
The Group has separately resolved AWP claims by state Medicaid
programmes in almost all of the states through the DOJ Settlement
or separate negotiations. Litigation concerning AWP issues is
continuing with two states, Illinois and Wisconsin.
Cidra, Puerto Rico manufacturing site
On 26 October 2010, the Group nalised an agreement with the
US Attorneys Ofce for the District of Massachusetts and the US
Department of Justice with respect to the investigation of the
Groups former manufacturing facility in Cidra, Puerto Rico. Under
the agreement and as a comprehensive settlement of pending
claims against the Group arising from the investigation, the Group
paid a total of $750 million (500 million) to resolve all civil and
criminal allegations, and SB Pharmco Puerto Rico, Inc., a subsidiary
of the Group, pleaded guilty to certain charges. The CIA with the
US Government entered into in July 2012 covers a portion of the
manufacturing operations and compliance matters related to the
Groups 2010 settlement of this investigation.
HIV division enquiry
On 26 July 2010, the Group received a subpoena from the Eastern
District of New Yorks US Attorneys Ofce regarding sales and
marketing practices for three HIV products, as well as educational
programmes, grants or payments to physicians regarding any drug
used to treat HIV-infected adults. On 5 September 2012, the
Group was advised that the US Government had concluded its
investigation and declined to intervene in a qui tam lawsuit led in
the United States District Court for the Eastern District of New York.
On 14 February 2013, the Group moved to dismiss the lawsuit.
Notes to the nancial statements
215 GSK Annual Report 2012
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44 Legal proceedings continued
Nominal pricing
In May, 2004, the Group was advised by the US Department of
Justice that it was investigating certain of the Groups nominal
pricing and bundled sale arrangements under the nominal price
exception to the best price reporting requirements of the Medicaid
Drug Rebate Programme. The Group also received subpoenas
and requests for documents and information from Delaware
and Michigan related to the Groups nominal price arrangements.
These matters were resolved as part of the Groups settlement
agreement with the federal government announced on 2 July 2012.
The Group has not entered into any nominal price arrangements
since December 2003.
Lovaza
On 18 April 2011, the Group received a subpoena from the Ofce of
the Inspector General of the US Department of Health and Human
Services requesting production of documents relating to the Groups
marketing and promotion of Lovaza. The Group complied with the
request and the US Government declined to take any further action
in the investigation. The matter was nally resolved at approximately
the same time as the Groups settlement agreement with the federal
government announced on 2 July 2012.
Paxil/Seroxat
In 2004, the Group settled a lawsuit led by the New York State
Attorney Generals ofce alleging that the Group failed to disclose
data on the use of Paxil in children and adolescents. In 2007 and
2008, the Group made class settlements of lawsuits brought by
consumers and third-party payers, respectively, for economic
damages allegedly resulting from prescriptions of Paxil to children
and adolescents. The Group denied liability in these settlements.
In 2010, plaintiffs voluntarily dismissed a similar purported class
action led on behalf of governmental entities that paid for
prescriptions of Paxil to minors. There remains a similar purported
class action in Canada seeking economic damages on behalf of
individuals, third party payers and governmental entities that
purchased Paxil for use by patients under the age of 18.
SEC/DOJ FCPA enquiry
The US Securities and Exchange Commission (SEC) and the US
Department of Justice initiated an industry-wide enquiry in 2010
into whether pharmaceutical companies may have engaged in
violations of the Foreign Corrupt Practices Act relating to the sale
of pharmaceuticals, including in Argentina, Brazil, Canada, China,
Germany, Italy, Poland, Russia and Saudi Arabia. The Group is one
of the companies that have been asked to respond to this enquiry
and is cooperating with the SEC and DOJ. No provision has been
made for this matter.
Anti-trust/competition
The Group has been able to make a reliable estimate of the
expected nancial effect of the matters discussed in this category
and has included a provision for such matters in the provision for
legal and other disputes, except as noted below. Matters for which
the Group has made a provision are also noted in Note 29,
Other provisions.
EU sector enquiry
On 17 January 2011, the European Commission requested
information from the Group and a number of other pharmaceutical
companies relating to patent settlement agreements affecting
European Union and European Economic Area markets. The request
for information was the second monitoring exercise by the
Commission of patent settlement agreements in the pharmaceuticals
sector. The results of the 2011 exercise were published on 6 July
2011. On 23 January 2012, the Commission repeated this exercise
(its third patent settlement monitoring exercise). The Group
responded on 3 February 2012. On 22 January 2013, the
Commission again repeated this exercise and requested information
from the Group. The Group responded on 5 February 2013.
No provision has been made for this matter.
EU enquiry: Tyverb and Combivir
On 17 December 2012, the Group and ViiV Healthcare received a
request for information from the European Commission regarding
the application of direct to pharmacy distribution of the Groups
product, Tyverb, and ViiV Healthcares product, Combivir. The
Group and ViiV Healthcare have provided the requested
information. No provision has been made for this matter.
UK Ofce of Fair Trading Competition Act investigation
On 12 August 2011, the UK Ofce of Fair Trading (OFT) launched
a formal investigation of the Group and other pharmaceutical
companies for potential infringement of the Competition Act. The
investigation focuses on whether: (i) litigation settlements between
the Group and potential suppliers of generic paroxetine
formulations, entered between 2001 and 2003, had as their object
or effect the prevention, restriction, or distortion of competition in
the UK, and (ii) the Group has infringed its dominant position by
making payments to potential suppliers of generic paroxetine with
the aim of restricting the development of full generic competition
in the UK. The Group terminated the agreements at issue in 2004.
The OFT investigation covers issues that were also investigated by
the European Commission in 2005 2006 in respect of paroxetine
in the European Union, and also in 2008, as part of the European
Commission Pharmaceutical Sector enquiry. On 2 March 2012, the
Commission announced that it had formally concluded its enquiry
with no further action. In March 2012, the OFT decided to focus its
investigation on potential anti-competitive aspects of the paroxetine
settlement agreements and dropped the investigation in relation to
potential abuse of dominance. However, in February 2013, the OFT
decided to re-open the dominance aspects of the matter.
The Group is cooperating with the OFT In the investigation. The
Group has provided information and documentation in response to
the OFTs requests and has held meetings with the OFT in 2011 and
September 2012 to discuss the matter. In November 2012, the OFT
advised that it will proceed to a Statement of Objection (SO),
to be issued in April 2013, subject to OFTs nal internal review.
No provision has been made for this matter.
216 GSK Annual Report 2012
44 Legal proceedings continued
Wellbutrin SR
In December 2004, January 2005 and February 2005, lawsuits,
several of which purported to be class actions, were led in the
United States District Court for the Eastern District of Pennsylvania
against the Group on behalf of direct and indirect purchasers of
Wellbutrin SR. The complaints alleged violations of US anti-trust laws
through sham litigation and fraud on the patent ofce by the Group
in obtaining and enforcing patents covering Wellbutrin SR. The
complaints followed the introduction of generic competition to
Wellbutrin SR in April 2004, after district and appellate court rulings
that a generic manufacturer did not infringe the Groups patents.
On 21 November 2011, the District Court approved the Groups
settlement with the certied class of direct purchasers and the
settlement has been concluded. On 11 January 2012, the Group
reached agreement in principle to settle the claims of all the indirect
purchasers for $21.5 million. Hearing on nal approval of the
settlement by the District Court is scheduled for 27 June 2013.
Wellbutrin XL
Actions have been led against Biovail Corporation (Biovail) and
the Group in the United States District Court for the Eastern District
of Pennsylvania by purported classes of direct and indirect
purchasers who allege unlawful monopolisation and other anti-trust
violations related to the enforcement of Biovails Wellbutrin XL
patents and the ling, by Biovail, of citizen petitions. Both direct
and indirect purchaser classes have been certied. The District
Court granted the Groups motion for partial summary judgement
primarily on immunity grounds. On 7 November 2012, the District
Court also granted the Groups motion for a stay of all proceedings
(except for a limited amount of ongoing discovery) in light of the US
Supreme Courts grant of a petition in the FTC v. Watson reverse
payment patent litigation case.
Flonase
Purported direct and indirect purchaser class actions were led
in the United States District Court for the Eastern District of
Pennsylvania alleging the Group illegally maintained monopoly
power in the market for Flonase and charged plaintiffs
supracompetitive prices. Additionally, a suit was led by Roxane
Laboratories, Inc., a generic competitor, seeking lost prots from
the Groups alleged actions unlawfully delaying Roxanes entry into
the market. The predicate for all of these allegations was the ling
by the Group of allegedly sham citizen petitions and subsequent
litigation. On 20 December 2012, the Group reached agreement
to settle the litigation with the direct purchasers for a payment of
$150 million and an agreement to settle with the indirect purchaser
class and other indirect purchasers for a payment of $45 million.
Hearings to approve the class action settlements are scheduled
for 3 June 2013.
Lamictal
Purported direct and indirect purchaser class actions were led
in the United States District Court for the District of New Jersey
alleging that the Group and Teva Pharmaceuticals unlawfully
conspired to delay generic competition for Lamictal, resulting in
their being overcharged. A separate count accuses the Group of
monopolising the market. The motions of the Group and Teva to
dismiss the amended complaint of the purported direct purchaser
class have been granted. The purported direct purchaser class has
appealed the decision. The Group also plans to move to have the
purported indirect purchaser class dismissed.
Commercial and corporate
Where the Group is able to make a reliable estimate of the expected
nancial effect, if any, for the matters discussed in this category, it
has included a provision in respect of such matters in the provision
for legal and other disputes as set out in Note 29, Other provisions.
No provision has been made for any of the following matters except
as indicated below.
Securities/ERISA class actions
Stiefel
On 6 July 2009, a class action suit brought on behalf of current and
former employees of Stiefel Laboratories, Inc. (Stiefel) was led in
the United States District Court for the Southern District of Florida.
The complaint alleges that Stiefel and its ofcers and directors
violated US Employee Retirement Income Security Act (ERISA)
and federal and state securities laws by inducing Stiefel employees
to sell their shares in the employee stock plan back to Stiefel at a
greatly undervalued price and without disclosing to employees
that Stiefel was about to be sold to the Group. On 21 July 2011,
the District Court denied plaintiffs motion for class certication.
In October 2011, the District Court granted the defendants
motions for summary judgment, dismissing all but one of the
remaining plaintiffs in the litigation. Trial of claims of that one
plaintiff, Timothy Finnerty, took place in May 2012 and resulted
in a $1.5 million jury verdict in favour of Mr. Finnerty on his
securities claims. The Group has appealed the verdict.
Separately, the Group has settled Mr. Finnertys ERISA claims.
Five separate lawsuits against Stiefel and Charles Stiefel, the former
CEO of Stiefel, also have been led by individual, former Stiefel
employees. Each case asserts claims similar to those contained in
the class action. These lawsuits are pending in federal court in
Florida and Georgia.
On 12 December 2011, the US Securities and Exchange Commission
(SEC) led a formal complaint against Stiefel and Charles Stiefel
in the United States District Court for the District of Florida alleging
that Stiefel and its principals violated federal securities laws by
inducing Stiefel employees to sell their shares in the employee
stock plan back to the company at a greatly undervalued price
and without disclosing to employees that the company was about
to be sold. A trial date has not yet been scheduled. The Group has
made a provision for the Stiefel litigation.
Avandia ERISA litigation
A putative class action suit was led against the Group on
27 August 2010 in the United States District Court for the Southern
District of New York. The complaint alleged that the Group and its
ofcers, directors and certain employees made misleading public
statements about Avandia, and that when these alleged misleading
statements were exposed, the value of the Groups stock dropped.
Plaintiff brought suit on behalf of himself and all other participants
in the Groups retirement plans, claiming that the Group and the
individual defendants breached their duciary duties to plan
participants under the Employee Retirement Income Security
Act (ERISA).
Plaintiffs subsequently amended their complaint to add allegations
concerning Wellbutrin SR and Paxil and to include additional Group
defendants and individual members of the Groups benets
committees. On 5 May 2011, the District Court dismissed the
plaintiffs complaint with prejudice. On 8 June 2011, plaintiffs led
an appeal with the United States Court of Appeals for the Second
Circuit. On 4 September 2012, the Court of Appeals ruled in the
Groups favour, afrming the lower courts dismissal of the
complaint. The matter has now been concluded.
Notes to the nancial statements
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44 Legal proceedings continued
Benlysta securities litigation
On 10 November 2011, a class action suit was led in the United
States District Court for the District of Maryland alleging that
Human Genome Sciences, Inc. (HGS), certain of its individual
ofcers and directors and the Group made statements about the
clinical trials for Benlysta that failed to disclose suicides among trial
participants, and that, by withholding this information, the
defendants caused HGS stock to be articially inated, harming
anyone who purchased HGS stock at the inated price. In November
2011, a second action was led in the same federal court. The two
cases have been combined. In May, 2012, the Group and HGS led
motions to dismiss the suits. Oral argument was heard in September
2012. The Courts ruling is awaited.
Wage and hour claims
In December 2006, two purported class actions were led against
the Group on behalf of all of the Groups US pharmaceutical sales
representatives. These actions, which were led in or transferred to
the United States District Court for the Central District of California,
initially alleged that those representatives are not exempt
employees under California law and/or the US Fair Labor Standards
Act (FLSA) and, consequently, are entitled to overtime pay, among
other things. Plaintiffs subsequently amended their complaints
to assert a class action, limited solely to pharmaceutical sales
representatives working in California, and only asserting claims
under Californias wage and hour laws.
The Group moved for summary judgment dismissing the claims
of the putative class representatives on the ground that they were
exempt employees. Because of appeals pending in the United States
Court of Appeals for the Ninth Circuit in cases involving other
manufacturers with virtually the same factual and legal arguments,
the District Court deferred ruling on the summary judgment motion
and stayed any further activity in the case until the appellate court
ruled in at least one of the other companies pending cases. The
Ninth Circuit deferred ruling on the other companies pending cases
until the California Supreme Court issued an opinion in a case
addressing the application of the administrative exemption under
California state law. In January 2012, the California Supreme Court
issued a ruling in the case, requesting brieng about the effect of
the ruling of the California Supreme Court on the other companies
pending pharmaceutical sales representative cases.
A third case, led in the United States District Court for the District
of Arizona in August 2008, sought to establish a nationwide
collective action on behalf of all of the Groups US pharmaceutical
sales representatives on the ground that those representatives were
not exempt employees under the FLSA.
In November 2009, the District Court granted the Groups motion
for summary judgment and dismissed the lawsuit on the ground
that the sales representatives were exempt employees under the
outside sales exemption to the FLSA. Plaintiffs appealed the decision
to the United States Court of Appeals for the Ninth Circuit. On
14 February 2011, the Ninth Circuit issued an opinion in favour of
the Group afrming the judgment of the United States District
Court for the District of Arizona and nding that the Groups
pharmaceutical sales representatives are exempt employees under
the outside sales exemption to the FLSA and, therefore, not entitled
to overtime pay. Plaintiffs led a petition seeking review of the
decision by the United States Supreme Court. On 28 June 2012,
the United States Supreme Court afrmed the decision of the
Ninth Circuit.
In November 2010, a purported class action was led against the
Group in the United States District Court for the Northern District
of New York on behalf of the Groups pharmaceutical sales
representatives working in New York during the previous six years.
The plaintiff makes similar allegations as those set forth in the other
FLSA cases as well as claims under the New York wage and hour
laws which closely follow the FLSA. In January 2011, a plaintiff led
a similar purported class action in Florida state court alleging that
the Groups pharmaceutical sales representatives are entitled to
overtime under the FLSA. The court issued a stay of most activities
in the New York case, and the parties agreed to ask the court to stay
all activities in the Florida case until the United States Supreme Court
has decided the applicability of the outside sales exemption to
pharmaceutical sales representatives. Now that the United States
Supreme Court has found in favour of the Group and determined
that pharmaceutical sales representatives are exempt from overtime
under the FLSA, all of the wage and hour lawsuits described above
(Arizona, California, Florida, and New York) have been dismissed
without any payment to the plaintiffs.
Environmental matters
The Group has been notied of its potential responsibility relating
to past operations and its past waste disposal practices at certain
sites, primarily in the USA. Some of these matters are the subject
of litigation, including proceedings initiated by the US federal or
state governments for waste disposal, site remediation costs and
tort actions brought by private parties.
The Group has been advised that it may be a responsible party
at approximately 23 sites, of which 12 appear on the National
Priority List created by the Comprehensive Environmental Response
Compensation and Liability Act (Superfund). These proceedings
seek to require the operators of hazardous waste facilities,
transporters of waste to the sites and generators of hazardous
waste disposed of at the sites to clean up the sites or to reimburse
the US Government for cleanup costs. In most instances, the
Group is involved as an alleged generator of hazardous waste.
Although Superfund provides that the defendants are jointly and
severally liable for cleanup costs, these proceedings are frequently
resolved on the basis of the nature and quantity of waste disposed
of by the generator at the site. The Groups proportionate liability
for cleanup costs has been substantially determined for about
19 of the sites referred to above.
The Groups potential liability varies greatly from site to site.
While the cost of investigation, study and remediation at such
sites could, over time, be substantial, the Group routinely accrues
amounts related to its share of the liability for such matters.
218 GSK Annual Report 2012
Directors statement of responsibilities
in relation to the companys nancial
statements
The Directors are responsible for preparing the parent company,
GlaxoSmithKline plc, nancial statements and the Remuneration
Report in accordance with applicable law and regulations.
Company law requires the Directors to prepare nancial statements
for each nancial year. Under that law the Directors have elected
to prepare the parent company nancial statements in accordance
with United Kingdom Accounting Standards and applicable law
(United Kingdom Generally Accepted Accounting Practice). Under
company law the Directors must not approve the parent company
nancial statements unless they are satised that they give a true
and fair view of the state of affairs of the company for that period.
In preparing those nancial statements, the Directors are
required to:
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are reasonable
and prudent;
state with regard to the parent company nancial statements
that applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in
the parent company nancial statements.
The Directors are responsible for keeping adequate accounting records
that are sufcient to show and explain the companys transactions and
disclose with reasonable accuracy at any time the nancial position of
the company and to enable them to ensure that the parent company
nancial statements and Remuneration Report comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The parent company nancial statements for the year ended
31 December 2012, comprising the balance sheet for the year ended
31 December 2012 and supporting notes, are set out on pages 220
to 223 of this report.
The responsibilities of the auditors in relation to the parent company
nancial statements are set out in the Independent Auditors report
on page 219.
The nancial statements for the year ended 31 December 2012 are
included in the Annual Report, which is published in hard-copy printed
form and made available on our website. The Directors are responsible
for the maintenance and integrity of the Annual Report on our website
in accordance with UK legislation governing the preparation and
dissemination of nancial statements. Access to the website is available
from outside the UK, where comparable legislation may be different.
The Strategic review and Financial review and risk sections of the
Annual Report include a fair review of the development and
performance of the business and the position of the company and
the Group taken as a whole, together with a description of the
principal risks and uncertainties that it faces.
Disclosure of information to auditors
The Directors in ofce at the date of this Report have each
conrmed that:
so far as he or she is aware, there is no relevant audit
information of which the companys auditors are unaware; and
he or she has taken all the steps that he or she ought to have
taken as a Director to make himself or herself aware of any
relevant audit information and to establish that the companys
auditors are aware of that information.
This conrmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies Act 2006.
Going concern basis
After making enquiries, the Directors have a reasonable expectation
that the company has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to
adopt the going concern basis in preparing the nancial statements.
The UK Corporate Governance Code
The Board considers that GlaxoSmithKline plc applies the principles
and provisions of the UK Corporate Governance Code maintained
by the Financial Reporting Council, as described in the Corporate
Governance section on pages 94 to 108, and has complied with its
provisions. As required by the Financial Services Authoritys Listing
Rules, the auditors have considered the Directors statement of
compliance in relation to those points of the UK Corporate
Governance Code which are specied for their review.
Sir Christopher Gent
Chairman
5 March 2013
Financial statements of GlaxoSmithKline plc prepared under UK GAAP
219 GSK Annual Report 2012
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Independent Auditors report
to the members of GlaxoSmithKline plc
We have audited the parent company nancial statements of
GlaxoSmithKline plc for the year ended 31 December 2012 which
comprise the Company balance sheet UK GAAP and the related
notes A-H. The nancial reporting framework that has been
applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
Respective responsibilities of directors and auditors
As explained more fully in the Directors statement of responsibilities
set out on page 218, the directors are responsible for the
preparation of the parent company nancial statements and for
being satised that they give a true and fair view. Our responsibility
is to audit and express an opinion on the parent company nancial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Boards Ethical Standards
for Auditors.
This report, including the opinions, has been prepared for and only
for the companys members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose.
We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Scope of the audit of the nancial statements
An audit involves obtaining evidence about the amounts and
disclosures in the nancial statements sufcient to give reasonable
assurance that the nancial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate
to the parent companys circumstances and have been consistently
applied and adequately disclosed; the reasonableness of signicant
accounting estimates made by the directors; and the overall
presentation of the nancial statements. In addition, we read all
the nancial and non-nancial information in the Annual Report
to identify material inconsistencies with the audited nancial
statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications
for our report.
Opinion on nancial statements
In our opinion the parent company nancial statements:
give a true and fair view of the state of the companys affairs
as at 31 December 2012;
have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of
the Companies Act 2006.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
the part of the Directors Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act
2006; and
the information given in the Directors Report for the nancial year
for which the parent company nancial statements are prepared is
consistent with the parent company nancial statements.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following matters where
the Companies Act 2006 requires us to report to you if, in our
opinion:
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company nancial statements and the part of the
Directors Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of directors remuneration specied by law
are not made; or
we have not received all the information and explanations we
require for our audit.
Other matters
We have reported separately on the Group nancial statements of
GlaxoSmithKline plc for the year ended 31 December 2012.
The company has passed a resolution in accordance with section
506 of the Companies Act 2006 that the senior statutory auditors
name should not be stated.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2013
Independent Auditors report
220 GSK Annual Report 2012
Financial statements of GlaxoSmithKline plc prepared under UK GAAP
Notes
2012
m
2011
m
Fixed assets investments D 19,689 19,680
Debtors E 7,872 3,870
Cash at bank 10 19
Current assets 7,882 3,889
Creditors: amounts due within one year F (406) (481)
Net current assets/(liabilities) 7,476 3,408
Net assets 27,165 23,088
Capital and reserves
Called up share capital G 1,349 1,387
Share premium account G 2,022 1,673
Other reserves H 1,393 1,339
Profit and loss account H 22,401 18,689
Equity shareholders funds 27,165 23,088
Approved by the Board on 5 March 2013
Sir Christopher Gent
Chairman
GlaxoSmithKline plc
Registered number: 3888792
Company balance sheet UK GAAP at 31 December 2012
221 GSK Annual Report 2012
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Notes to the company balance sheet
UK GAAP
A) Presentation of the nancial statements
Description of business
GlaxoSmithKline plc is the parent company of GSK, a major global
healthcare group which is engaged in the creation and discovery,
development, manufacture and marketing of pharmaceutical
products, including vaccines, over-the-counter (OTC) medicines
and health-related consumer products.
Preparation of nancial statements
The nancial statements, which are prepared on a going concern
basis, are drawn up in accordance with UK Generally Accepted
Accounting Practice (UK GAAP) and with UK accounting
presentation as at 31 December 2012, with comparative gures
as at 31 December 2011. Where appropriate, comparative
gures are reclassied to ensure a consistent presentation with
current year information.
As permitted by section 408 of the Companies Act 2006, the
prot and loss account of the company is not presented in this
Annual Report.
Accounting convention and standards
The balance sheet has been prepared using the historical cost
convention and complies with applicable UK accounting standards.
Accounting principles and policies
The preparation of the balance sheet in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the balance sheet. Actual amounts could differ from
those estimates.
The balance sheet has been prepared in accordance with the
companys accounting policies approved by the Board and described
in Note B.
B) Accounting policies
Foreign currency transactions
Foreign currency transactions are recorded at the exchange rate
ruling on the date of transaction, or at the forward rate if hedged by
a forward exchange contract. Foreign currency assets and liabilities
are translated at rates of exchange ruling at the balance sheet date,
or at the forward rate.
Dividends paid and received
Dividends paid and received are included in the accounts in the
period in which the related dividends are actually paid or received.
Expenditure
Expenditure is recognised in respect of goods and services received
when supplied in accordance with contractual terms. Provision is
made when an obligation exists for a future liability in respect of a
past event and where the amount of the obligation can be reliably
estimated.
Investments in subsidiary companies
Investments in subsidiary companies are held at cost less any
provision for impairment.
Impairment of investments
The carrying value of investments are reviewed for impairment when
there is an indication that the investment might be impaired. Any
provision resulting from an impairment review is charged to the
income statement in the year concerned.
Share based payments
The issuance by the company to its subsidiaries of a grant over the
companys options, represents additional capital contributions by the
company in its subsidiaries. An additional investment in subsidiaries
results in a corresponding increase in shareholders equity. The
additional capital contribution is based on the fair value of the grant
issued, allocated over the underlying grants vesting period.
Taxation
Current tax is provided at the amounts expected to be paid applying
tax rates that have been enacted or substantially enacted by the
balance sheet date.
The company accounts for taxation which is deferred or accelerated
by reason of timing differences which have originated but not
reversed by the balance sheet date. Deferred tax assets are only
recognised to the extent that they are considered recoverable
against future taxable prots.
Deferred tax is measured at the average tax rates that are
expected to apply in the periods in which the timing differences
are expected to reverse. Deferred tax liabilities and assets are
not discounted.
Financial guarantees
Liabilities relating to guarantees issued by the company on behalf
of its subsidiaries are initially recognised at fair value and amortised
over the life of the guarantee.
C) Operating prot
A fee of 10,132 (2011 11,474) relating to the audit of the
company has been charged in operating prot.
222 GSK Annual Report 2012
Notes to the company balance sheet UK GAAP continued
D) Fixed assets investments
2012
m
2011
m
Shares in GlaxoSmithKline Services Unlimited 613 613
Shares in GlaxoSmithKline Holdings (One) Limited 18 18
Shares in GlaxoSmithKline Holdings Limited 17,888 17,888
Shares in GlaxoSmithKline Mercury Limited 33 33
18,552 18,552
Capital contribution relating to share based payments 1,137 1,128
19,689 19,680
E) Debtors
2012
m
2011
m
Amounts due within one year:
UK Corporation tax recoverable 206 227
Amounts owed by Group undertakings 7,319 3,236
7,525 3,463
Amounts due after more than one year:
Amounts owed by Group undertakings 347 407
7,872 3,870
F) Creditors
2012
m
2011
m
Amounts due within one year:
Bank overdraft 10 9
Amounts owed to Group undertakings 4
Other creditors 396 468
406 481
The company has guaranteed debt issued by one of its subsidiary companies for which it receives an annual fee from the subsidiary.
In aggregate, the company has outstanding guarantees over $10 billion of debt instruments.
The amount due from the subsidiary companies in relation to these guarantee fees will be recovered over the life of the bonds and
are disclosed within debtors (see Note E).
Financial statements of GlaxoSmithKline plc prepared under UK GAAP
223 GSK Annual Report 2012
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Notes to the company balance sheet UK GAAP continued
G) Share capital and share premium account
Ordinary Shares of 25p each
Share
premium
Number m m
Share capital authorised
At 31 December 2011 10,000,000,000 2,500
At 31 December 2012 10,000,000,000 2,500
Share capital issued and fully paid
At 1 January 2011 5,670,458,177 1,418 1,428
Issued under employee share schemes 21,949,144 5 245
Share capital cancelled (142,204,223) (36)
At 31 December 2011 5,550,203,098 1,387 1,673
Issued under employee share schemes 28,045,821 7 349
Share capital cancelled (180,652,950) (45)
At 31 December 2012 5,397,595,969 1,349 2,022
31 December
2012
000
31 December
2011
000
Number of shares issuable under outstanding options 114,985 126,810
Number of unissued shares not under option 4,487,419 4,322,987
At 31 December 2012, of the issued share capital, 75,205,594 shares were held in the ESOP Trusts, 494,951,327 shares were held as
Treasury shares and 4,827,439,048 shares were in free issue. All issued shares are fully paid. The nominal, carrying and market values
of the shares held in the ESOP Trusts are disclosed in Note 42, Employee share schemes.
A total of 174 million shares were purchased by the company during 2012 at a cost of 2,493 million and 181 million shares were cancelled.
The company expects to make further share repurchases of 12 billion during 2013. The exact amount and timing of further purchases and
whether the shares will be held as Treasury shares or be cancelled will be determined by the company and is dependent on market conditions
and other factors. No shares were purchased in the period 1 January 2013 to 28 February 2013.
H) Reserves
Other
reserves
m
Prot and
loss account
m
Total
m
At 1 January 2011 1,282 10,031 11,313
Profit attributable to shareholders 14,255 14,255
Dividends to shareholders (3,406) (3,406)
Shares purchased and cancelled or held as Treasury share 36 (2,191) (2,155)
Capital contribution relating to share based payments 21 21
At 31 December 2011 1,339 18,689 20,028
Profit attributable to shareholders 10,019 10,019
Dividends to shareholders (3,814) (3,814)
Shares purchased and cancelled or held as Treasury share 45 (2,493) (2,448)
Capital contribution relating to share based payments 9 9
At 31 December 2012 1,393 22,401 23,794
The prot of GlaxoSmithKline plc for the year was 10,019 million (2011 14,255 million), which after dividends of 3,814 million
(2011 3,406 million), gave a retained prot of 6,205 million (2011 10,849 million). After the cost of shares purchased and
cancelled or held as Treasury shares of 2,493 million (2011 2,191), the prot and loss account reserve at 31 December 2012 stood
at 22,401 million (2011 18,689 million), of which 4,096 million is unrealised (2011 4,096 million).
224 GSK Annual Report 2012
Investor
information
Product development pipeline 225
Products, competition and
intellectual property 229
Quarterly trend 232
Five year record 236
Share capital and share price 239
Dividends 240
Annual General Meeting 2013 241
US law and regulation 242
Tax information for shareholders 243
Analysis of shareholdings 244
Shareholder services and contacts 245
Glossary of terms and index 247
Join the conversation
In 2012 we improved and broadened our
communications channels to inform and engage
with our stakeholders. Find out more by visiting
our new website www.gsk.com or follow us on
twitter @GSK to join the conversation.
225 GSK Annual Report 2012
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Pharmaceuticals and Vaccines product development pipeline
Key
CD20 human monoclonal antibody chronic lymphocytic leukaemia, rst line therapy III
& use in relapsed patients
Arzerra (ofatumumab)
CD20 human monoclonal antibody diffuse large B cell lymphoma (relapsed patients) III
Arzerra (ofatumumab)
CD20 human monoclonal antibody follicular lymphoma (refractory & relapsed patients) III
Benlysta (belimumab) B lymphocyte stimulator monoclonal systemic lupus erythematosus III
antibody (s.c.)
Benlysta (belimumab) B lymphocyte stimulator monoclonal vasculitis III
antibody (i.v.)
mepolizumab IL5 monoclonal antibody severe asthma III
sirukumab
trametinib
+ dabrafenib MEK1/2 inhibitor + BRAF protein kinase metastatic melanoma, adjuvant therapy III
inhibitor
Tyverb/Tykerb (lapatinib) human epidermal growth factor breast cancer, adjuvant therapy III
receptor-2 (Her2) and epidermal growth
factor receptor (EGFR) dual kinase inhibitor
Tyverb/Tykerb (lapatinib) Her2 and EGFR dual kinase inhibitor gastric cancer III
Tyverb/Tykerb (lapatinib) Her2 and EGFR dual kinase inhibitor head & neck squamous cell carcinoma III
(resectable disease)
Votrient (pazopanib) multi-kinase angiogenesis inhibitor ovarian cancer, maintenance therapy III
Votrient (pazopanib) multi-kinase angiogenesis inhibitor renal cell cancer, adjuvant therapy III
dabrafenib BRAF protein kinase inhibitor metastatic melanoma Submitted S: Jul12 S: Jul12
trametinib
+ dabrafenib MEK1/2 inhibitor + BRAF protein kinase metastatic melanoma Submitted S: Feb13
inhibitor
Tyverb/Tykerb (lapatinib) Her2 and EGFR dual kinase inhibitor metastatic breast cancer, in combination with Submitted S: Feb12
trastuzumab
Votrient (pazopanib) multi-kinase angiogenesis inhibitor sarcoma Approved A: Aug12 A: Apr12
Revolade/Promacta thrombopoietin receptor agonist hepatitis C induced thrombocytopaenia Approved S: May12 A: Nov12
(eltrombopag)
Ophthalmology
darapladib Lp-PLA2 inhibitor diabetic macular oedema (also atherosclerosis) II
Investor information
227 GSK Annual Report 2012
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Achieved regulatory
review milestones
Compound Type Indication Phase MAA NDA/BLA
Respiratory
1325756 CXCR2 chemokine receptor antagonist COPD I
2256294 soluble epoxide hydrolase inhibitor COPD I
2269557 phosphoinositide 3 kinase inhibitor asthma & COPD I
2339345 sodium channel blocker cough I
uticasone furoate glucocorticoid agonist + long-acting beta2 COPD I
(685698) + vilanterol
+ agonist
uticasone furoate)
umeclidinium (573719) muscarinic acetylcholine antagonist COPD
III
vilanterol
+ agonist
uticasone furoate)
Relvar/Breo long-acting beta2 agonist + glucocorticoid COPD Submitted S: Jun12 S: Jul12
(vilanterol
+ agonist
uticasone furoate)
Anoro (umeclidinium + muscarinic acetylcholine antagonist + COPD Submitted S: Jan13 S: Dec12
vilanterol
MMR live attenuated measles, mumps, rubella prophylaxis III (USA) A: Nov97
Mosquirix (Malaria RTS,S)
ex-vivo stem cell gene therapy adenosine deaminase severe combined immune III
deciency (ADA-SCID)
migalastat HCl
NA
hypertension, left ventricular (formulation)
dysfunction post MI
Fraxiparine nadroparin deep vein thrombosis, Lovenox, Fragmin, expired expired
pulmonary embolism Innohep
* See Outlook on page 15 for details of uncertainty on the timing of follow-on competition.
Generic competition possible in 2013.
Pharmaceutical products, competition and intellectual property
230 GSK Annual Report 2012
Major Patent expiry dates
Products Compounds Indication(s) competitor brands USA EU
Lovaza omega-3 acid ethyl esters very high triglycerides Tricor 2017
1
NA
(formulation)
Volibris ambrisentan pulmonary hypertension Tracleer, Revatio NA 2020
Anti-bacterials
Augmentin amoxicillin/clavulanate common bacterial generic products NA expired
potassium infections
Oncology
Arzerra ofatumumab refractory chronic MabThera/Rituxan pending 2023
lymphocytic leukaemia
Hycamtin topotecan ovarian cancer, small cell Doxil, Gemzar expired expired
lung cancer, cervical cancer
Promacta/ eltrombopag idiopathic thrombocytopenic Nplate 2021 2021
Revolade purpura
Tykerb/Tyverb lapatanib advanced and metastatic Herceptin 2020 2023
breast cancer in HER2
positive patients
Votrient pazopanib soft tissue sarcoma Yondelis, Sutent, 2021 2021
metastatic renal cell Nexavar, Anitor
carcinoma
Vaccines
Boostrix diphtheria, tetanus, acellular booster vaccination Adacel 2017 2017
pertussis
Infanrix/Pediarix diphtheria, tetanus, pertussis, diphtheria, tetanus, pertussis, Pentacel, Pediacel, 2017 2014
polio, hepatitis B (HepB), polio, hepatitis B (HepB) Pentaxim, Pentavac
inactivated antigens
Cervarix HPV 16 & 18 virus like particles human papilloma virus Gardasil (Silgard) 2020 2020
(VLPs), AS04 adjuvant (MPL + type 16 and 18
aluminium hydroxide)
Fluarix split inactivated inuenza virus seasonal inuenza Vaxigrip, Mutagrip, 2022 2022
subtypes A and type B antigens Fluzone, Inuvac,
Aggripal, Fluad
FluLaval split inactivated inuenza virus seasonal inuenza Vaxigrip, Mutagrip, none none
subtypes A and type B antigens Fluzone, Inuvac,
Aggripal, Fluad
Pandemrix derived split inactivated A(H1N1)v2009 inuenza Focetria, Celvapan, 2014 2014
inuenza virus antigen, prophylaxis emeru
AS03 adjuvant
Prepandrix derived split inactivated inuenza prophylaxis Aunov 2014 2014
inuenza virus antigen,
AS03 adjuvant
Synorix conjugated pneumococcal invasive pneumococcal Prevenar (Prevnar) NA 2021
polysaccharide disease
HIV
Combivir lamivudine and zidovudine HIV/AIDS Truvada, Atripla expired expired
(combination) (combination)
Epivir lamivudine HIV/AIDS Truvada, Atripla expired expired
Epzicom/Kivexa lamivudine and abacavir HIV/AIDS Truvada, Atripla 2016
1
2019
(combination) (combination)
Lexiva fosamprenavir HIV/AIDS Prezista, Kaletra, 2017
1
2019
Reyataz
Selzentry maraviroc HIV/AIDS Isentress, Intelence, 2021 2022
Prezista
Trizivir lamivudine, zidovudine HIV/AIDS Truvada, Atripla 2016
1
2016
and abacavir (combination) (combination)
1 See Note 44 to the nancial statements, Legal proceedings.
Investor information
Pharmaceutical products, competition and intellectual property continued
231 GSK Annual Report 2012
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Brand Products Application Markets Competition
Total wellness
Panadol tablets, caplets, infant drops paracetamol-based treatment global except USA Reckitt-Benckisers Nurofen
of headache and joint pain,
fever, cold symptoms
NicoDerm, gum, patch, mini lozenge, treatment of nicotine global Novartis Nicotinell
NiQuitin CQ, original lozenge withdrawal as an aid to Nicorette in Europe
and Nicabate. quitting smoking retailers own brands
Also Nicorette
(US only)
ENO effervescent and rapid relief antacid global Hypermarcas Estomazil
Tums chewable tablets Pzers Gelusil
Sanos Rolaids
Johnson & Johnsons Mylanta
Oral care
Sensodyne toothpastes, toothbrushes prevention of dental global Colgate-Palmolives
mouthwashes sensitivity Colgate Pro Relief
Polident denture adhesive, denture improve comfort of global none
Poligrip cleanser tted dentures and to
Corega clean dentures
Aquafresh toothpastes, toothbrushes prevention of caries, gum global Colgate-Palmolives Colgate
mouthwashes disease and bad breath Procter & Gambles Crest
and Oral-B
Parodontax toothpastes, mouthwashes help stop bleeding gums global Colgate-Palmolivess
gum health Colgate Pro-Gum
Nutrition
Lucozade energy and sports drinks energy and hydration UK, Ireland, Pepsicos Gatorade
Africa Coca-Colas Powerade
Red Bull
Horlicks malted, milk-based drinks nutrition UK, Ireland, India Mondelezs Bournvita
and foods Nestles Milo
Maxinutrition sports nutrition, protein nutrition UK Myprotein
powder, bars Optimum Nutrition
Skin health
Physiogel moisturising, creams, face and body care for dry, Germany, France, Italy, LOreals La Roche Posay
lotions and cleansers sensitive and irritated skin Poland, Spain Beiersdorfs Eucerin
Pierre Fabres Avene
Oilatum emollient bath and creams, soothing treatment for eczema UK, Poland, Reckitt-Benckisers E45
shampoo and dry skin conditions other markets Sanos Emolium
Consumer Healthcare products and competition
232 GSK Annual Report 2012
Quarterly trend
An unaudited analysis of the Group results is provided by quarter in Sterling for the nancial year 2012.
Income statement total
12 months 2012 Q4 2012
m CER% % m CER% %
Turnover Pharmaceuticals and Vaccines 21,321 (2) (4) 5,553 (2)
Consumer Healthcare 5,110 (3) 1,249 (3)
Total turnover 26,431 (1) (3) 6,802 (3)
Cost of sales (7,894) 6 3 (2,011) 6 3
Selling, general and administration (8,739) 4 3 (2,198 3 1
Research and development (3,968) (1) (1) (1,141) 5 4
Royalty income 306 (1) 76 (16) (16)
Other operating income 1,256 412
Operating prot 7,392 (3) (5) 1,940 7 3
Net nance costs (729) (199)
Share of after tax prots of associates and joint ventures 29 10
Profit before taxation 6,692 (11) (13) 1,751 8 3
Taxation (1,948) (912)
Tax rate % 29.1% 52.1%
Profit after taxation for the period 4,744 (11) (13) 839 (30) (35)
Prot attributable to non-controlling interests 179 (25)
Prot attributable to shareholders 4,565 864
Basic earnings per share (pence) 92.9p (9) (11) 17.8p (24) (29)
Diluted earnings per share (pence) 91.5p 17.6p
Income statement core
Total turnover 26,431 (1) (3) 6,802 (3)
Cost of sales (7,078) 1 (2) (1,830) (2)
Selling, general and administration (7,855) (1) (1,927) 2
Research and development (3,474) (5) (6) (834) (15) (16)
Royalty income 306 (1) 76 (15) (16)
Operating prot 8,330 (3) (5) 2,287 5 1
Net nance costs (724) (194)
Share of after tax prots of associates and joint ventures 29 10
Profit before taxation 7,635 (4) (6) 2,103 5 1
Taxation (1,864) (468)
Tax rate % 24.4% 22.3%
Profit after taxation for the period 5,771 (2) (4) 1,635 7 3
Prot attributable to non-controlling interests 235 58
Prot attributable to shareholders 5,536 1,577
Adjusted earnings per share (pence) 112.7p (2) 32.6p 9 4
The calculation of core results is described on page 56.
Financial record
233 GSK Annual Report 2012
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Q3 2012 Q2 2012 Q1 2012
m CER% % m CER% % m CER% %
5,259 (6) (9) 5,205 (3) (4) 5,304 2 1
1,268 (2) (6) 1,257 (3) 1,336 1
6,527 (5) (8) 6,462 (2) (4) 6,640 2 1
(2,081) 5 (1,992) 18 14 (1,810) (1) (3)
(2,224) 13 10 (2,187) (1) (2,130) 1 2
(934) (4) (5) (922) (10) (9) (971) 6 6
92 12 8 66 6 6 72 (4)
299 309 236
1,679 (18) (21) 1,736 (1) (2) 2,037 2
(178) (184) (168)
9 10
1,510 (20) (22) 1,552 (1) (3) 1,879 (22) (24)
(314) (233) (489)
20.8% 15.0% 26.0%
1,196 (15) (17) 1,319 16 15 1,390 (11) (12)
74 65 65
1,122 1,254 1,325
22.9p (14) (17) 25.4p 17 17 26.7p (10) (11)
22.6p 25.1p 26.3p
6,527 (5) (8) 6,462 (2) (4) 6,640 2 1
(1,847) (2) (7) (1,690) 8 4 (1,711) (2) (4)
(1,934) 2 (1) (1,956) (4) (6) (2,038) 2 3
(868) (5) (6) (880) (3) (3) (892) 4 4
92 12 8 66 6 6 72
1,970 (13) (15) 2,002 (7) (8) 2,071 3 1
(178) (184) (168)
9 10
1,801 (14) (16) 1,818 (7) (8) 1,913 3 1
(437) (464) (495)
24.3% 25.5% 25.9%
1,364 (12) (15) 1,354 (6) (7) 1,418 5 3
64 48 65
1,300 1,306 1,353
26.5p (11) (13) 26.4p (5) (5) 27.3p 7 5
234 GSK Annual Report 2012
Pharmaceuticals and Vaccines turnover by therapeutic area 2012
Total USA Europe EMAP Rest of World
2011
Therapeutic area/ 2012 (restated) Growth 2012 Growth 2012 Growth 2012 Growth 2012 Growth
major products m m CER% % m CER% % m CER% % m CER% % m CER% %
Respiratory 7,291 7,298 1 3,388 1 3 1,906 (5) (10) 858 13 10 1,139 3 3
Avamys/Veramyst 246 241 5 2 59 (6) (5) 62 2 (5) 63 24 17 62 2 3
Flixonase/Flonase 133 138 (3) (4) 14 100 100 32 (11) (14) 57 14 16 30 (31) (33)
Flixotide/Flovent 779 813 (4) (4) 448 (1) 122 (15) (19) 55 8 6 154 (6) (6)
Seretide/Advair 5,046 5,061 1 2,533 1 2 1,447 (4) (8) 417 12 10 649 3 4
Serevent 145 182 (19) (20) 51 (19) (18) 64 (22) (25) 3 27 (13) (16)
Ventolin 631 602 6 5 277 14 16 126 (6) (11) 171 10 7 57 (8) (8
Xyzal 129 64 100 >100 16 113 >100 >100
Zyrtec 81 96 (16) (16) 36 28 24 45 (34) (33)
Other 101 101 6 6 (33) (33) 53 4 (5) 40 16 8 2 (100) (100
Anti-virals 753 842 (11) (11) 57 (42) (41) 74 (23) (27) 360 2 3 262 (12) (12)
Hepsera 126 127 (2) (1) 95 (3) (1) 31
Zovirax 89 339 (16) (18) 3 (73) (73) 21 (19) (22) 35 (3) (5) 30 (9) (12)
Valtrex 252 109 (25) (26) 35 (51) (51) 33 (27) (31) 37 (3) 147 (19) (19)
Zefx 243 237 3 15 27 36 16 (29) (33) 188 3 7 24 (4) (8)
Other 43 30 37 43 4 100 100 4 100 100 5 >100 >100 30 12 20
Central nervous
system 1,670 1,721 (2) (3) 510 6 8 386 (15) (20) 329 8 6 445 (3) (2)
Imigran/Imitrex 190 210 (8) (10) 72 (13) (12) 67 (4) (9) 7 44 (6) (6)
Lamictal 610 536 14 14 332 18 20 112 (9) (15) 75 7 6 91 58 60
Requip 164 218 (22) (25) 19 (55) (55) 76 (29) (33) 14 25 17 55 8 8
Seroxat/Paxil 374 435 (14) (14) (1) 100 67 57 (9) (14) 84 (5) (5) 234 (19) (18)
Treximet 49 57 (14) (14) 49 (16) (14)
Wellbutrin 84 85 4 (1) 12 (25) (25) 44 4 (2) 28 26 22
Other 199 180 13 11 27 >100 >100 30 (39) (41) 121 15 10 21 31 31
Cardiovascular
and urogenital 2,431 2,454 (1) 1,461 (5) (4) 504 1 (6) 292 18 16 174 23 23
Arixtra 195 276 (27) (29) 68 (54) (54) 91 (6) 28 33 33 8 (27) (27)
Avodart 790 748 7 6 317 (5) (4) 228 9 2 84 26 22 161 28 29
Coreg 133 155 (15) (14) 132 (15) (14) 1
Fraxiparine 233 234 4 145 (4) (10) 87 26 24 1 (50) (50)
Lovaza 607 569 5 7 604 5 7 3 50
Vesicare 175 126 37 39 174 37 38 1
Other 298 346 (13) (14) 166 (20) (18) 40 (17) (23) 92 1 1
Metabolic 171 331 (47) (48) (12) 29 (49) (52) 65 10 3 89 (24) (24)
Avandia products 6 123 (94) (95) (12) 12 (33) (33) 6 (59) (65)
Other 165 208 (18) (21) 29 (52) (55) 53 27 18 83 (18) (17)
Anti-bacterials 1,247 1,390 (7) (10) 20 (63) (63) 403 (17) (21) 735 5 2 89 (12) (11)
Augmentin 608 641 (1) (5) 1 202 (13) (19) 367 8 4 38 (10) (7)
Other 639 749 (12) (15) 19 (65) (65) 201 (20) (24) 368 2 (1) 51 (14) (14)
Oncology and
emesis
798 683 19 17 321 18 20 256 11 4 131 48 42 90 15 15
Arzerra 60 44 36 36 38 23 23 21 83 75 1 (100)
Promacta 130 75 76 73 54 66 69 36 65 57 12 >100 >100 28 87 87
Tyverb/Tykerb 239 231 6 3 68 5 6 87 (5) (10) 54 36 29 30 7 7
Votrient 183 100 88 83 91 59 63 66 89 78 22 >100 >100 4
Other 186 233 (19) (20) 70 (18) (18) 46 (34) (39) 43 11 13 27 (21) (21)
Dermatology 850 898 (2) (5) 228 (14) (13) 156 5 388 7 1 78 (19) (19)
Bactroban 124 123 3 1 51 (2) 26 (7) 39 17 11 8 (11) (11)
Duac 87 109 (19) (20) 38 (38) (37) 24 4 13 8 12
Other* 639 666 (4) 139 (9) (9) 106 6 1 336 6 1 58 (23) (23)
Rare diseases 495 463 8 7 117 10 11 123 (6) (12) 48 20 17 207 16 16
Flolan 135 97 (25) (25) 33 (14) (11) 23 (42) (47) 79 (21) (20)
Volibris 127 179 35 31 73 12 6 9 80 80 45 96 96
Other 233 187 26 25 84 22 24 27 4 39 11 8 83 50 48
Immuno-
inammation 70 15 >100 >100 65 >100 >100 4 >100 >100 1
Benlysta 70 15 >100 >100 65 >100 >100 4 >100 >100 1
Other
pharmaceuticals 846 951 (6) (11) 19 25 19 180 (23) (32) 423 (2) (7) 224 3 4
Vaccines 3,325 3,497 (2) (5) 826 1 980 (4) (10) 1,107 14 9 412 (29) (29)
Boostrix 238 192 25 24 147 35 36 53 17 10 16 78 78 22 (19) (19)
Cervarix 270 506 (46) (47) 6 (25) (25) 53 (2) (9) 75 (19) (20) 136 (61) (61)
Fluarix, FluLaval 200 230 (11) (13) 88 (35) (33) 43 15 8 44 35 29 25 8 4
Hepatitis 646 688 (5) (6) 266 (10) (9) 197 (8) (13) 128 21 15 55 (11) (4)
Infanrix, Pediarix 775 690 17 12 218 32 34 376 (7) 120 85 76 61 9 9
Nimenrix 1 1
Rotarix 360 300 21 20 100 (11) (9) 39 2 (5) 159 25 23 62 >100 >100
Synorix 385 350 17 10 45 (8) (13) 334 22 14 6
Other 450 541 (13) (17) 1 173 (18) (22) 231 (12) (16) 45 7 2
19,947 20,543 (1) (3) 7,000 (2) 5,001 (7) (12) 4,736 10 6 3,210 (5) (5)
ViiV Healthcare
(HIV) 1,374 1,569 (10) (12)
21,321 22,112 (2) (4)
CER% represents growth at constant exchange rates. % represents growth at actual exchange rates.
Investor information
235 GSK Annual Report 2012
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Pharmaceuticals and Vaccines turnover by therapeutic area 2011 (restated)
Total USA Europe EMAP Rest of World
Therapeutic area/ 2011 2010 Growth 2011 Growth 2011 Growth 2011 Growth 2011 Growth
major products m m CER% % m CER% % m CER% % m CER% % m CER% %
Respiratory 7,298 7,238 2 1 3,301 1 (3) 2,115 (2) (2) 779 9 6 1,103 9 15
Avamys/Veramyst 241 193 24 25 62 (6) (10) 65 14 16 54 42 42 60 90 100
Flixonase/Flonase 138 164 (17) (16) 7 (78) (81) 37 (8) (8) 49 11 11 45 (2) 5
Flixotide/Flovent 813 804 3 1 447 8 4 151 (6) (5) 52 8 2 163 (4)
Seretide/Advair 5,061 5,139 (2) 2,475 (1) (5) 1,580 (2) (1) 379 2 (1) 627 9 14
Serevent 182 201 (9) (9) 62 2 (3) 85 (14) (13) 3 50 50 32 (19) (14)
Ventolin 602 522 17 15 239 39 34 141 (1) (1) 160 14 10 62 4 11
Xyzal 64 33 85 94 16 7 7 48 >100 >100
Zyrtec 96 82 12 17 29 36 32 67 3 12
Other 101 100 1 1 9 (40) (10) 56 6 6 37 12 9 (1) 33 >(100)
Anti-virals 842 1,167 (29) (28) 96 (73) (73) 101 (24) (22) 348 (1) (1) 297 (13) (9)
Hepsera 127 128 (3) (1) 96 (4) (3) 31 4 11
Zovirax 109 152 (29) (28) 11 (79) (79) 27 (4) 37 12 12 34 (13) (13)
Valtrex 339 532 (38) (36) 72 (70) (71) 48 (31) (29) 38 11 9 181 (4) 2
Zefx 237 233 1 2 11 (15) (15) 24 (8) (8) 176 5 6 26 (11) (7)
Other 30 122 (76) (75) 2 (95) (95) 2 (75) (75) 1 (94) (94) 25 (55) (53)
Central nervous
system 1,721 1,753 (2) (2) 474 (3) (6) 480 (12) (11) 311 12 10 456 2 7
Imigran/Imitrex 210 212 (2) (1) 82 12 9 74 (14) (13) 7 47 (4) 4
Lamictal 536 504 8 6 277 12 8 131 (10) (8) 71 3 57 61 73
Requip 218 233 (7) (6) 42 (2) (5) 113 (18) (18) 12 51 23 28
Seroxat/Paxil 435 482 (13) (10) (3) <(100) <(100) 66 (20) (20) 88 7 7 284 (8) (2)
Treximet 57 56 5 2 57 7 4 (100) (100)
Wellbutrin 85 81 6 5 16 (33) (33) 45 15 15 23 35 35 1 100
Other 180 185 (2) (3) 3 (87) (87) 51 (9) (6) 110 20 17 25 21 14
Cardiovascular
and urogenital 2,454 2,314 8 6 1,527 4 534 8 9 252 24 22 141 43 48
Arixtra 276 301 (7) (8) 147 (14) (17) 97 (3) (2) 21 47 40 11 (10) 10
Avodart 748 629 20 19 331 2 (2) 223 26 27 69 27 23 125 93 >100
Coreg 155 171 (6) (9) 154 (6) (9) 1
Fraxiparine 234 222 5 5 162 5 5 70 29 25 2 (92) (83)
Lovaza 569 530 12 7 567 12 7 2
Vesicare 126 114 15 11 126 16 12
Other 346 347 2 202 4 1 52 (15) (13) 92 15 16 (38) >(100)
Metabolic 331 647 (49) (49) 90 (60) (62) 61 (62) (62) 63 (36) (37) 117 (27) (22)
Avandia products 123 440 (71) (72) 91 (60) (62) (3) <(100) <(100) 18 (71) (71) 17 (68) (68)
Other 208 207 (1) (1) 64 (11) (11) 45 21 18 100 4 3
Anti-bacterials 1,390 1,396 1 54 (25) (28) 513 (5) (4) 724 9 5 99 3
Augmentin 641 625 4 3 <(100) 248 3 3 352 10 6 41 (5) (2)
Other 749 771 (1) (3) 54 (13) (16) 265 (11) (10) 372 9 4 58 4 7
Oncology and
emesis 683 679 1 1 268 (20) (23) 245 22 24 92 25 23 78 25 30
Arzerra 44 31 45 42 31 23 19 12 >100 >100 1
Promacta 75 31 >100 >100 32 36 28 23 >100 >100 5 15 >100 >100
Tyverb/Tykerb 231 227 2 2 64 (6) (9) 97 2 3 42 26 20 28 (7)
Votrient 100 38 >100 >100 56 76 70 37 >100 >100 7
Other 233 352 (33) (34) 85 (54) (56) 76 (19) (16) 38 34 21 17
Dermatologicals 898 849 8 6 263 (4) (8) 157 3 3 382 26 22 96 (9) (3)
Bactroban 123 119 6 3 51 4 28 4 4 35 9 3 9 14 29
Duac 109 116 (3) (6) 60 (6) (10) 24 4 13 8 12 (8) (8)
Other 666 614 10 8 152 (6) (10) 105 4 3 334 29 26 75 (11) (5)
Rare diseases 463 408 12 13 105 (4) (7) 140 1 2 40 40 33 178 30 39
Flolan 179 195 (11) 8 37 (15) (20) 43 (37) (36) 99 13 21
Volibris 97 46 >100 >100 69 70 73 5 >100 >100 23 >100 >100
Other 187 167 12 12 68 4 1 27 (7) (7) 35 24 21 56 29 37
Other
pharmaceuticals 966 956 2 1 30 29 25 264 (15) (15) 456 14 8 217 1 8
Vaccines 3,497 4,326 (19) (19) 814 11 7 1,091 (36) (35) 1,012 (11) (12) 580 (26) (21)
Boostrix 192 181 7 6 108 2 (2) 48 9 12 9 (10) 27 33 50
Cervarix 506 242 >100 >100 8 (31) (38) 58 (50) (50) 94 70 68 346 >100 >100
Fluarix, FluLaval 230 241 (2) (5) 132 25 20 40 (38) (37) 34 (20) (23) 24
Hepatitis 688 720 (3) (4) 293 (1) (5) 227 (7) (6) 111 (2) (2) 57 (3) (2)
Infanrix, Pediarix 690 700 (2) (1) 163 16 12 403 (7) (6) 68 (4) (6) 56 (4) 6
Rotarix 300 235 31 28 110 55 49 41 8 8 129 16 12 20 >100 >100
Synorix 350 221 57 58 52 21 21 292 81 81 6 (76) (65)
Other 541 1,786 (70) (70) <(100) <(100) 222 (69) (69) 275 (51) (52) 44 (91) (91)
20,543 21,733 (5) (5) 7,022 (4) (8) 5,700 (13) (12) 4,459 5 3 3,362 (3) 3
ViiV Healthcare
(HIV) 1,569 1,566 1
22,112 23,299 (4)
CER% represents growth at constant exchange rates. % represents growth at actual exchange rates.
236 GSK Annual Report 2012
Five year record
A record of nancial performance is provided, analysed in accordance with current reporting practice. The information included in the Five
year record is prepared in accordance with IFRS as adopted by the European Union and also with IFRS as issued by the International
Accounting Standards Board.
Turnover by division
2012
m
2011
(restated)
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2010
(restated)
m
2009
(restated)
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(restated)
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Pharmaceuticals 17,996 18,615 18,973 19,962 17,842
Vaccines 3,325 3,497 4,326 3,706 2,539
Pharmaceuticals and Vaccines 21,321 22,112 23,299 23,668 20,381
Consumer Healthcare 5,110 5,275 5,093 4,700 3,971
26,431 27,387 28,392 28,368 24,352
Group turnover by geographic region
USA 8,446 8,684 9,345 10,315 9,746
Europe 7,320 8,271 9,091 9,696 8,262
EMAP 6,780 6,403 6,074 5,019 4,013
Japan 2,225 2,318 2,155 1,782 1,127
Other 1,660 1,711 1,727 1,556 1,204
26,431 27,387 28,392 28,368 24,352
Group turnover by segment
USA 7,000 7,022 7,629 8,571 8,254
Europe 5,001 5,700 6,479 7,063 5,847
EMAP 4,736 4,459 4,347 3,615 2,748
Japan 1,969 2,082 1,959 1,605 995
ViiV Healthcare (HIV) 1,374 1,569 1,566 1,605 1,513
Other trading and unallocated pharmaceuticals 1,241 1,280 1,319 1,209 1,024
Pharmaceuticals and Vaccines 21,321 22,112 23,299 23,668 20,381
Consumer Healthcare 5,110 5,275 5,093 4,700 3,971
26,431 27,387 28,392 28,368 24,352
ViiV Healthcare turnover
Total USA Europe EMAP Rest of World
2011
Therapeutic area/ 2012 (restated) Growth 2012 Growth 2012 Growth 2012 Growth 2012 Growth
major products m m CER% % m CER% % m CER% % m CER% % m CER% %
Combivir 179 322 (43) (44) 24 (81) (81) 64 (27) (31) 79 (2) (5) 12 (42) (37)
Epivir 49 110 (54) (55) 8 (81) (81) 21 (31) (35) 12 (55) (56) 8 (23) (38)
Epzicom/Kivexa 665 617 10 8 243 4 6 285 11 5 57 37 34 80 10 11
Lexiva 127 142 (9) (11) 68 (9) (8) 33 (20) (26) 19 25 21 7 (14)
Selzentry 128 110 20 16 57 25 26 56 16 9 4 9 2 11 30 10
Trizivir 107 126 (13) (15) 61 (11) (10) 37 (21) (25) 5 4 (1) 4 25
Other 119 142 (16) (16) 59 (24) (24) 27 (10) (13) 22 5 5 11 (17) (8)
1,374 1,569 (10) (12) 520 (22) (21) 523 (3) (9) 198 3 133 (2) (3)
Total USA Europe EMAP Rest of World
2011 2010
Therapeutic area/ (restated) (restated) Growth 2011 Growth 2011 Growth 2011 Growth 2011 Growth
major products m m CER% % m CER% % m CER% % m CER% % m CER% %
Combivir 322 363 (10) (11) 127 (8) (11) 93 (21) (21) 83 6 4 19 (26) (17)
Epivir 110 115 (3) (4) 39 3 (3) 32 (14) (14) 27 13 13 12 (21) (14)
Epzicom/Kivexa 617 555 12 11 230 14 10 272 10 11 43 13 13 72 10 16
Lexiva 142 155 (7) (8) 74 (4) (8) 45 (14) (12) 16 23 23 7 (36) (36)
Selzentry 110 80 39 38 45 38 32 51 24 24 4 100 100 10 >100 >100
Trizivir 126 144 (11) (13) 67 (4) (8) 50 (18) (17) 5 25 25 4 (43) (43)
Other 142 154 (6) (8) 78 (1) (3) 31 (12) (9) 21 (10) 12 (11) (37)
1,569 1,566 1 660 4 574 (3) (2) 199 9 9 136 (4) (2)
Investor information
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Pharmaceuticals and Vaccines turnover by therapeutic area
2012
m
2011
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2010
(restated)
m
2009
(restated)
m
2008
(restated)
m
Respiratory 7,291 7,298 7,238 6,977 5,817
Anti-virals 753 842 1,167 2,474 1,638
Central nervous system 1,670 1,721 1,753 1,870 2,897
Cardiovascular and urogenital 2,431 2,454 2,314 2,077 1,674
Metabolic 171 331 647 1,151 1,156
Anti-bacterials 1,247 1,390 1,396 1,457 1,301
Oncology and emesis 798 683 679 620 489
Dermatology 850 898 849 547 305
Rare diseases 495 463 408 364 298
Immuno-inammation 70 15
Other pharmaceuticals 846 951 956 820 754
Vaccines 3,325 3,497 4,326 3,706 2,539
ViiV Healthcare (HIV) 1,374 1,569 1,566 1,605 1,513
21,321 22,112 23,299 23,668 20,381
Consumer Healthcare turnover
Total wellness 2,008 2,278 2,202 2,157 1,776
Oral care 1,797 1,711 1,596 1,479 1,240
Nutrition 1,050 1,025 953 851 796
Skin health 255 261 342 213 159
5,110 5,275 5,093 4,700 3,971
Financial results total
2012
m
2011
m
2010
m
2009
m
2008
m
Turnover 26,431 27,387 28,392 28,368 24,352
Operating prot 7,392 7,807 3,783 8,425 7,141
Prot before taxation 6,692 7,698 3,157 7,891 6,659
Prot after taxation 4,744 5,458 1,853 5,669 4,712
pence pence pence pence pence
Basic earnings per share 92.9 104.6 32.1 109.1 88.6
Diluted earnings per share 91.5 103.2 31.9 108.2 88.1
Financial results core
2012
m
2011
m
2010
m
Turnover 26,431 27,387 28,392
Operating prot 8,330 8,803 9,497
Prot before taxation 7,635 8,111 8,866
Prot after taxation 5,771 6,007 6,600
pence pence pence
Core earnings per share 112.7 115.5 125.5
Core diluted earnings per share 111.0 113.9 124.4
2012
millions
2011
millions
2010
millions
2009
millions
2008
millions
Weighted average number of shares in issue:
Basic 4,912 5,028 5,085 5,069 5,195
Diluted 4,989 5,099 5,128 5,108 5,226
% % % % %
Return on capital employed 85.9 82.9 30.8 82.8 73.1
Return on capital employed is calculated as total prot before taxation as a percentage of average net assets over the year.
238 GSK Annual Report 2012
Balance sheet
2012
m
2011
m
2010
m
2009
m
2008
m
Non-current assets 27,783 24,913 26,194 25,292 22,124
Current assets 13,692 16,167 16,036 17,570 17,269
Total assets 41,475 41,080 42,230 42,862 39,393
Current liabilities (13,815) (15,010) (12,794) (12,118) (10,017)
Non-current liabilities (20,913) (17,243) (19,691) (20,002) (21,058)
Total liabilities (34,728) (32,253) (32,485) (32,120) (31,075)
Net assets 6,747 8,827 9,745 10,742 8,318
Shareholders equity 5,810 8,032 8,887 10,005 7,931
Non-controlling interests 937 795 858 737 387
Total equity 6,747 8,827 9,745 10,742 8,318
Number of employees
2012 2011 2010 2009 2008
USA 17,201 16,707 17,555 22,594 21,176
Europe 38,788 38,696 39,910 42,048 44,677
EMAP 36,738 35,080 31,992 28,327 26,162
Japan 3,515 3,573 3,461 3,264 3,174
Other 3,246 3,333 3,543 3,680 3,814
99,488 97,389 96,461 99,913 99,003
Manufacturing 31,369 30,664 30,611 31,162 32,622
Selling 45,601 45,155 43,918 44,621 42,430
Administration 9,607 8,883 8,850 9,405 8,787
Research and development 12,911 12,687 13,082 14,725 15,164
99,488 97,389 96,461 99,913 99,003
The geographic distribution of employees in the table above is based on the location of GSKs subsidiary companies. The number of
employees is the number of permanent employed staff at the end of the nancial period. It excludes those employees who are employed
and managed by GSK on a contract basis.
Exchange rates
As a guide to holders of ADS, the following tables set out, for the periods indicated, information on the exchange rate of US dollars for
Sterling as reported by the Federal Reserve Bank of New York (noon buying rate)*.
2012 2011 2010 2009 2008
Average 1.59 1.60 1.55 1.56 1.85
The average rate for the year is calculated as the average of the noon buying rates for each day of the year.
2013
Feb
2013
Jan
2012
Dec
2012
Nov
2012
Oct
2012
Sep
High 1.58 1.63 1.60 1.58 1.59 1.59
Low 1.51 1.57 1.63 1.61 1.62 1.63
* On 31 December 2008, the Federal Reserve Bank of New York ceased publishing noon buying rates. The Bank of England 4pm buying rates have been used for
subsequent calculations.
The 4pm buying rate on 28 February 2013 was 1= US$1.51.
Five year record continued
Investor information
239 GSK Annual Report 2012
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Share capital and control
Details of our issued share capital and the number of shares held
in Treasury as at 31 December 2012 can be found in Note 33 to
the nancial statements, Share capital and share premium account.
Our shares are listed on the London Stock Exchange and are also
quoted on the New York Stock Exchange (NYSE) in the form of
American Depositary Shares (ADS). Each ADS represents two
Ordinary Shares. For details of listed debt and where it is listed
refer to Note 32 to the nancial statements, Net debt.
Holders of Ordinary Shares are entitled to receive dividends, when
declared, the companys Annual Report, to attend and speak
at general meetings of the company, to appoint proxies and to
exercise voting rights.
There are no restrictions on the transfer, or limitations on the
holding, of Ordinary Shares and no requirements to obtain approval
prior to any transfers. No Ordinary Shares carry any special rights
with regard to control of the company and there are no restrictions
on voting rights. Major shareholders have the same voting rights
per share as all other shareholders.
There are no known arrangements under which nancial rights are
held by a person other than the holder of the shares and no known
agreements on restrictions on share transfers or on voting rights.
Shares acquired through our share schemes and plans rank equally
with the other shares in issue and have no special rights. The
trustees of our Employee Share Ownership Plan trusts have waived
their rights to dividends on shares held by those trusts.
Exchange controls and other limitations affecting
security holders
Other than certain economic sanctions which may be in force from
time to time, there are currently no applicable laws, decrees or
regulations restricting the import or export of capital or affecting
the remittance of dividends or other payments to holders of the
companys shares who are non-residents of the UK. Similarly, other
than certain economic sanctions which may be in force from time
to time, there are no limitations relating only to non-residents of
the UK under English law or the companys Articles of Association
on the right to be a holder of, and to vote in respect of, the
companys shares.
Interests in voting rights
Other than as stated below, as far as we are aware, there are no
persons with signicant direct or indirect holdings in the company.
Information provided to the company pursuant to the Financial
Services Authoritys (FSA) Disclosure and Transparency Rules (DTRs)
is published on a Regulatory Information Service and on the
companys website.
At 28 February 2013, the company had received notications in
accordance with the FSAs DTRs of the following notiable interests
in the voting rights in the companys issued share capital:
No. of
shares
*Percentage of
issued
capital (%)
BlackRock, Inc. 271,061,000 5.52
Legal & General Group Plc 153,140,293 3.12
* Percentage of Ordinary Shares in issue, excluding Treasury shares.
BNY Mellon Depositary Receipts is the Depositary for the companys
ADS, which are listed on the NYSE. Ordinary Shares representing the
companys ADR programme, which is managed by the Depositary,
are registered in the name of BNY (Nominees) Limited. Details of
the number of Ordinary Shares held by the Depositary can be
found on page 244.
We have not acquired or disposed of any interests in our own shares
during the period under review, other than in connection with our
share buy-back programme.
Share buy-back programme
The Board has been authorised to issue and allot Ordinary Shares
under Article 9 of the companys Articles of Association. The power
under Article 9 and the authority for the company to make
purchases of its own shares are subject to shareholder authorities
which are sought on an annual basis at our Annual General Meeting
(AGM). Any shares purchased by the company may be cancelled or
held as Treasury shares.
During 2012, we continued our long-term share buy-back
programme and 174 million shares were purchased at a total cost
of 2,493 million. No shares were purchased in the period 1 January
to 28 February 2013.
Our programme covers purchases of shares for cancellation or
to be held as Treasury shares, in accordance with the authority
renewed by shareholders at the AGM in May 2012, when the
company was authorised to purchase a maximum of just under
505 million shares. Details of shares purchased, expectations of
future repurchases, those cancelled, and those held as Treasury
shares are disclosed in Note 33 to the nancial statements Share
capital and share premium account.
The exact amount and timing of any future purchases, and the
extent to which repurchased shares will be held as Treasury shares
rather than being cancelled, will be determined by the company
and is dependent on market conditions and other factors.
Market capitalisation
The market capitalisation, based on shares in issue excluding
Treasury shares, of GSK at 31 December 2012 was 65.47 billion.
At that date, GSK was the fth largest company by market
capitalisation in the FTSE index.
Share price
2012
2011
2010
, a direct ADS
purchase/sale and dividend reinvestment plan for ADR holders.
Glaxo Wellcome and SmithKline Beecham
Corporate PEPs
The Share Centre Limited
Oxford House, Oxford Road, Aylesbury, Bucks HP21 8SZ
Tel: +44 (0)1296 414 141
ShareGift
17 Carlton House Terrace, London, SW1Y 5AH
Tel: +44 (0)20 7930 3737
www.sharegift.org
Shareholders with a small number of shares, the value of which
makes it uneconomical to sell, may wish to consider donating them
to the charity ShareGift (registered charity no. 1052686). Donated
shares are aggregated and sold by ShareGift, who pass on the
proceeds to a wide range of charities.
Share scam alert
If you receive an unsolicited telephone call offering to sell or buy
your shares, please take extra care. The caller may be part of a highly
organised nancial scam.
If you are a UK shareholder, please contact the Financial Services
Authority for further information on this, or other similar activities,
on its consumer helpline:
Tel: 0845 606 1234 (in the UK)
Lines are open from 8.00am to 6.00pm, UK time,
Monday to Friday, except UK public holidays.
Corporate Responsibility Report
We are publishing our Corporate Responsibility Report 2012 online
in 2013. This will outline GSKs approach to, and performance in,
our key corporate responsibility areas, Health for all, Our behaviour,
Our people and Our planet.
Internet
Information about the company, including the share price, is available
on our website at www.gsk.com. Information made available on the
website does not constitute part of this Annual Report.
The provision of share dealing details is not intended to be an invitation or
inducement to engage in an investment activity. Advice on share dealing
should be obtained from a stockbroker or independent nancial adviser.
Contacts
GSK Response Center
Tel: 1 888 825 5249 (US toll free)
Investor relations
Investor relations may be contacted as follows:
UK
980 Great West Road,
Brentford
Middlesex
TW8 9GS
Tel: +44 (0)20 8047 5000
USA
Five Crescent Drive
Philadelphia PA 19112
Tel: 1 888 825 5249 (US toll free)
Tel: +1 215 751 4000 (outside the USA)
Shareholder information
247 GSK Annual Report 2012
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Glossary of terms
Terms used in the Annual Report US equivalent or brief description
Accelerated capital allowances Tax allowance in excess of depreciation arising from the purchase of xed assets that delay
the charging and payment of tax. The US equivalent of tax depreciation.
American Depositary Receipt (ADR) Receipt evidencing title to an ADS. Each GlaxoSmithKline ADR represents two
Ordinary Shares.
American Depositary Shares (ADS) Listed on the New York Stock Exchange; represents two Ordinary Shares.
Basic earnings per share Basic income per share.
Called-up share capital Ordinary Shares, issued and fully paid.
CER growth Growth at constant exchange rates.
The company GlaxoSmithKline plc.
Corporate Integrity Agreement (CIA) In 2012, the company entered into a settlement with the US Federal Government related to past
sales and marketing practices. As part of the settlement the company entered into a Corporate
Integrity Agreement with the US Department of Health and Human Services, under which
improvements are being built into its existing compliance programmes.
Currency swap An exchange of two currencies, coupled with a subsequent re-exchange of those currencies,
at agreed exchange rates and dates.
Dened benet plan Pension plan with specic employee benets, often called nal salary scheme.
Dened contribution plan Pension plan with specic contributions and a level of pension dependent upon the growth
of the pension fund.
Derivative nancial instrument A nancial instrument that derives its value from the price or rate of some underlying item.
Diluted earnings per share Diluted income per share.
Employee Share Ownership Plan Trusts Trusts established by the Group to satisfy share-based employee incentive plans.
Finance lease Capital lease.
Freehold Ownership with absolute rights in perpetuity.
Gearing ratio Net debt as a percentage of total equity.
The Group GlaxoSmithKline plc and its subsidiary undertakings.
Hedging The reduction of risk, normally in relation to foreign currency or interest rate movements,
by making off-setting commitments.
Intangible xed assets Assets without physical substance, such as computer software, brands, licences, patents,
know-how and marketing rights purchased from outside parties.
Prot Income.
Prot attributable to shareholders Net income.
Share capital Ordinary Shares, capital stock or common stock issued and fully paid.
Shareholders funds Shareholders equity.
Share option Stock option.
Share premium account Additional paid-up capital or paid-in surplus (not distributable).
Shares in issue The number of shares outstanding.
Subsidiary An entity in which GlaxoSmithKline holds a majority shareholding and/or exercises control.
Treasury share Treasury stock.
Turnover Revenue.
UK Corporate Governance Code As required by the UK Listing Authority, the company has disclosed in the Annual Report how it
has applied the best practice corporate governance provisions of the Financial Reporting Councils
UK Corporate Governance Code.
248 GSK Annual Report 2012
Index
Access to medicines 10
Accounting principles and policies 144
Acquisitions and disposals 188
Adjustments reconciling prot after tax to operating
cash ows 186
Annual General Meeting 241
Assets held for sale 171
Associates and joint ventures 159
Board 88
Business review 01
Cash and cash equivalents 171
Chairman and othe Non-Executive Directors 125
Chairmans statement 02
Chief Executives review 03
Commitments 193
Committee reports 103
Competition 15
Consolidated balance sheet 141
Consolidated cash ow statement 143
Consolidated income statement 140
Consolidated statement of changes in equity 142
Consolidated statement of comprehensive income 140
Consumer Healthcare products and competition 231
Contingent liabilities 181
Corporate Executive Team 92
Corporate governance 94
Critical accounting policies 64
Directors and senior management 136
Directors emoluments and total remuneration 127
Directors interests 129
Directors interests in contracts 136
Directors statement of responsibilities 138,218
Dividends 163,240
Donations to political organisations and
political expenditure 242
Earnings per share 162
Employee costs 157
Employee share schemes 203
Employees 52
Exchange rates 150
Executive Director terms and conditions 125
Finance expense 159
Finance income 158
Financial instruments and related disclosures 194
Financial position and resources 66
Financial review 56
Financial review 2011 72
Financial statements of GlaxoSmithKline plc, prepared
under UK GAAP 220
Five year record 236
Glossary of terms 247
Goodwill 165
Independent Auditors report 139,219
Intellectual property and trademarks 15
Inventories 170
Investments in associates and joint ventures 169
Investor relations 246
Key accounting judgements and estimates 148
Key performance indicators 06
Late-stage pipeline summary 40
Legal proceedings 210
Long-Term Incentive plans 130
Major restructuring costs 158
Movements in equity 184
Net debt 181
New accounting requirements 150
Non-Executive Director terms and conditions 130
Non-Executive Directors fees 128
Notes to the nancial statements 144
Operating prot 156
Other intangible assets 167
Other investments 170
Other non-current assets 170
Other non-current liabilities 181
Other operating income 155
Other provisions 179
Outlook 15
Pensions and other post-employment benets 172
Pharmaceutical products, competition and
intellectual property 229
Pipeline 225
Post balance sheet event 193
Presentation of the nancial statements 144
Principal Group companies 207
Product development pipeline 225
Products 229
Property, plant and equipment 163
Quarterly trend 232
Reconciliation of net cash ow to movement in net debt 187
Registrar 245
Related party transactions 186
Relations with shareholders 100
Remuneration Report 109
Research and development 30
Responsible business 49
Risk factors 78
Segment information 151
Segment reviews 20
Share capital and control 239
Share capital and share premium account 183
Share price 239
Shareholder information 239
Strategy 16
Taxation 160
Taxation information for shareholders 243
Trade and other payables 172
Trade and other receivables 171
US law and regulation 242
World market 12
Page Page
Shareholder information
GlaxoSmithKline plc was incorporated as an English
public limited company on December 6, 1999. We
were formed by a merger between Glaxo Wellcome plc
and SmithKline Beecham plc. GSK acquired these two
English companies on 27 December 2000 as part of the
merger arrangements.
Our shares are listed on the London Stock Exchange
and the New York Stock Exchange.
About GSK
Printed on Amadeus 100 silk, a 100% recycled paper with full FSC certication. All pulps used are made from 100%
de-inked, post-consumer waste and are elemental chlorine free. The manufacturing mill holds the ISO 14001 and EU
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Giving children a better start
GSK is part of a global coalition working to eliminate ten of the 17 neglected
tropical diseases by 2020. We have committed to donate up to 600 million
treatments of our anti-parasitic treatment, albendazole, each year to help
eliminate lymphatic lariasis and up to 400 million treatments to ght intestinal
worms in school age children. In 2012, we provided albendazole treatment for over
120 million school age children including these children in Ghana (see page 50).
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Read more at www.gsk.com
www.gsk.com
Here you will nd down-loadable PDFs of:
Ahhual ReporI 2012
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CorporaIe RespohsibiliIy ReporI
Head O!!ce ahd RegisIered O!!ce
GlaxoSmithKline plc
980 CreaI WesI Road
Brentford, Middlesex TW8 9GS
United Kingdom
Tel: +44 (0)20 8047 5000
RegisIered humber: 3888792
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