GlaxoSmithKline’s (GSK) Q3 2016 Earnings Call

Sir Andrew Witty – Chief Executive Officer

On the challenge of generics

“I think the fact that we’ve absorbed so much pain on pricing over the last three years actually puts us in a more interesting zone going into the generic cycle. Of course it would have an impact on us. Of course generics would lead to a reduction in sales and profitability from Advair. The question really is to what degree and that is very much determined by just exactly when, what the profile of the generic entry is, and that is not within my control to predict, I am afraid..”

On pricing in US markets

“I think it is important to be conscious of the dynamics around U.S. pricing and it’s not just political dynamics although of course that is what drives a lot of headlines. There are tremendous market forces at work in terms of the way in which the U.S. market is changing, who is making the decisions, who is controlling the lives, that has changed dramatically.”

Good dialogue post-brexit between the industry and the government

“…in terms of the UK government position, I think first of all there is a very good dialogue going on between the industry and government. Of course, the overall strategic framework of the UK’s exit from Europe is not clear or defined, so inevitably there is an absence of black and white decisions and clarity if I can put it that way. But I would say that the number one most important thing that has definitively been confirmed since June 23 is life sciences is one of the top three industrial sectors that Britain wants to swing behind.”

Significant currency tailwinds going forward

“it’s highly likely we will retain a significant currency tailwind into and through much of next year if everything stays as it is today. There was no guarantee of that of course but it’s hard to remember almost that the pound is at 1.50 as recently as June 22. And so for the first of next year, you’re likely to see a very significant currency tailwind.”

M&A is tricky to get done

“I think from the kind of mega cap M&A dimension, I think the possibility of – the economic rationale for that type of thing must be rising if you believe the environment becomes more pressurized from a price perspective. But we are now – certainly when I started in this industry, I think there was 65 companies global drug companies, we’re down to a reasonably small number. These are very big companies typically, but they are complex and we’ve obviously seen a variety of potential or putative transactions launched and then canceled in the last two or three years always for slightly different reasons, but nonetheless they’ve been tricky to get done. And I think that is an issue.”

Simon Dingemans – Chief Financial Officer

The weaker sterling is having an impact

“The impact of a weaker sterling on the reported operating margin varies in the quarter by business with pharma positively affected given its relatively higher proportion of sterling costs while it’s more of a drag for vaccines and consumer.”

In sum

“…another strong quarter execution across the business, reflected in delivery of sales growth, integration and restructuring benefits, improved cash flow, and earnings. And as a result, we are confident in delivering the full-year guidance.”