TIDMGSK
RNS Number : 0165F
GlaxoSmithKline PLC
04 March 2020
GlaxoSmithKline plc
(the 'Company')
Publication of Annual Report 2019
The Company will today publish on its website
www.annualreport.gsk.com its Annual Report for the year ended 31
December 2019 ('Annual Report 2019').
A hard copy version of the Annual Report 2019 and the Notice of
Annual General Meeting 2020 ('AGM Notice') will be sent to those
shareholders who have elected to receive paper communications on or
about 23 March 2020. The AGM Notice will be made available to
shareholders who have not elected to receive paper communications
on the same date.
In compliance with Listing Rule 9.6.1R of the UK Financial
Conduct Authority ('FCA'), the Annual Report 2019 will be submitted
to the UK Listing Authority and will shortly be available for
inspection at the National Storage Mechanism (NSM)
www.morningstar.co.uk/uk/NSM .
The information included in the unaudited preliminary results
announcement released on 5 February 2020, together with the
information in the Appendices to this announcement which is
extracted from the Annual Report 2019, constitute the materials
required by the FCA's Disclosure Guidance and Transparency Rule
6.3.5R. This announcement is not a substitute for reading the
Annual Report 2019 in full. Page and note references in the
Appendices below refer to page and note references in the Annual
Report 2019.
Appendix D to this announcement contains an explanatory note
regarding a revision to the consolidated Balance Sheet included in
the unaudited preliminary results announcement .
V A Whyte
Company Secretary
4 March 2020
Cautionary statement regarding forward-looking statements
GSK cautions investors that any forward-looking statements or
projections made by GSK, including those made in this announcement,
are subject to risks and uncertainties that may cause actual
results to differ materially from those projected. Such factors
include, but are not limited to, those set out in Appendix A of
this announcement. GSK also refers investors to the cautionary
statement on the inside back cover of the Annual Report 2019.
Brand names
Brand names appearing in italics throughout this announcement
are trademarks either owned by and/or licensed to GlaxoSmithKline
or associated companies.
APPIX A
Principal risks and uncertainties
The principal risks discussed below are the risks and
uncertainties relevant to our business, financial condition and
results of operations that may affect our performance and ability
to achieve our objectives. They are the risks that we believe could
cause our actual results to differ materially from expected and
historical results.
During 2019, we continued to embed changes to our risk
management and reporting cycle to help us identify, manage and
report our most important risks across the organisation in a more
consistent and proportionate way. We completed Enterprise Risk
Plans for all of our most important risks and ensured businesses
adopted them and only adapted them with approval. We deployed
confirmation across the organisation, reinforcing leader
accountability for risk management, and measured how well the
controls set out in the Enterprise Risk Plans had been implemented
and gaps closed. We further evolved our risk management process by
introducing new reports to the Board with more focus on data and
key risk indicators, leading to better informed discussions on risk
exposure and action needed. We introduced a new approach to the
annual risk review to support CET decisions on any changes required
to our most important risks.
We are required to comply with a broad range of laws and
regulations which apply to research and development, manufacturing,
testing, approval, distribution, sales and marketing of
Pharmaceutical, Vaccines and Consumer Healthcare products.
These affect not only the cost of product development but also
the time required to reach the market and the likelihood of doing
so successfully on an uninterrupted basis.
As rules and regulations change, government interpretation
evolves, and our business activities change, the nature of a
particular risk may change. Changes to certain regulatory regimes
may be substantial. Any change in, and any failure to comply with,
applicable laws and regulations could materially and adversely
affect our financial results.
Similarly, our global business exposes us to litigation and
government investigations, including but not limited to product
liability litigation, patent and antitrust litigation and sales and
marketing litigation. Litigation and government investigations,
including related provisions we may make for unfavourable outcomes
and increases in related costs such as insurance premiums, could
materially and adversely affect our financial results.
More detail on the status and various uncertainties in our
significant unresolved disputes and potential litigation is set out
in Note 46 'Legal proceedings'.
UK regulations require a discussion of the mitigation activities
a company takes to address principal risks and uncertainties. Below
is a description of each of our principal risks with a summary of
the activities that we take to manage each risk across our
businesses. The principal risks and uncertainties are not listed in
order of significance.
Patient safety
Risk definition
Failure to appropriately collect, review, follow up, or report
human safety information (HSI), including adverse events from all
potential sources, and to act on any relevant findings in a timely
manner.
Risk impact
The risk impact has the potential to compromise our ability to
conduct robust safety signal detection and interpretation and to
ensure that appropriate decisions are taken with respect to the
risk/ benefit profile of our products, including the completeness
and accuracy of product labels and the pursuit of additional
studies/ analyses, as appropriate. Additionally, this risk could
potentially negatively impact our ability to incorporate verified
safety signals into local (country) labelling. This could lead to
potential harm to patients, reputational damage, product liability
claims or other litigation, governmental investigation, regulatory
action such as fines, penalties or loss of product
authorisation.
Context
Pre-clinical and clinical trials are conducted during the
development of investigational Pharmaceutical, Vaccine and Consumer
Healthcare products to determine the safety and efficacy of the
products for use by humans. Notwithstanding the efforts we make to
determine the safety of our products through appropriate
pre-clinical and clinical trials, unanticipated side effects may
become evident only when products are widely introduced into the
marketplace.
Questions about the safety of our products may be raised not
only by our ongoing safety surveillance and post-marketing studies
but also by governmental agencies and third parties that may
analyse publicly available clinical trial results. Constant
vigilance and flexibility are required in order to respond to a
varied regulatory environment which continues to evolve and diverge
globally. Externally, developments in data interrogation present
potential benefits for patient safety but the volume of data to be
analysed presents a significant challenge which intensifies when
coupled with fragmented regulatory requirements and privacy
concerns. In the economic arena, mergers and acquisition activities
introduce data integrity risks. Technology presents a significant
opportunity for patient safety risk management by creating more
reliable data interrogation tools and more accurate data collection
mechanisms, even though the pace of Artificial Intelligence
development has not been as great as once expected. Cyberattacks
are an ever-growing concern given the volume of data and digital
dependency.
The Group is currently a defendant in a number of product
liability lawsuits, including class actions, that involve
significant claims for damages related to our products. Litigation,
particularly in the US, is inherently unpredictable. Class actions
that seek to sweep together all persons who take our products
increase the potential liability. Claims for pain and suffering and
punitive damages are frequently asserted in product liability
actions and, if allowed, can represent potentially open-ended
exposure and thus, could materially and adversely affect the
Group's financial results.
Mitigating activities
The Chief Medical Officer (CMO) is accountable for the patient
safety enterprise risk and has the authoritative role for
evaluating and addressing matters of human safety. The CMO is
supported by an enterprise-wide Safety Governance Board to provide
oversight and management of the control framework, including the
risk management process. Product specific safety governance boards
are in place to ensure that human safety is addressed proactively
throughout the product lifecycle. Each business has a named medical
officer and subsidiary business specific boards provide further
oversight and governance.
It is our policy that employees are required to report
immediately any issues relating to the safety or quality of our
products. Each of our country managers is responsible for
monitoring, exception tracking and training that helps assure the
collection of safety information and reporting the information to
the relevant central safety department, in accordance with policy
and legal requirements.
Once a Group product is approved for marketing, we have an
extensive post-marketing surveillance and signal detection system.
Information on possible side effects of products is received from
several sources including unsolicited reports from healthcare
professionals (HCPs) and patients, regulatory authorities, medical
and scientific literature, traditional media and social media.
Information that changes the risk/benefit profile of one of our
products will result in certain actions to characterise,
communicate and minimise the risk. Proposed actions are discussed
with regulatory authorities and can include modifying the
prescribing information, communications to physicians and other
healthcare providers, restrictions on product
prescribing/availability to help assure safe use, and sometimes
carrying out further clinical trials. In certain cases, it may be
appropriate to stop clinical trials or to withdraw the medicine
from the market.
In 2019, we implemented organisational changes to create a more
flexible, scalable and fit for purpose organisation to meet
changing internal and external demands. We are also investing in
system upgrades and quality checks to reduce risks of individual
case safety reports.
Product quality
Risk definition
Failure by GSK, its contractors or suppliers to ensure:
- Appropriate controls and governance of quality in product development
- Compliance with good manufacturing practice or good
distribution practice regulations in commercial or clinical trials
manufacture and distribution activities
- Compliance with the terms of GSK product licences and supporting regulatory activities
Risk impact
A failure to ensure product quality could have far reaching
implications in terms of patient and consumer safety, delays in
launching products, drug shortages, product recalls, as well as
regulatory, legal, and financial consequences, which could
materially and adversely affect GSK's reputation and financial
results.
Context
The external environment for product quality continues to be
challenging. The single biggest change since 2018 is the political
instability and uncertainty surrounding the delivery of Brexit and
the implications for medicine supply continuity both into and out
of mainland Europe. Two new sets of requirements are due to be
implemented by EMA shortly and we are preparing for both. In the
first quarter of 2020, there will be new reporting requirements on
potential drug shortages and from May 2020 there are new
regulations covering the licensing of medical devices.
Technological developments are increasingly used to both enhance
manufacture and to support the inclusion of packaging features that
help secure the legitimate supply chain e.g. serialisation. The
threat of cyberattacks remains a key risk to the integrity of
product quality data and its audit trail.
Significant changes are taking place in GSK as we implement the
new organisational alignments and IPTc strategy. These changes are
assessed by the Quality organisations to ensure our quality
procedures and governance can facilitate the strategy whilst also
ensuring that no unintended consequences increase our product
quality risk.
Mitigating activities
An extensive global network of quality and compliance
professionals is aligned with each business unit to provide
oversight and assist with the delivery of quality performance and
operational compliance, from site level to senior management level.
Management oversight of those activities is accomplished through a
hierarchy of quality councils and through an independent Chief
Product Quality Officer and Global Product Quality Office that
provides oversight of product quality risk across the company.
We have developed and implemented a single Quality Management
System that defines the quality standards and systems for our
businesses associated with Pharmaceuticals, Vaccines and Consumer
Healthcare products and clinical trial materials. This system has a
broad scope and is applicable throughout the product lifecycle from
R&D to mature commercial supply. It is augmented by a
consolidation of the numerous regulatory requirements defined by
markets across the world which assures that it meets external
expectations for product quality in the markets supplied. It is
based on the internationally recognised principles from the 'ICH
Q10: Pharmaceutical Quality Systems' framework.
The Quality Management System is routinely updated to ensure
that it keeps pace with the evolving external regulatory
environment and with new scientific understanding of our products
and processes. As part of our drive to continually improve the
operational deployment of our Quality Management System, we are
making our policies and procedures simpler to understand and
implement, as well as adopting innovative tools to give a more
user-friendly experience. All staff members are regularly trained
in regulatory expectations, learnings from inspections and current
procedures to ensure continued maintenance of cGMP standards.
We have implemented a risk-based approach to assessing and
managing third party suppliers that provide materials which are
used in finished products. Contract manufacturers making our
products are expected to comply with GSK standards and are
regularly audited to provide assurance that standards are met.
Product Incident Committee processes are in place to investigate
product issues and make recommendations on remediation activities
including where necessary, the recall of product from the
marketplace in order to protect patients and consumers. A
complaints process is also in place to ensure GSK responds to
product quality issues raised by patients and customers.
Allegations of non-compliance or misconduct received through
formal and informal 'Speak Up' channels are reviewed and triaged by
independent functions. Global disciplinary and enforcement
procedures apply to any breaches of our standards, initiated
following an investigation.
Key risk indicators are leveraged to support risk management
activities and we provide the Corporate Executive Team and Risk
Oversight and Compliance Council with an integrated assessment of
product quality performance.
Financial controls and reporting
Risk definition
Failure to comply with current tax laws or incurring significant
losses due to treasury activities; failure to report accurate
financial information in compliance with accounting standards and
applicable legislation.
Risk impact
Non-compliance with existing or new financial reporting and
disclosure requirements, or changes to the recognition of income
and expenses, could expose us to litigation and regulatory action
and could materially and adversely affect our financial results. In
the current period of significant political uncertainty especially
in the USA and UK, there can be significant changes at short
notice. Failure to comply with any changes in the substance or
application of the governing laws covering transfer pricing,
dividends, tax credits, and intellectual property could materially
and adversely affect our financial results.
Significant losses may arise from inconsistent application of
treasury policies, transactional or settlement errors, or
counterparty defaults.
Context
The Group is required by the laws of various jurisdictions to
disclose publicly its financial results and events that could
materially affect the financial results of the Group. Regulators
routinely review the financial statements of listed companies for
compliance with new, revised or existing accounting and regulatory
requirements. The Group believes that it complies with the
appropriate regulatory requirements concerning our financial
statements and disclosure of material information including any
transactions relating to business restructuring such as
acquisitions and divestitures. However, should we be subject to an
investigation into potential non-compliance with accounting and
disclosure requirements, this can lead to restatements of
previously reported results and significant penalties.
Our Treasury group deals in high value transactions, mostly
foreign exchange and cash management transactions, daily. These
transactions involve market volatility and counterparty risk.
The Group's effective tax rate reflects rates of tax in the
jurisdictions in which the Group operates that are both higher and
lower than the UK rate and considers regimes that encourage
innovation and investment in science by providing tax incentives
which, if changed, could affect the Group's tax rate. In addition,
the worldwide nature of our operations means that our intellectual
property, R&D and manufacturing operations are centered in
several key locations. A consequence of this is that our
cross-border supply routes, necessary to ensure supplies of
medicines into numerous end markets, can be complex and result in
conflicting claims from tax authorities as to the profits to be
taxed in individual countries. Tax legislation itself is also
complex and differs across the countries in which we operate. As
such, tax risk can also arise due to differences in the
interpretation of such legislation. The tax charge included in our
financial statements is our best estimate of tax liability pending
audits by tax authorities.
We expect there to be continued focus on tax reform driven by
initiatives of the Organisation for Economic Cooperation &
Development to address the taxation of the digital economy and
European Commission initiatives including the use of fiscal state
aid investigations. Together with domestic initiatives around the
world, these may result in significant changes to established tax
principles and an increase in tax authority disputes. These,
regardless of their merit or outcomes, can be costly, divert
management attention and may adversely impact our reputation and
relationship with key stakeholders.
Mitigating activities
Financial results are reviewed and approved by regional
management and then reviewed with the Financial Controller and the
Chief Financial Officer (CFO). This allows our Financial Controller
and our CFO to assess the evolution of the business over time, and
to evaluate performance to plan. Significant judgments are reviewed
and confirmed by senior management. Technical or organisational
transformation and newly acquired activities are integrated into
risk assessments and appropriate controls and reviews are
applied.
We maintain a control environment designed to identify material
errors in financial reporting and disclosure. The design and
operating effectiveness of key financial reporting controls are
regularly reviewed by management and tested by external third
parties. A minimum standard control set is in place for all finance
locations irrespective of size and reviewed by management and
monitored independently. This provides us with the assurance that
controls over key financial reporting and disclosure processes have
operated effectively. Our Global Finance Risk Management and
Controls Centre of Excellence provides extra support during
significant transformations such as system deployment or
management/structural reorganisations. We also add operational
resources to ensure processes and controls are maintained during
such changes. Additional risk mitigation has been introduced by
amending the programme timelines of system upgrades to optimize
delivery.
The Disclosure Committee, reporting to the Board, reviews the
Group's quarterly results and Annual Report and determines
throughout the year, in consultation with its legal advisors,
whether it is necessary to disclose publicly information about the
Group through Stock Exchange announcements. We keep up-to-date with
the latest developments in financial reporting requirements by
working with our external auditor and legal advisors.
The Treasury Management Group meets on a regular basis to seek
to ensure that liquidity, interest rate, counterparty, foreign
currency transaction and foreign currency translation risks are all
managed in line with the conservative approach as detailed in the
associated risk strategies and policies which have been adopted by
the Board.
Counterparty exposure is subject to defined limits approved by
the Board for both credit rating and individual counterparties.
Oversight of Treasury's role in managing counterparty risk in line
with agreed policy is performed by a Corporate Compliance Officer,
who operates independently of Treasury. Further details on
mitigation of Treasury risks can be found on pages 227 to 229, Note
43 'Financial instruments and related disclosures'.
Tax risk is managed through robust internal policies, processes,
training and compliance programmes to ensure we have alignment
across our business and meet our tax obligations. We seek to
maintain open, positive relationships with governments and tax
authorities worldwide and we welcome constructive debate on
taxation policy. We monitor government debate on tax policy in our
key jurisdictions to deal proactively with any potential future
changes in tax law. We engage advisors and legal counsel to confirm
the implications for our business of tax legislation. Where
appropriate, we are active in providing relevant business input to
tax policy makers. Significant decisions are submitted for
consideration to the Tax Governance Board which meets quarterly and
comprises senior personnel from across GSK's Finance division.
Our tax affairs are managed on a global basis through a
coordinated team of tax professionals led by the Global Head of Tax
who works closely with the business. Our tax professionals are
suitably qualified for the roles they perform, and we support their
training needs in order that they continue to be able to provide up
to date technical advice. We submit tax returns according to
statutory time limits and engage with tax authorities to seek to
ensure our tax affairs are current, entering arrangements such as
Continuous Audit Programmes and Advance Pricing Agreements where
appropriate. These agreements provide long-term certainty for both
tax authorities and for us over the tax treatment of our business.
In exceptional cases where matters cannot be settled by agreement
with tax authorities, we may have to resolve disputes through
formal appeals or other proceedings.
Anti-bribery and corruption (ABAC)
Risk definition
The ABAC risk comprises five sub-risk areas:
- Bribery of public officials by GSK
- Bribery of commercial and other non-public entities by GSK
- Bribery by third parties acting on behalf of GSK
- GSK employees receiving and/or requesting bribes and/or other undue personal benefit
- Other corruption-non-compliance with laws and regulations
related to money laundering or facilitation of tax evasion by third
parties/clients/partners.
Risk impact
Failure to mitigate this risk could expose the Group and
associated persons to governmental investigation, regulatory
action, and civil and criminal liability and may compromise the
Group's ability to supply its products under certain government
contracts. In addition to legal and financial penalties, a failure
to prevent bribery through complying with ABAC legislation and
regulations could have substantial implications for the reputation
of the company, the credibility of senior leaders, and an erosion
of investor confidence in our governance and risk management.
Context
The macro risk level remains unchanged as we continue to see
legal frameworks similar to the UK and US develop in emerging
economies; high standards are expected of individuals and
corporations aided by improved technology and increased
enforcement.
The overall environment for ABAC in 2019 remained challenging.
Divergence of legislation is making compliance harder and countries
are increasingly holding individuals accountable as well as
corporations, increasing the employer duty of care. Society is
holding corporations to ever higher standards with technology
providing a speedy and anonymous avenue for dissemination of
previously privileged information or even damaging false reports.
Enforcement actions and penalties have increased across the globe
with focus on use of third-party intermediaries. Supportive aspects
of new policies include Latin America moving towards compliance
regimes like those established by the US and UK. In India there was
an amendment of the Corruption Act (2018) which explicitly makes an
offence to pay a bribe. China has introduced significant
anti-bribery and anti-corruption/legislative and regulatory
reforms.
The GSK exposure remains unchanged.
Mitigating activities
Programme governance is provided through Enterprise Risk
Management overseen by the ABAC/TPO Governance Board which includes
representation from key functional areas and the business. This
joint board was created in 2019 to ensure strategic focus across
the two principle risk areas as they have considerable
co-dependency.
We have an enterprise-wide ABAC programme designed to ensure
compliance with our ABAC policies and mitigate the risk of bribery
and corruption. It builds on our business standards, values and
expectations to form a comprehensive and practical approach to
compliance and is flexible to the evolving nature of our
business.
We have appropriate controls in place such as training,
awareness raising, strong monitoring around transactions and
payments to third parties. We plan to continue with pre and
post-transaction ABAC due diligence, increase the capabilities in
the business on monitoring, oversight and red flag resolution of
third parties; review controls and accountabilities of government
officials. We continue to understand and assess our
money-laundering risk exposure and mitigate any existing risk.
Our Code of Conduct, values and expectations, and commitment to
zero tolerance are integral to how we mitigate this risk. In light
of the complexity and geographic breadth of this risk, we
constantly evolve our oversight of activities and data, reinforce
to our workforce clear expectations regarding acceptable
behaviours, and maintain regular communications between the centre
and local markets.
Our ABAC programme is built on best in class principles and is
subject to ongoing review and development. It provides us with the
basis from which we seek to manage the risk from top down and
bottom up. For example, the programme comprises top-level
commitment from the Board of Directors and leadership, and a new
data analytics programme to create and embed local key risk
indicators to enable targeted intervention and risk management
activities.
The programme is underpinned by a global ABAC policy and written
standards that address commercial and other practices that give
rise to ABAC risk. In addition, the programme mandates enhanced
controls over interactions with government officials and during
business development transactions. Controls in our ABAC policy
establish due diligence requirements for the engagement of third
parties. The ABAC team continually works together with the TPO team
to address and improve controls and monitoring requirements when
engaging third parties.
We provide mandatory periodic ABAC training to our staff and
relevant third parties in accordance with their roles,
responsibilities and the risks they face.
We have a dedicated ABAC team responsible for the implementation
and evolution of the programme in response to developments in the
internal and external environment. For example, in 2019 we
introduced a global process to centrally document conflicts of
interest (COI) of employees and complementary workers supported by
a simpler policy to ensure we can collate and report on COI
management in the organisation.
This is complemented with independent oversight and assurance
undertaken by the Audit & Assurance and Independent Business
Monitoring teams. Issues identified during oversight and assurance
exercises as well as resulting from investigations are used to
identify areas for specific intervention in the markets as well as
to continuously improve the programme.
We continually benchmark our ABAC programme against other large
multinational companies and use external expertise and internal
insights to drive improvements in the programme.
Formal and informal 'Speak Up' channels are available to report
misconduct or non-compliance. Allegations of non-compliance are
reviewed and triaged by the central investigations team and
allocated for investigation as appropriate.
Commercial practices
Risk definition
Failure to engage in commercial activities that are consistent
with the letter and spirit of the law, industry, or the Group's
requirements relating to marketing and communications about our
medicines and associated therapeutic areas; appropriate
interactions with healthcare professionals (HCPs) and patients; and
legitimate and transparent transfer of value.
Risk impact
Failure to manage risks related to commercial practices could
materially and adversely affect our ability to deliver our strategy
and long-term priorities. Failure to comply with applicable laws,
rules and regulations may result in governmental investigation,
regulatory action and legal proceedings brought against the Group
by governmental and private plaintiffs which could result in
government sanctions, and criminal and/or financial penalties.
Failure to provide accurate and complete information related to our
products may result in incomplete awareness of the risk/benefit
profile of our products and possibly suboptimal treatment of
patients and consumers. Any practices that are found to be
misaligned with our values could also result in reputational harm
and dilute trust established with external stakeholders.
Context
We continue to evolve our business operations (including
acquisitions and joint ventures) to operate on a global basis in an
industry that is both highly competitive and highly regulated. Our
competitors may make significant product innovations and technical
advances and may intensify price competition. In light of this
competitive environment, continued development of commercially
viable new products and the development of additional uses for
existing products that reflect insights which help ensure those
products address the needs of patients/consumers, HCPs, and payers
are critical to achieve our strategic objectives.
As other pharmaceutical, vaccine and consumer companies, we face
downward price pressure in major markets, declining emerging market
growth, rapidly evolving digital landscape, and negative foreign
exchange impact.
Developing new Pharmaceutical, Vaccine and Consumer Healthcare
products is a costly, lengthy and an uncertain process. A product
candidate may fail at any stage, including after significant
economic and human resources have been invested. Our competitors'
products or pricing strategies, or any failure on our part to
develop commercially successful products, or to develop additional
uses for existing products, could materially and adversely affect
our ability to achieve our strategic objectives.
We are committed to the ethical and responsible
commercialisation of our products to support our purpose to improve
the quality of human life by enabling people to do more, feel
better, and live longer. To accomplish this purpose, we engage the
healthcare community in various ways to provide important
information about our medicines.
Promotion of approved products seeks to ensure that HCPs
globally have access to information they need, that patients and
consumers have access to the information and products they need and
that products are prescribed, recommended or used in a manner that
provides the maximum healthcare benefit to patients and consumers.
We are committed to communicating information related to our
approved products in a responsible, legal and ethical manner.
Mitigating activities
Our strategic objectives are designed to ensure we achieve our
purpose of helping people do more, feel better and live longer. We
continue to strive for new product launches that are competitive
and resourced effectively. We also strive to have a healthy
proportion of the Group's sales ratio attributable to new product
or innovation sales.
This innovation helps us defray the effect, for example, of
downward price pressure in major markets, declining emerging market
growth, rapidly evolving digital landscape, and negative foreign
exchange impact. Establishing new products that are priced to
balance expectations of patients and consumers, HCPs, payers,
shareholders, and the community enables us to maintain a strong
global business and remain relevant to the needs of patients and
consumers. Our values and behaviours provide a guide for how we
lead and make decisions. We constantly strive to do the right thing
and deliver quality products and ensure supply is sustained to meet
customer needs and demand requirements, seeking to ensure our
actions reflect our values, behaviours and the purpose of our
company.
We have taken action to enhance and improve standards and the
application of data analytics and e-commerce channels. We have
policies and standards governing commercial activities undertaken
by us or on our behalf. Training has been implemented to support
the evolution of our activities to all relevant employees. All of
these activities we conduct worldwide must conform to high ethical,
regulatory, and industry standards. Where local standards differ
from global standards, the more stringent of the two applies. Where
the standards of an acquired company or joint venture partner
differ from our global standards, we will expediently remediate
legacy policies and implement revisions to gain alignment. We have
harmonised policies and procedures to guide above-country
commercial practice processes as well as clarified applicable
standards for operations in the various markets in which we
operate. Each business has adopted the Internal Control Framework
to support the assessment and management of its risks. Commercial
practices activities have appropriate monitoring programmes and
oversight from business unit Risk Management and Compliance Boards
that manage risks across in-country business activities. Where in
the past we have fallen below our own or any other regulatory or
industry standards, we have sought to improve both the framework
and culture for our compliance processes.
All promotional materials and activities must be reviewed and
approved according to our policies and standards, and conducted in
accordance with local laws and regulations, to seek to ensure that
these materials and activities fairly represent the products or
services of the Group. When necessary, we have disciplined (up to
and including termination) employees who have engaged in misconduct
and claw back remuneration from senior management in the event of
misconduct.
We made changes to our incentive programme for our
Pharmaceutical and Vaccines sales representatives to better
recognise and reward individual effort. Specifically, in Specialty
Care, the capped variable pay element of a sales representative's
compensation will be evaluated on the basis of individual sales
targets. The changes were implemented in the US, UK and Canada from
July 2019 supported by a comprehensive training, control, and
monitoring framework to ensure implementation of the new programme
is fully aligned with GSK's values-based approach to HCP
engagement.
We allow fair market value payments to be made by GSK to expert
practitioners to speak about our innovative medicines and vaccines
in a limited number of countries during a restricted time period in
a product's lifecycle. Controls and training ensure appropriate
oversight across the markets. We report payments to individual HCPs
as part of our commitment to transparency and responsible
disclosure.
Consumer Healthcare has developed a Digital risk plan to support
implementation of a robust control framework. Actions include
development of new written standards, use of tools to increase
visibility and control over social media presence, and an increase
in management monitoring.
GSK is committed to comply with all applicable sanctions laws
and regulations, and it has deployed a sanctions programme designed
to enable management of sanctions risk. The programme, owned by
Finance, comprises of various systems and controls including, but
not limited to, policies and procedures, training and awareness,
screening, monitoring and risk reporting.
Privacy
Risk definition
The failure to collect, secure, use and destroy personal
information (PI) in accordance with data privacy laws can lead to
harm to individuals and GSK, including fines and operational,
financial and reputational risk.
Risk impact
Non-compliance can lead to harm to individuals and GSK. It can
also damage trust between GSK and individuals, communities,
business partners and government authorities.
The General Data Protection Regulation (GDPR), with other
privacy legislation following suit, increased the enforcement
powers of supervisory authorities, including the ability to impose
fines and to suspend processing of PI. GDPR and other privacy laws
also give individuals the right to bring collective legal actions
against GSK for failure to comply with data privacy laws.
Context
Data privacy legislation is diverse with limited harmonisation
or simplification, despite Europe's adoption of GDPR. It is
challenging for multi-nationals to standardise their approach to
compliance with data privacy laws due to the high-level of local
variation. Governments are enforcing compliance with data privacy
laws more rigorously. The focus on the ethical use of PI is
growing, over and above compliance with data privacy laws, due to
an increase in data volume processed and advancements in
technology. Individuals are more aware of their rights under data
privacy laws.
Mitigating activities
The Chief Compliance Officer is also the chairperson of the
Privacy Governance Board (PGB), which oversees GSK's overall data
privacy operating model. Each business and function have appointed
a Risk Owner who is accountable for the oversight of privacy risks
in that business or functional area. They are supported by Privacy
Leaders within their business or function. Additionally, in some
countries data privacy laws require a Data Protection Officer (DPO)
to be appointed. GSK has appointed a single DPO for the European
Union, who is represented and supported in specific countries by
Country Privacy Advisors. The Chief Compliance Officer is the
Enterprise Risk Owner (ERO). The ERO has appointed a delegate risk
owner, the Global Privacy Officer (GPO) who has accountability on a
day-to-day basis for designing and implementing the control
framework. The GPO co-leads the cross-functional Privacy Centre of
Excellence (CoE), together with the Global Privacy Counsel. They
are supported by Privacy Officers and Privacy Counsel for each
Region and multiple Country Privacy Advisors (who are familiar with
local privacy regulations).
GSK has evolved the initial control framework implemented for
GDPR to be a comprehensive privacy control framework based on
global privacy principles common across many local privacy laws.
This global framework is now being deployed in countries with
robust privacy legislation in place or coming into effect soon to
strengthen local risk mitigation measures
The Privacy Centre of Excellence in Global Ethics and Compliance
is responsible for (i) improving the control framework further;
(ii) implementing the control framework outside of the European
Economic Area; (iii) remediating certain existing business
activities to ensure compliance with GDPR and (iv) deploying a
comprehensive training programme to drive greater awareness and
accountability for managing PI across the entire organisation. Key
roles of the privacy network at GSK will be certified with an
accredited international privacy association.
Through monitoring, we continuously improve our processes, such
as issue identification, reporting and handling. We have
implemented a legislative scanning process to detect and assess new
privacy regulations early allowing us to prepare and mitigate
regulatory risk to GSK. The Privacy Centre of Excellence is
involved in new business development opportunities at an early
stage to ensure appropriate due diligence is performed and the
right steps are taken when onboarding or splitting off a business
unit.
Research practices
Risk definition
Research practices risk is the failure to adequately conduct
ethical and sound pre-clinical and clinical research. In addition,
it is the failure to engage in scientific activities that are
consistent with the letter and spirit of the law and industry, or
the Group's requirements. It comprises the following sub-risks:
Non-clinical & laboratory research; Human subject research;
Data integrity; Care, welfare and treatment of animals; Human
biological samples management; Data disclosure; Regulatory filings
and engagement; Scientific engagement; and Intellectual
property.
Risk impact
The impacts of the risk include harm to human subjects,
reputational damage, failure to obtain the necessary regulatory
approvals for our products, governmental investigation, legal
proceedings brought against the Group by governmental and private
plaintiffs (product liability suits and claims for damages), loss
of revenue due to inadequate patent protection or inability to
supply GSK products, and regulatory action such as fines,
penalties, or loss of product authorisation. Any of these
consequences could materially and adversely affect our financial
results and cause loss of trust from our customers and
patients.
Context
Research relating to animals can raise ethical concerns however,
in many cases, research in animals is the only method that can be
used to investigate the effects of a potential new medicine in a
living body other than in humans. Animal research provides critical
information about the causes and mechanisms of diseases and
therefore remains a vital part of our research. We continually seek
ways in which we can minimise our use of animals in research whilst
complying with regulatory requirements and reduce the impact on the
animals used.
Clinical trials in healthy volunteers and patients are used to
assess and demonstrate an investigational product's efficacy and
safety, or further evaluate the product once it has been approved
for marketing. We also work with human biological samples. These
samples are fundamental to the discovery, development and safety
monitoring of our products. GSK is committed to ensuring that human
biological samples are managed in accordance with relevant laws,
regulations and ethical principles, in a manner that respects the
interests of the sample donors.
The integrity of our data is essential to success in all stages
of the research data lifecycle: design, generation, recording and
management, analysis, reporting, storage and retrieval. Our
research data is governed by legislation and regulatory
requirements. Research data and supporting documents are core
components at various stages of pipeline progression
decision-making and form the content of regulatory submissions,
publications and patent filings. Poor data integrity can compromise
our research efforts and negatively impact company reputation.
There are innate complexities and interdependencies required for
regulatory filings, particularly given our global research and
development footprint. Continually changing and increasingly
stringent submission requirements continue to increase the
complexity of worldwide product registration. The continued supply
of GSK medicines to patients is dependent on the ongoing compliance
and maintenance of these licenses across many geographies whose
requirements and timelines differ. The secure management of the
high volume of lifecycle changes to these licenses and their
renewal is critical to enable compliant supply. Failure to maintain
licenses will directly impact patients and company revenue.
Scientific engagement, defined as the interaction and exchange
of information between GSK and external communities to advance
scientific and medical understanding, including the appropriate
development and use of our products, is an essential part of
scientific discourse. Such non-promotional engagement with external
stakeholder groups is vital to GSK's purpose and necessary for
scientific and medical advance. Scientific engagement activities
are essential but present legal, regulatory, and reputational risk
if the sharing of data, invited media coverage or payments to HCPs
have, or are perceived to have, promotional intent.
A wide variety of biological materials are used by GSK in
discovery, research and development phases. Through the Convention
on Biological Diversity (CBD) and the Nagoya Protocol, the
international community has established a global framework
regulating access to, and use of, genetic resources of non-human
origin in R&D.
We support the principles of access and benefit sharing to
genetic resources as outlined in the CBD and the Nagoya Protocol,
recognising the importance of appropriate, effective and
proportionate implementation measures at national and regional
levels.
Patent rights are awarded to protect innovation and play an
important role in providing GSK with a competitive advantage in the
market for a limited period of time. Any loss of patent protection
in a market for GSK's products developed through our R&D,
including reducing the term, availability or scope of patent
rights, could materially and adversely affect our financial results
in that market. Absence of adequate patent or data exclusivity
protection, which could lead to, for example, competition from
manufacturers of generic or biosimilar pharmaceutical products,
could limit the opportunity to rely on such markets for future
sales growth for our products, which could also materially and
adversely impact our financial results.
Following expiration of certain intellectual property rights, a
generic or biosimilar manufacturer may lawfully produce a generic
version of a product. Introduction of generic products typically
leads to a rapid and dramatic loss of sales and reduces our
revenues and margins for our proprietary products.
Mitigating activities
We have an established Office of Animal Welfare, Ethics and
Strategy (OAWES), led by the Chief Veterinary Officer, that
supports the humane and responsible care of animals, shares
knowledge and advocates for the application of non-animal
alternatives. The OAWES provides a framework of animal welfare
governance, promotes application of 3Rs (replacement, refinement
and reduction of animals in research), conducts quality
assessments, manages a program of external animal diligence, and
develops and deploys strategies on reproducibility and
translatability.
The Chief Medical Officer oversees the following enterprise
Medical Governance Boards:
- The Human Subject Research Board is in place to provide
oversight for the human subject research sponsored and supported by
us to ensure it conforms to ethical, medical and scientific
standards
- The Data Disclosure Board provides oversight for disclosure of
our sponsored and supported human subject research. We make
information available on our clinical studies, including summaries
of the results - whether positive or negative. We were the first
company to publish clinical study reports that form the basis of
submissions to regulatory agencies and we have publicly posted more
than 2,500 clinical study reports in addition to more than 6,000
study result summaries
- Specific accountability and authorisation for scientific
engagement is overseen by the Scientific Engagement and Promotional
Practices Board. This Board is responsible for oversight of
applicable policies and seeking to ensure the highest level of
integrity and continuous development of scientific engagement
We have a Global Human Biological Samples Management (HBSM)
governance framework in place to oversee the ethical and lawful
acquisition and management of human biological samples. Our HBSM
Enterprise Risk Management Team works to minimise the risks related
to the acquisition, storage, use, transfer, and disposal of
HBS.
It remains an important priority to enhance our data integrity
controls. Data Integrity Committees are in place to provide
oversight and Data Integrity Quality Assurance teams conduct
assessments to provide independent business monitoring of our
internal controls for R&D activities.
The Regulatory Governance Board serves as the global regulatory
risk management and compliance board, promoting compliance with
regulatory requirements and procedures, and oversees Group-wide
written standards for cross business regulatory processes. A
significant program is in progress to transform regulatory
information management systems to replace and modernise information
systems cross-enterprise.
We established an Access and Benefit Sharing Centre of
Excellence to oversee applicable requirements and enforcement
measures for the acquisition and use of genetic material of
non-human origin in scope of the Nagoya Protocol.
R&D maintains and controls pre-publication procedures to
guard against public disclosure in advance of filing patent
applications. In addition, because loss of patent protection can
occur due to lack of data integrity in preparing patent application
data and information, legal experts collaborate with R&D to
support the review process for new patent applications.
The Research practices risk is overseen by an Enterprise
framework that seeks to ensure strengthened governance across the
R&D businesses in Pharmaceuticals, Vaccines and Consumer
Healthcare.
Under the leadership of the Research Practices Enterprise Risk
Owner, management of the risk takes a pragmatic approach to
information sharing, streamlining risk identification and
escalation, while ensuring ownership stays with the business.
Third party oversight (TPO)
Risk definition
There is a risk that our third parties fail to meet their
contractual, regulatory or ethical obligations resulting in
significant operational, reputational, legal and financial risk for
GSK (and in some cases our employees directly).
Put simply, there is a risk that third parties fail to deliver
the goods and services we expect or fail to deliver them in a legal
and compliant way.
Risk impact
Failure to adequately manage third party relationships could
result in business disruption and exposure to risks ranging from
sub-optimal contractual terms and conditions, to severe business
and legal sanctions and/or significant reputational damage. Any of
these consequences could materially and adversely affect our
business operations and financial results.
Context
Third parties are critical to our business delivery and are an
integral part of the solution to meeting our business objectives.
We rely on third parties, including suppliers, advisors,
distributors, individual contractors, licensees, and other
pharmaceutical and biotechnology collaboration partners for
discovery, manufacture, and marketing of our products and for
supporting other important business processes.
These business relationships present a material risk. For
example, we share critical and sensitive information such as
marketing plans, clinical data, and employee data with specific
third parties who are conducting the relevant outsourced business
activities. Inadequate protection or misuse of this information by
third parties could have significant business impact. Similarly, we
use distributors and agents in a range of activities such as
promotion and tendering which have inherent risks such as
inappropriate promotion or corruption. Insufficient internal
compliance and controls by the distributors could affect our
reputation. These risks are further increased by the complexities
of working with large numbers of third parties across a diverse
geographical spread.
Mitigating activities
To guide and enforce our global principles for interactions with
third parties we have a global policy framework applicable to
buying goods and services, managing our external spend, paying and
working with our third parties. This policy framework applies to
all employees and complementary workers worldwide.
The enterprise-wide TPO programme takes an enterprise-wide view
of third party related risks to ensure compliance with our ABAC
policies and additional risks such as Labour Rights, Health and
safety and Human safety information. It forms a comprehensive and
practical approach to third party oversight that is flexible to the
evolving nature of our business and the type of engagement being
managed. The programme is designed and governed through the Global
Ethics and Compliance organisation and has been globally deployed.
The operational service assisting the business in completion of
assessments transitioned to Global Procurement in early 2019 to
bring it closer to other core procurement processes. TPO has
strengthened risk assessment, contractual terms and due diligence
efforts on third parties and improved the overall management of our
third party risks through the lifecycle of the third party
engagement.
We have a dedicated TPO team responsible for the implementation
and evolution of the programme in response to developments in the
internal and external environment. Programme governance is provided
through Enterprise Risk Management overseen by the ABAC and TPO
Governance Board which includes representation from key functional
areas and the business. This joint board was created in 2019 to
ensure strategic focus across the two principle risk areas as they
have considerable co-dependency. An example of this is the new ABAC
Conflict of Interest tool which better protects GSK when working
with third parties. Global Ethics and Compliance are working with
the Global Procurement, Legal and Tech organisations to plan
further simplifications in order to maintain oversight and reduce
complexity for the business.
Each business leadership team retains ultimate accountability
for managing third party interactions and risks. When working with
third parties, our employees are expected to manage external
interactions and commitments responsibly. This expectation is
embedded in our values and Code of Conduct. It is our
responsibility that all activities carried out on our behalf are
performed safely and in compliance with applicable laws and our
values, expectations, standards and Code of Conduct (See ABAC
report above).
Our programme is complemented with independent oversight and
assurance undertaken by the Audit & Assurance and Independent
Business Monitoring teams. We review the TPO programme against
other large multinational companies and use external expertise and
internal insights to drive improvements in the programme.
Environment, health & safety and sustainability
(EHS&S)
Risk definition
Failure in management of:
- execution of hazardous activities;
- GSK's physical assets and infrastructure;
- handling and processing of hazardous chemicals and biological agents;
- control of releases of substances harmful to the environment
in both the short and long term; leading to incidents which could
disrupt our R&D and Supply activities, harm employees, harm the
communities we operate in and harm the environment and its
longer-term sustainability.
Risk impact
Failure to manage EHS&S risks could lead to significant harm
to people, the environment and communities in which we operate,
fines, failure to meet stakeholder expectations and regulatory
requirements, litigation or regulatory action, and damage to the
Group's reputation, which could materially and adversely affect our
financial results.
Context
GSK is subject to health, safety and environmental laws of
various jurisdictions. These laws impose duties to protect people,
the environment, and the communities in which we operate, as well
as potential obligations to remediate contaminated sites. Overall,
our control framework for managing EHS&S risk is effective and
our frequency of serious events is similar to peers and lower than
for high hazard industries e.g. petrochemicals.
Mitigating activities
The Corporate Executive Team (CET) is responsible for EHS&S
governance and risk oversight and ensures there is an effective
control framework in place and in use to manage the risks, impacts
and legal compliance issues that relate to EHS&S across each of
our businesses. This includes assigning responsibility to senior
managers for providing and maintaining those controls and ensuring
that tiered monitoring and governance processes are in place within
their businesses. Individual managers seek to ensure that the
EHS&S control framework is effective and well implemented in
their respective business area and that it is fully compliant with
all applicable laws and regulations, adequately resourced,
maintained, communicated, and monitored. Additionally, each
employee is personally responsible for ensuring that all applicable
local standard operating procedures are followed by them and
expected to take responsibility for EHS&S matters.
Our risk-based, proactive approach is articulated in our Global
EHS&S policy and detailed in our global EHS&S standards
against which we audit all our operations to ensure compliance. We
ensure hazards are appropriately controlled through safe design of
facilities, plant and equipment and by following rigorous
procedures that help us provide effective barriers to protect
employees' health and well-being.
Control of antibiotic emissions from manufacturing effluents, is
an increasing concern for a number of stakeholders (forming part of
their wider concern around AMR - antimicrobial resistance). To
address this, we are ensuring that all our own manufacturing
facilities and those of our suppliers are following good
operational practice and meeting emission limits as defined by the
AMR Alliance Manufacturing Framework.
During the year we made an assessment of our business resilience
to climate change against the Task Force on Climate-related
Financial Disclosures (TCFD) framework guidelines. We did not
identify any fundamental risks to our overall business.
Information security
Risk definition
The risk that unauthorised disclosure, theft, unavailability or
corruption of GSK's information or key information systems may lead
to harm to our patients, workforce and customers, disruption to our
business and/or loss of commercial or strategic advantage, damage
to our reputation or regulatory sanction.
Risk impact
Failure to adequately protect critical and sensitive systems and
information may result in loss of commercial or strategic advantage
and could materially affect our ongoing business operations, such
as scientific research, clinical trials and manufacturing and
supply chain activities.
Further, inadequately applying controls that would be expected
of GSK may result in regulatory fines or present a reputational
risk to the organisation.
Context
We rely on critical and sensitive systems and data, such as
corporate strategic plans, intellectual property, manufacturing
systems and trade secrets. There is the potential that our computer
systems or information may be exposed to misuse or unauthorised
disclosure.
GSK operates a highly 'connected' information network that
exposes our confidential research and development, manufacturing,
commercial, workforce and financial data to the risk of external
attacks. GSK's Digital and Data Analytics Strategy also
substantially increases the businesses dependency on digital assets
and distributed data, while increasing the number of assets
potentially impacted by a cyberattack. As threats evolve, we cannot
provide broad assurances that the significant efforts we deliver in
the protection and monitoring of our systems and information will
always be successful in preventing compromise or disruption.
Cybersecurity losses increasingly involve highly-resourced and
organised threat actors such as nation-states and online criminal
collectives targeting GSK's large and complex information
technology (IT) and operational technology (OT) footprint, as well
as the systems of our supply chain partners (including outsourced
operations).
This means that our systems and information have been and will
continue to be the target of cyberattacks. Additionally, extensive
use of third parties to store and process our data increases GSK's
reliance on suppliers to operate effectively. This dependence
increases the complexity around security controls and practices. It
also reduces GSK's ability to monitor controls and effectively
investigate and respond to incidents involving GSK information or
systems. While GSK stands at the ready to address cybersecurity
incidents and risks as they occur, in the past year GSK has not
experienced a material cybersecurity incident that would have
resulted in substantial harm to GSK (e.g., injury to reputation,
financial performance, and customer and vendor relationships).
Mitigating activities
We have a global information security policy and accompanying
information technology standards and processes that are supported
through a dedicated team and programme of activity. The GSK
Technology, Security, and Risk function provides strategy,
direction, and oversight, including active monitoring of
cybersecurity, while enhancing our global information security
capabilities, through an ongoing programme of investment. The
following mitigation activities represent the significant
investments we have made in the past year and will continue to
improve in the coming year:
- Engaging external expertise and next generation tools to fully
map and inventory IT and OT environment to enable high confidence
of a real time snapshot of all connected devices within the network
and improve our patching timeframe on some systems from months to
weeks/days.
- A site technology refresh plan has been approved and underway
for the GSK's most substantial sites.
- A significant upgrade of tools is funded and progressing focused on key control areas.
- GSK's core information technology organisation, information
security organisation, and business units are working together to
validate critical apps and data stores to ensure we have adequate
backup and restore capabilities.
- A new unified security standard has been approved across all
sites and an operational technology security office has been
established under the CISO. Tooling in IT is being extended with
each deployment in the OT programme.
- Deployment of new tools and a prioritised deployment plan for
identity and access management is fully resourced and is moving at
speed addressing financial and manufacturing systems as priorities
for 2019 and will continue for the balance of systems over the
coming years.
- A plan for the enhancement of third-party practices to
automate the visibility of security of critical vendors has been
established and is in process.
- A team dedicated solely to securing our systems and data
during our expansion in growth markets (e.g. China) has been formed
and is being overseen by the CISO.
Supply continuity
Risk definition
Failure to deliver a continuous supply of compliant finished
product; inability to respond effectively to a crisis incident in a
timely manner to recover and sustain critical operations.
Risk impact
We recognise that failure to supply our products can adversely
impact consumers and patients who rely on them. A material
interruption of supply or exclusion from healthcare programmes
could expose us to litigation or regulatory action and financial
penalties that could adversely affect the Group's financial
results. The Group's international operations, and those of its
partners, expose our workforce, facilities, operations and
information technology to potential disruption from natural events
(e.g. storm, earthquake), man-made events (e.g. trading barriers
imposed at short notice, civil/political unrest, terrorism), and
global emergencies (e.g. coronavirus outbreak, Ebola outbreak, flu
pandemic). It is important that we have robust crisis management
and recovery plans in place to manage such events.
Context
Our supply chain operations are subject to review and approval
by various regulatory agencies that effectively provide our license
to operate. Failure by our manufacturing and distribution
facilities or by suppliers of key services and materials could lead
to litigation or regulatory action such as product recalls and
seizures, interruption of supply, delays in the approval of new
products, and suspension of manufacturing operations pending
resolution of manufacturing or logistics issues.
We rely on materials and services provided by third party
suppliers to make our products, including active pharmaceutical
ingredients, antigens, intermediates, commodities, and components
for the development, manufacture and packaging of Pharmaceutical,
Vaccine and Consumer Healthcare products. Some of the third-party
services procured, such as services provided by contract
manufacturing and clinical research organisations to support
development of key products, are important to ensure continuous
operation of our business.
Although we undertake risk mitigation, we recognise that certain
events could nevertheless still result in delays or service
interruptions. We use effective crisis management and business
continuity planning to provide for the health and safety of our
people and to minimise impact to us, by maintaining functional
operations following a natural or man-made disaster, or a public
health emergency.
Mitigating activities
The supply chain model adopted in Pharmaceuticals, Vaccines and
Consumer Healthcare business units is designed to ensure the
supply, quality and security of our products globally, as far as
possible.
Supply Chain Governance Committees within each business unit are
used to closely monitor the inventory status and delivery of our
products, with the aim of ensuring that customers have the products
they need. Improved links between commercial forecasting and
manufacturing made possible by our core commercial cycle should,
over time, reduce the risk associated with demand fluctuations and
any impact on our ability to supply or the cost of write-offs where
products exceed their expiry date. Each node of the supply chain is
also periodically reviewed to ensure adequate safety stock, while
balancing working capital in our end-to-end supply chain.
Particular attention is placed on mitigating supply risks
associated with medically critical and high-revenue products.
We routinely monitor the compliance of manufacturing external
suppliers and service providers to identify and manage risks in our
supply base. Where practical, we minimise our dependence on single
sources of supply for critical items. Where alternative sourcing
arrangements are not possible for certain materials, our inventory
strategy aims to limit the impact and ultimately protect the supply
chain from unanticipated disruption.
We continue to implement anti-counterfeit systems such as
product serialisation in accordance with new and emerging supply
chain requirements around the world such as the EU Falsified
Medicines Regulation.
A corporate policy requires each business and functional area
head to ensure effective crisis management and business continuity
plans are in place that include authorised response and recovery
strategies, key areas of responsibility and clear communication
routes, before any business disruption occurs. Corporate Security
supports the business by: coordinating crisis management and
business continuity training; facilitating simulation exercises;
assessing our preparedness and recovery capability; and providing
assurance oversight of our central repository of plans supporting
our critical business processes.
Each business unit performs risk oversight through their
respective Risk Management and Compliance Board (RMCB) to assure
adequate risk mitigation including identifying new and emerging
threats. For example, we have taken a coordinated approach to
evaluate and manage the implications for our business arising from
Brexit.
These activities help ensure an appropriate level of readiness
and response capability is maintained. We also develop and maintain
partnerships with external bodies like the Business Continuity
Institute and the UN International Strategy for Disaster Risk
Reduction, which helps improve our business continuity initiatives
in disaster-prone areas and supports the development of community
resilience to disasters.
APPENDIX B
Directors' responsibility statement
Each of the current Directors, whose names and functions are
listed in the Corporate Governance section of the Annual Report
2019 confirms that, to the best of his or her knowledge:
- the Group financial statements, which have been prepared in
accordance with IFRS as adopted by the EU and IFRS as issued by the
IASB, give a true and fair view of the assets, liabilities,
financial position and profit of the Group; and
- the Strategic report and risk sections of the Annual Report,
which represent the management 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.
Name Function
Sir Jonathan Symonds Non-Executive Chairman
Emma Walmsley Chief Executive Officer
Dr Hal Barron Chief Scientific Officer and President,
R&D
Iain Mackay Chief Financial Officer
Manvinder Singh (Vindi) Banga Senior Independent Non-Executive
Director
Dr Vivienne Cox Independent Non-Executive Director
and Workforce Engagement Director
Lynn Elsenhans Independent Non-Executive Director
Dr Laurie Glimcher Independent Non-Executive Director
and Scientific & Medical Expert
Dr Jesse Goodman Independent Non-Executive Director
and Scientific & Medical Expert
Judy Lewent Independent Non-Executive Director
Urs Rohner Independent Non-Executive Director
APPENDIX C
Related party transactions
At 31 December 2019, GSK owned 32 million shares or 31.6% of
Innoviva Inc. which is a biopharmaceutical company listed on
NASDAQ. GSK began recognising Innoviva as an associate on 1
September 2015. The royalties due from GSK to Innoviva in the year
were GBP215 million (2018 - GBP209 million). At 31 December 2019,
the balance payable by GSK to Innoviva was GBP63 million (2018 -
GBP64 million).
At 1 January 2019, GSK held a 50% interest in Japan Vaccine Co.
Ltd (JVC) through its subsidiary GlaxoSmithKline K.K. This joint
venture with Daiichi Sankyo Co., Ltd was primarily responsible for
the development and marketing of certain prophylactic vaccines in
Japan. During 2019, GSK sold GBP11 million of its vaccine products
into the joint venture. Daiichi Sankyo's shares in JVC were
acquired by GSK during 2019 at which point, JVC ceased to be a
related party.
Loans of GBP3.8 million to Medicxi Ventures I LP and GBP10.6
million to Index Ventures Life VI (Jersey) LP remained due to GSK
at 31 December 2019. In 2019, GSK increased the investment in Kurma
Biofund II, FCPR by GBP1.1 million and Apollo Therapeutics LLP by
GBP2.1 million. Further investments were also made in Medicxi
Ventures I LP of GBP3.1 million and in Index Ventures Life VI
(Jersey) LP of GBP1.8 million. As part of the joint venture
agreement with Qura Therapeutics LLC, the Group has an obligation
to fund the joint venture $1 million per quarter up to April 2020.
On 26 June 2019, the agreement was extended for a second five-year
period up to April 2025, with both GSK and its joint venture
partner committing additional financial support in the amount of
$20 million. At 31 December 2019, the outstanding liability due to
Qura was GBP16.1 million. Cash distributions were received from our
investments in Medicxi Ventures I LP of GBP18.5 million and in
Longwood Founders Fund LP of GBP2.8 million.
The aggregate compensation of the Directors and CET is given in
Note 9, 'Employee costs'.
APPENDIX D
Adjustment to 2018 retained earnings and non-controlling
interests balances
In 2018, the Group acquired Novartis' non-controlling interest
in the old Consumer Healthcare Joint Venture. As a result of the
transaction, the non-controlling interest ceased to exist and
should have been fully eliminated from the consolidated reserves.
An adjustment of GBP579 million has been made between the 2018
closing balances of retained earnings and non-controlling interests
to reallocate cumulative translation exchange and eliminate the
remaining non-controlling interest balance. There was no impact on
profit for the year, other comprehensive income, net assets or
total equity for 2018 and no impact on any items in earlier years.
The effect of the adjustment on the relevant equity balances was as
follows:
At 31 December At 31 December
2018, as 2018, as
reported Adjustment revised
GBPm GBPm GBPm
========================== ============== ============ ==============
Retained earnings (2,137) (579) (2,716)
Shareholders' equity 4,360 (579) 3,781
Non-controlling interests (688) 579 (109)
Total equity 3,672 - 3,672
========================== ============== ============ ==============
As a result of the above, the same impact applies on the
December 2019 balances, as previously reported in the unaudited
preliminary results announcement on 5 February 2020. The effect of
the adjustment on the relevant equity balances at 31 December 2019
was as follows:
At 31 December At 31 December
2019, as 2019, as
reported Adjustment revised
GBPm GBPm GBPm
========================== ============== ============ ==============
Retained earnings 5,109 (579) 4,530
Shareholders' equity 11,984 (579) 11,405
Non-controlling interests 6,373 579 6,952
Total equity 18,357 - 18,357
========================== ============== ============ ==============
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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