TIDMGSK
RNS Number : 5943H
GlaxoSmithKline PLC
13 March 2018
GlaxoSmithKline plc
(the 'Company')
Publication of 2017 Annual Report
The Company will today publish on its website,
www.annualreport.gsk.com, the Annual Report for the year ended 31
December 2017 (the '2017 Annual Report').
A hard copy version of the following documents will be sent to
those shareholders who have elected to receive paper communications
on or about 29 March 2018:
- 2017 Annual Report
- 2017 Annual Summary (the '2017 Summary')
- 2018 Notice of Annual General Meeting
Shareholders who have not elected to receive paper
communications will be sent the 2017 Summary notifying them of the
availability of these documents on the Company's website.
In compliance with Listing Rule 9.6.1R of the UK Financial
Conduct Authority ('FCA'), the aforementioned documents will be
submitted to the UK Listing Authority and they will be available
for public inspection at the National Storage Mechanism (NSM)
www.morningstar.co.uk/uk/NSM.
The information included in the unaudited preliminary results
announcement released on 7 February 2018, together with the
information in the Appendices to this announcement which is
extracted from the 2017 Annual Report, 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 2017
Annual Report in full. Page and note references in the Appendices
below refer to page and note references in the 2017 Annual
Report.
V A Whyte
Company Secretary
13 March 2018
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.
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. The risks below are those that we
believe could cause our actual results to differ materially from
expected and historical results.
We must adapt to and comply with a broad range of laws and
regulations. These requirements apply to research and development,
manufacturing, testing, approval, distribution, sales and marketing
of Pharmaceutical, Vaccine and Consumer Healthcare products and
affect not only the cost of product development but also the time
required to reach the market and the likelihood of doing so
successfully.
Moreover, as rules and regulations change, and governmental
interpretation of those rules and regulations evolves, 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 law 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 involved in
our significant unresolved disputes and potential litigation is set
out in Note 45, 'Legal proceedings,' on pages 227 to 232.
UK regulations require a discussion of the mitigating activities
a company takes to address principal risks and uncertainties. A
summary of the activities that the Group takes to manage each of
our principal risks accompanies the description of each principal
risk below. 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
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. 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.
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), who is also the Medical Officer
for Pharmaceuticals, is responsible for medical governance under a
global policy. Under that policy, safeguarding human subjects in
our clinical trials and patients who take our products is of
paramount importance, and the CMO has the authoritative role for
evaluating and addressing matters of human safety.
Individual Medical Officers within the Pharmaceutical, Vaccines
and Consumer Healthcare businesses and our substantial Safety and
Pharmacovigilance organisation keep track of any adverse issues
reported for our products during the course of clinical studies.
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. 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.
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.
Our Global Safety Board (GSB), comprising senior physicians and
representatives of supporting functions, is an integral component
of the system. The GSB (including subsidiary boards dedicated to
Consumer Healthcare products and Vaccines) reviews the safety of
investigational and our marketed products and has the authority to
stop a clinical trial if continued conduct of such trial is not
ethically or scientifically justified in light of information that
has emerged since the start of the trial.
In addition to the medical governance framework as described
above, we use several mechanisms to foster the early evaluation,
mitigation, and resolution of disputes as they arise and of
potential claims even before they occur. The goal of the programmes
is to create a culture of early identification and evaluation of
risks and claims (actual or potential), in order to minimise
liability and litigation.
Product quality
Risk definition
Failure to comply with current Good Manufacturing Practices
(cGMP) or inadequate controls and governance of quality in the
supply chain covering supplier standards, manufacturing and
distribution of products.
Risk impact
A failure to ensure product quality could have far reaching
implications in terms of patient and consumer safety resulting in
product launch delays, supply interruptions and product recalls.
This would have the potential to do damage to our reputation, as
well as result in other regulatory, legal and financial
consequences.
Context
Patients, consumers and HCPs trust the quality of our products.
Product quality may be influenced by many factors including product
and process understanding, consistency of manufacturing components,
compliance with GMP, accuracy of labelling, reliability of the
external supply chain, and the embodiment of an overarching quality
culture. The internal and external environment continues to evolve
as new products and new legislation are introduced. Critically, we
are addressing the impact of Brexit on our supply chain management
and quality oversight between the UK and the EU and are developing
and deploying appropriate contingency plans to avoid interruption
of supply to patients.
Mitigating activities
We have developed and implemented a single Pharmaceutical
Quality System (PQS) 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.
There is no single external quality standard or system that
governs the detailed global regulatory expectations for the quality
of medicinal products. Requirements are often complex and
fragmented across national and regional boundaries. Consequently,
we have adopted the internationally recognised principles from the
'ICH Q10: Pharmaceutical Quality Systems' framework as the basis
for the GSK PQS.
This is an industry standard which incorporates quality concepts
throughout the product lifecycle. The GSK PQS 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. The PQS
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 PQS, 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.
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. We
provide the Corporate Executive Team & Risk Oversight and
Compliance Council with an integrated assessment of Regulated
Quality (GxP) performance. The defined key performance indicators
cover manufacturing practice, clinical practice, pharmacovigilance
practice, regulatory practice, drug safety assessment, and animal
welfare.
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.
All staff members are regularly trained to ensure that cGMP
standards and behaviours based on our values are followed.
Additionally, advocacy and communication programmes are routinely
deployed to ensure consistent messages are conveyed across the
organisation, whether they originate from changes in regulation,
learnings from inspections, or regulatory submissions. There is a
continued emphasis on the value of quality performance metrics to
facilitate improvement and foster a culture of 'right first
time'.
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.
Changes in tax laws or in their application with respect to matters
such as transfer pricing, foreign dividends, controlled companies,
R&D tax credits, taxation of intellectual property or a
restriction in tax relief allowed on the interest on debt funding,
could impact our effective tax rate. Significant losses may arise
from inconsistent application of treasury policies, transactional
or settlement errors, or counterparty defaults.
Any changes in the substance or application of the governing tax
laws, failure to comply with such tax laws or significant losses
due to treasury activities could materially and adversely affect
our financial results.
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 may 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, on a daily
basis. 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 takes into account 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 centred in a number of 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 in 2018 and
future years driven by the Organisation for Economic Cooperation
& Development's Base Erosion and Profit Shifting project 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
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 tested by management and via Independent Business
Monitoring. This provides us with the assurance that controls over
key financial reporting and disclosure processes have operated
effectively. A minimum standard control set has been implemented,
whereby all Finance personnel, irrespective of size or geographical
location, are required to apply and ensure they are monitored. Our
Global Finance Risk Management and Controls Centre of Excellence
provides extra support to large Group organisations undergoing
transformation such as system deployment or significant business
transformation. We have also added operational resources to ensure
processes and controls are maintained during business
transformation, the upgrade of our financial systems and processes.
Additional risk mitigation has been introduced by amending the
programme timelines of system upgrades.
We keep up-to-date with the latest developments in financial
reporting requirements by working with our external auditors and
legal advisors.
There is shared accountability for financial results across our
businesses. 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. Business reorganisations and
newly acquired activities are integrated into risk assessments and
appropriate controls and reviews are applied.
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. 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 213 and 214,
Note 42, '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 such as the recently enacted US Tax
Cuts and Jobs Act. 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 the
GSK's Finance division.
Our tax affairs are managed on a global basis through a
co-ordinated team of tax professionals led by the Global Head of
Tax who works closely with the business. They 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
Risk definition
Failure of GSK employees, consultants and third parties to
comply with our Anti-bribery & corruption (ABAC) principles and
standards, as well as with all applicable legislation.
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 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
We are exposed to bribery and corruption risk through our global
business operations. In some markets, the government structure and
the rule of law are less developed, and this has a bearing on our
bribery and corruption risk exposure. In addition to the global
nature of our business, the healthcare sector by its very nature
maintains relationships with government bodies, is highly
competitive and subject to regulation. This increases the instances
where we are exposed to activities and interactions with bribery
and corruption risk.
The Group has been subject to a number of ABAC inquiries. We
reached a resolution with the US authorities in 2016 regarding
their ABAC inquiry, following which we are subject to a
self-monitoring arrangement until September 2018. Government
investigations regarding our China and other business operations
are ongoing. These investigations are discussed further in Note 45,
'Legal proceedings'.
Mitigating activities
Our Code of Conduct, values and behaviours 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.
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 values and business standards to
form a comprehensive and practical approach to compliance, and is
flexible to the evolving nature of our business.
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 global
risk assessment to enable targeted intervention and compliance
monitoring 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 and ongoing training and
communications. In addition, the programme mandates enhanced
controls over interactions with government officials and during
business development transactions. We provide mandatory periodic
ABAC training to our staff and relevant third parties in accordance
with their roles, responsibilities and the risks they face.
Programme governance is provided by the ABAC Governance Board
which includes representation from key functional areas and
business units. 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. This is
complemented with independent oversight and assurance undertaken by
the Audit & Assurance and Independent Business Monitoring
teams.
We continually benchmark our ABAC programme against other large
multinational companies and use external expertise to drive
improvements in the programme.
Commercial practices
Risk definition
Failure to engage in commercial activities that are consistent
with the letter and spirit of legal, industry, or the Group's
requirements relating to marketing and communications about our
medicines and associated therapeutic areas; appropriate
interactions with 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 grow a diversified
global business and deliver more products of value for patients and
consumers. 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 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 do other pharmaceutical, vaccine and consumer companies, we
face downward price pressure in major markets, declining emerging
market growth, 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 mission to improve
the quality of human life by enabling people to do more, feel
better, and live longer. To accomplish this mission, 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
mission 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 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 mission of our company.
We have taken action to enhance and improve standards and
procedures for promotional interactions including an increased
focus on digital marketing, based on our values of transparency,
respect, integrity and patient focus. We have policies and
standards governing promotional activities undertaken by us or on
our behalf. 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. We have harmonised policies and procedures to
guide above country commercial practices processes as well as
clarified applicable standards for operations in the various
markets in which we operate. Each business unit 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 both business unit Risk
Management and Compliance Boards and Country Executive 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 have broadened our ability to claw back remuneration from
senior management in the event of misconduct.
We have evolved our commercial operating model, embedding
industry leading changes in the compensation model for sales
professionals and their managers who interact with HCPs. These
changes eliminated rewards based on individual sales or market
share of prescription products in individuals' territories in
favour of rewards based on the quality of the individuals'
interactions with HCPs. We now allow fair market value payments to
be made by GSK to expert researchers and practitioners to speak
about the science behind our products, disease and clinical
practice in a limited number of GSK sponsored, medical-led
meetings.
Research practices
Risk definition
Failure to adequately conduct ethical and sound preclinical and
clinical research. In addition, failure to engage in scientific
activities that are consistent with the letter and spirit of the
law, industry, or the Group's requirements, and failure to secure
adequate patent protection for GSK's products.
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. While
we attempt to address this proactively, animal studies remain a
vital part of our research. In many cases, they are the only method
that can be used to investigate the effects of a potential new
medicine in a living body before it is tested in humans, and they
are generally mandated by regulators and ethically imperative.
Animal research can provide critical information about the causes
of diseases and how they develop. Nonetheless, we are continually
seeking ways in which we can minimise our use of animals in
research, whilst complying with regulatory requirements.
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.
The integrity of our data is essential to success in all stages
of the research data lifecycle: design, generation, recording and
management, analysis, reporting and 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. 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.
Scientific engagement (SE), 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 mission and necessary
for scientific and medical advance. SE 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.
In addition, any loss of patent protection in a market for GSK's
products developed through our R&D, including reducing the
availability or scope of patent rights or compulsory licensing (in
which a government forces a manufacturer to license its patents for
specific products to a competitor), 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 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 manufacturer may
lawfully produce a generic version of a product, and generic drug
manufacturers have also exhibited a readiness to market generic
versions of many of our most important products prior to the
expiration of our patents. Introduction of generic products
typically leads to a rapid and dramatic loss of sales and reduces
our revenues and margins for our proprietary products. Moreover, in
the US, it has become common for patent infringement actions to
prompt claims that anti-trust laws have been violated during the
prosecution of the patent or during litigation involving the
defence of that patent.
Mitigating activities
We have an established Office of Animal Welfare, Ethics and
Strategy (OAWES), led by the Chief of Animal Welfare, Ethics and
Strategy, that ensures the humane and responsible care of animals
and increases the knowledge and 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
and develops and deploys strategies on animal model 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 management of clinical trials sponsored and
supported by us to ensure they conform to ethical, medical and
scientific standards.
- The Data Disclosure Board provides oversight for disclosure of
our sponsored and supported clinical trials. 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 2,300
clinical study reports in addition to more than 6,300 study result
summaries. Detailed and appropriately protected patient-level data
from approximately 2,000 clinical studies can be requested and
accessed through clinicalstudydatarequest.com.
- Specific accountability and authorisation for SE 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 SE.
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 global
HBSM network champions HBSM activities and provides an experienced
group to support internal sample custodians on best practice.
It remains an important priority to enhance our data integrity
controls. Data Integrity Committees are in place to provide
oversight and a Data Integrity Quality Assurance team conducts
assessments to provide independent business monitoring of our
internal controls for R&D activities.
The Chief Regulatory Officer chairs the Regulatory Governance
Board which 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.
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 now aligned with a new Enterprise
framework that seeks to ensure strengthened governance across the
R&D businesses in Pharmaceuticals, Vaccines and Consumer
Healthcare. Under the leadership of the Chief Research Practices
Officer, management of the risk takes a pragmatic approach to
information sharing, streamlining risk identification and
escalation while ensuring ownership stays at the business unit
level and allows for a proportional risk treatment.
Third party oversight risk
Risk definition
Failure to maintain adequate governance and oversight over third
party relationships and failure of third parties to meet their
contractual, regulatory, confidentiality or other obligations.
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
Each business unit 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, standards and Code of Conduct.
To guide and enforce our global principles for interactions with
third parties we have in place a 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 framework is
complemented by technical and local standards designed to ensure
alignment with the nature of third party interactions, such as good
manufacturing practice and adherence to local laws and regulations.
Independent Business Monitoring of key financial and operational
controls is in place and is supplemented by periodic checks from
the company's independent Audit & Assurance function.
Continuous monitoring and performance of third parties is
enhanced through the Third Party Oversight Programme managed
through the Global Ethics and Compliance organisation. The
programme takes an enterprise-wide view of third party related
risks, 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.
Environment, health and safety and sustainability
Risk definition
Failure to manage environment, health & safety and
sustainability (EHS&S) risks in line with our objectives and
policies and with relevant laws and regulations.
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
We are 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. We have
also been identified as a potentially responsible party under the
US Comprehensive Environmental Response Compensation and Liability
Act at a number of sites for remediation costs relating to our use
or ownership of such sites in the US. Failure to manage these
environmental risks properly could result in litigation, regulatory
action and additional remedial costs that may materially and
adversely affect our financial results. See Note 45 to the
financial statements, 'Legal proceedings', for a discussion of the
environmental related proceedings in which we are involved. We
routinely accrue amounts related to our liabilities for such
matters.
Mitigating activities
The Corporate Executive Team (CET) is responsible for EHS&S
governance under a global policy. Under that policy, the CET seeks
to ensure there is a control framework in place to manage the
risks, impacts and legal compliance issues that relate to EHS&S
and for assigning responsibility to senior managers for providing
and maintaining those controls. 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
refreshed Global EHS&S standard which supports our EHS&S
policy and our objective to discover, develop, manufacture, supply
and sell our products without harming people or the environment. In
addition to the design and provision of safe facilities, plant and
equipment, we operate rigorous procedures that help us eliminate
hazards where practicable and protect employees' health and
well-being. Through our continuing efforts to improve environmental
sustainability we have reduced our value chain carbon intensity per
pack, water consumption and waste generation. We actively manage
our environmental remediation obligations and seek to ensure
practices are environmentally sustainable and compliant. Our
EHS&S performance results are shared externally each year in
our Responsible Business Supplement.
Information protection
Risk definition
The risk to GSK business activities if information becomes
disclosed to those not authorised to see it, or if information or
systems fail to be available or are corrupted, typically because of
cybersecurity threats, although accident or malicious insider
action may be contributory causes.
This also includes the risk of failure to collect, secure, and
use personal information in accordance with data privacy laws.
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. Failure to comply with data privacy laws
could lead to adverse impact on individuals (for example financial
loss, distress or prejudice). In both cases, damage to our
reputation, litigation, or other business disruption including
regulatory sanction could occur, which could materially and
adversely affect our financial results.
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.
We believe that the cyber security incidents that we have
experienced to date have not resulted in significant disruptions to
our operations, and have not had a significant adverse effect on
our results of operations, or on third parties. However, as the
threats evolve we cannot provide assurance that our significant
efforts in protecting and monitoring our systems and information
will always be successful in preventing compromise or disruption in
future.
All parts of our business process personal information. The use
of this information is critical to our operations and innovation,
including the development and sale of our products, as well as
management of our employees.
New and evolving laws and regulations, such as the European
Union General Data Protection Regulation (GDPR), are likely to
bring increased scrutiny of our data management.
Mitigating activities
We have a global information protection policy and accompanying
information technology standards and processes that are supported
through a dedicated team and programme of activity. Our Information
Protection function provides strategy, direction, and oversight,
including active monitoring of cyber security, while enhancing our
global information security capabilities, through an ongoing
programme of investment that is in its fifth year.
We assess changes in our information protection risk environment
through briefings by government agencies, subscription to
commercial threat intelligence services and knowledge sharing with
other pharmaceutical businesses and cross-industry bodies. Such
changes are regularly reviewed by our Executive team and our Board
and suitable adjustments agreed.
We aim to apply industry best practices as part of our
information security policies, processes and technologies and
invest in strategies that are commensurate with the changing nature
of the security threat landscape. This will include suitable levels
of cyber-risk insurance cover in future.
Nevertheless, cyber threats are growing and evolving. They
increasingly involve highly-resourced threat actors such as nation-
states and organised criminals. Combined with the size and
complexity of our IT systems and those of our supply chain partners
(including outsourced operations), this means that our systems and
information have been and are expected to continue to be, the
subject of cyber-attacks of various types.
We are enhancing our approach to data privacy compliance, in
part to comply with the new EU General Data Protection Regulation
(GDPR), by deploying an enterprise-wide privacy programme, launched
in 2017 and scheduled for deployment in 2018.
This will involve greater standardisation and additional expert
resources to support the business. New standards and controls will
enable us to better to address data privacy at the outset of any
business process. These changes also prepare us for the
introduction of GDPR in May 2018.
All employees are required to complete training on privacy and
the appropriate handling and maintaining of personal information.
Programme governance is provided by the Privacy Governance Board,
which includes representation from key functional areas. We have a
dedicated Privacy team, responsible for the implementation and
evolution of the programme in response to developments in the
internal and external environment.
Supply continuity and crisis management
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, including
key supply chains.
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 or earthquake), man-made events (e.g. civil unrest,
terrorism), and global emergencies (e.g. 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 licence
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 (API), antigens, intermediates, commodities, and
components for the 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 businesses.
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
Our supply chain model is designed to ensure the supply, quality
and security of our products globally, as far as possible. We
closely monitor, through the Supply Chain Governance Committees,
the inventory status and delivery of our products with the aim to
ensure that customers have the Pharmaceutical, Vaccines and
Consumer Healthcare 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 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 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, our inventory strategy aims to protect the supply chain
from unanticipated disruption.
We continue to implement anti-counterfeit systems such as
product serialisation in accordance with emerging supply chain
requirements around the world.
A corporate policy requires each business unit 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 has a governance board which performs risk
oversight and monitoring including identifying new and emerging
threats. We have a coordinated approach to evaluate and manage the
implications for our business arising from Brexit. Our approach to
Brexit is set out
on page 55.
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.
APPIX B
Directors' responsibility statement
Each of the current Directors, whose names and functions are
listed below in the Corporate Governance section of the Annual
Report 2017 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
Group, together with a description of the principal risks and
uncertainties that it faces.
Name Function
Sir Philip Hampton Independent Non-Executive Chairman
Emma Walmsley Chief Executive Officer
Dr Hal Barron Chief Scientific Officer and President,
R&D
Simon Dingemans Chief Financial Officer
Dr Patrick Vallance Outgoing President, R&D
Professor Sir Roy Anderson Independent Non-Executive Director
Vindi Banga Senior Independent Non-Executive
Director
Dr Vivienne Cox Independent Non-Executive Director
Lynn Elsenhans Independent Non-Executive Director
Dr Laurie Glimcher Independent Non-Executive Director
Dr Jesse Goodman Independent Non-Executive Director
Judy Lewent Independent Non-Executive Director
Urs Rohner Independent Non-Executive Director
APPENDIX C
Related party transactions
At 31 December 2017, GSK owned 32 million shares or 31.4% 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 GBP173 million (2016 - GBP108 million). At 31 December 2017,
the balance payable by GSK to Innoviva was GBP53 million (2016 -
GBP36 million).
At 31 December 2017, 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 is primarily responsible
for the development and marketing of certain prophylactic vaccines
in Japan. During 2017, GSK sold GBP41 million (2016 - GBP43
million) of its vaccine products into the joint venture. At 31
December 2017, the trading balance due to GSK from JVC was GBP11
million (2016 - GBP9 million) and the balance payable by GSK to JVC
was GBPnil million (2016 - GBPnil). Loans of GBP7 million to JVC,
GBP7 million to Medicxi Ventures I LP and GBP8 million to Index
Ventures Life VI (Jersey) LP remained due to GSK at 31 December
2017.
The aggregate compensation of the Directors and CET is given in
Note 9, 'Employee Costs'.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSFKNDKQBKDKND
(END) Dow Jones Newswires
March 13, 2018 10:10 ET (14:10 GMT)
Gsk (LSE:GSK)
Historical Stock Chart
From Apr 2024 to May 2024
Gsk (LSE:GSK)
Historical Stock Chart
From May 2023 to May 2024