GSK plc (GSK) Earnings Call Transcript & Summary

[Audio Gap] was sent to our distribution list by e-mail, and you'll be also able to find it on gsk.com. Please turn to Slide 2. This is the usual safe harbor statement. We will comment on our performance using constant exchange rates, or CR unless stated otherwise. As a reminder, following the Consumer Healthcare demerger in 2022 to form Helion, we're presenting performance and growth of the continuing operations for GSK. Please turn to Slide 3. Today's management presentation will last approximately 30 minutes with the remaining 30 minutes for your questions. [Operator Instructions] Our speakers are Emma Walmsley, Tony Wood, Luke Miels, Deborah Waterhouse and Iain Mackay with David Redfern joining the rest of the team for Q&A as we hit the end of the call. Julie Brown, who will officially start as CFO next week is also with us today on the call in listening capacity only as part of the CFO succession from [ Nova ]. Turning to Slide 4, I'll now hand the call over to Emma.

Thanks, Nick, and welcome to everybody. Please turn to the next slide. Our purpose is clear to get ahead of disease together by uniting science, technology and talent. We are preventing and treating disease at enormous scale and delivering a new chapter of growth. As a world leader in infectious diseases, we are also focused on building our business in HIV, immunology respiratory and oncology. And we're off to a strong start in 2023, showing our strategy continues to deliver for all stakeholders. Excluding Pandemic Solutions, we've delivered double-digit sales growth, including a fifth consecutive quarter of growth across the full portfolio with excellent commercial performances in Vaccines, Specialty and General Medicines. Our adjusted operating profit, excluding COVID-19 Solutions also grew by 5%, below the rate of sales growth this quarter due to some one-off factors as well as planned investment in new launches, and Iain will cover this in a moment. Our adjusted EPS grew by 14%, and we're firmly on track for our guidance this year. Our clear capital allocation priorities mean we continue to invest for growth and to deliver shareholder returns, and the Board approved a dividend of 14p for the quarter. Please turn to Slide 6. Our continued commercial success comes with a focus on driving the performance of our key growth products, contributing a new record high 44% of our Q1 sales, adding GBP 500 million of additional revenue versus Q1 of last year. Notable contributions came from Shingrix and our HIV 2 drug regimens. Our growth drivers and new launches will support our growth over the decade and beyond. Our business mix continues to shift the Vaccines and Specialty Medicines, which are now delivering more than 60% of sales, and we're confident that this shift will progress to around 3/4 of our revenue by 2026. A large portion of the growth is due to our pipeline launches in recent years. New products launched since 2017 delivered GBP 2.2 billion during Q1 alone, underpinning our confidence in continuous future investment in pipeline development. Please turn to Slide 7. Our R&D progress is delivering on our priority to strengthen our long-term growth prospects. In infectious diseases, we're advancing our RSV older adult vaccine through the regulatory process and are on track to get the first U.S. FDA approval in May. And we also reported positive data last month on our pentavalent MenACWY vaccine for adolescents. We continue to invest in our priority vaccine platforms, including protein-based antigens, mRNA following some encouraging early data in flu this year and bacterial platforms like MAPS. In HIV, we presented positive data from long-acting Cabenuva compared to a daily oral medicine, and we continue to enhance our portfolio with business development. In March, we signed an exclusive license agreement with SCYNEXIS to access a first-in-class novel antifungal, adding to our growing anti-infectives portfolio. And we're also delighted to announce the proposed acquisition of BELLUS Health last week, further strengthening our specialty medicines and building on our respiratory expertise with a potential best-in-class treatment for refractory chronic cough. We expect to do more targeted business development in the year ahead. Tony and the team look forward to sharing updates on our continued pipeline development and progress throughout the year with a series of therapeutic area focused meeting the management events. I'll now hand it over to him for some more pipeline details.

Thank you, Emma. Please turn to Slide 9. Our R&D strategy is focused across 4 therapeutic areas, shaped by our world-leading capabilities in infectious diseases, our understanding of the immune system and our technology capabilities. Our pipeline today comprises 68 assets in clinical development, around 2/3 of which target infectious disease and HIV. And we're making good progress in continuing to strengthen our growth prospects for 2026 and beyond. This quarter, we saw 2 U.S. FDA approvals, 2 advisory committees and several assets progress through the clinical development, including a Phase II start for our oligonucleotide NASH asset, GSK'990. We also started retreating into our Phase III program for bepirovirsen for the treatment of chronic hepatitis B. Our ambition for that is to improve functional cures for chronic hepatitis B patients and establishing a new standard of care. We look forward to presenting data from the Phase III B-Together trial in the second half of this year. Next slide, please. Elsewhere in our infectious diseases portfolio, we reported 3 important developments in the quarter. Firstly, we received a positive recommendation from the FDA's Advisory Committee for our RSV vaccine Arexvy. We remain on track for an FDA decision anticipated by May 3. Our Phase III RSV study rerandomized subjects for a second season to receive either vaccine or placebo. These second season data will be important to better understand the duration of protection provided by Arexvy. Data collection is ongoing, and we expect a study report around midyear. Secondly, we announced positive data from our Men ABCWY Phase III trial, which demonstrated that our pentavalent vaccine has comparable protection to Bexsero and Menveo, was well tolerated with a safety profile consistent with Bexsero and Menveo. Invasive meningococcal disease is an uncommon but serious infection, which can cause life-threatening complications and death. 5 serogroups are responsible for the most meningococcal infections and there is currently no single approved vaccine which can protect against all 5 of these groups. Our pentavalent vaccine combines the antigenic components of Bexsero and Menveo. If approved, it could provide the broadest meningococcal serogroup coverage of the class and a simplified immunization schedule which we expect will lead to increased vaccine uptake. We will present preliminary data from this Phase III trial at ESCMID in May. We look forward to sharing these data with regulators to make this important vaccine innovation available as soon as possible. Finally, at ECCMID, we presented positive Phase III data for gepotidacin in the treatment of uncomplicated urinary tract infections. In the U.S. alone, there are around 15 million UTI episodes each year, around 1/4 of which are resistant to existing treatments. Gepotidacin has the potential to become the first new class of antibiotics for uncomplicated urinary tract infection for over 20 years. To complement gepotidacin, we've also been active in business development. At the end of last year, we added tebipenem, a novel antibiotic in Phase III for complicated urinary tract infection to our infectious diseases portfolio. Also in March, we agreed to in-license Brexafemme, a novel oral glucan synthase inhibitor approved for treating vulvovaginal candidiasis. Together, these 3 novel agents will broaden our anti-infectious portfolio, an area of significant societal need. Next slide, please. In HIV, we reported data from SOLAR, the first head-to-head study of our long-acting HIV treatment Cabenuva versus a daily oral therapy. SOLAR demonstrated non-inferior efficacy, a very low rate of neurologic failure and a strong patient preference for Cabenuva, with 90% of participants in the trial expressing a preference for the long-acting regimen. At CROI, we also present proof of concept data from N6LS, our broadly neutralizing HIV antibody. These data demonstrate high potency from a single antibody even at the lowest dose tested. On mutualizing antibodies just 1 asset currently in development is a potential combination partner for cabotegravir. Next slide, please. To augment our respiratory and specialty franchises, we're delighted with our recent agreement to acquire BELLUS Health, a late-stage biopharma company working to better the lives of patients suffering from refractory chronic cough or RCC. When completed, the acquisition will provide GSK access to Camlipixant, a potential best-in-class and highly selective P2X3 antagonist currently in Phase III development for the first-line treatment of adult patients with RCC. RCC effects around 28 million people globally and it is defined as a persistent cough lasting for more than 8 weeks that does not respond to treatment for an underlying condition. There are no approved medicines for RCC, which has a significant impact on quality of life with some patients experiencing over 900 coughs each day. Camlipixant has the highest P2X3 selectivity in the class. Phase II reported a very low incidents of Dysgeusia, a taste disturbance attributed to P2X3 selectivity that frequently leads to patients discontinuing treatment. Phase III trials are underway and are expected to read out by 2025. We're confident that the Phase III program will confirm the best-in-class profile and provide an excellent addition to our Specialty Medicines portfolio building upon our expertise in respiratory therapies. Next slide, please. In oncology, we were pleased to report 2 significant developments adding to the evidence supporting to Sargon. The RUBY trial presented at SGO and ESMO meetings in March demonstrated a 72% reduction in the risk of disease progression or death in the dMMR population of patients with first-line advanced endometrial cancer. In the overall population, preliminary overall survival data showed a clinically meaningful trend and a 36% reduction in risk of death or progression in favor of the Sargon treatment. Endometrial cancer remains a significant unmet medical need. Over 400,000 new cases are reported annually with around 15% to 20% of patients presenting with advanced disease at the time of first diagnosis. We look forward to sharing these data with regulators as soon as possible. In February, a U.S. FDA advisory community voted to support our proposed trial design to evaluate Jemperli in treating locally advanced rectal cancer. The trial is now recruiting patients. Next slide, please. As pipeline momentum continues to build in vaccines, HIV and infectious diseases, this slide highlights important regulatory events and clinical data readouts anticipated in the next 12 months. A more comprehensive view of the portfolio is provided in the appendix. We anticipate an FDA decision for Arexvy, our RSV older adult vaccine in early May, with additional data to support the vaccine launch including those from a high-risk 50- to 59-year-old cohort additional sleep combinations and second season outcomes. In oncology, we anticipate an FDA decision for momelotinib in the treatment of myelofibrosis in June. We also anticipate presenting data from the B-Together Phase II trial which will provide evidence on the durability of response for hepatitis B patients receiving bepi and interferon. Part of our program to develop a functional peer for some of the 300 million people living with chronic hepatitis B infection today. The continuous progress we are making underpins my confidence that our pipeline will drive growth in the latter half of the decade. Recent data, pipeline progression and business development have further strengthened our R&D portfolio, and I look forward to sharing more data with you over the coming quarters and in the future meetings. I'll now hand over to Luke on Slide 15.

Thanks, Tony. Please turn to slide -- to the next slide. Strong commercial execution in the quarter continues to drive growth across our business. And as you can see on this slide, not only are product area is contributing to growth, but we've also increased sales in each region and provided a balanced strong portfolio with room to grow. Our improved commercial execution capabilities will play an essential role as we launch new products and value coming through the pipeline and via BD, including RSV vaccine for all the adults. Please turn to Slide 17. This quarter, we delivered strong performance with sales up 10%, excluding Pandemic Solutions and in vaccine, strong growth of 9%, excluding COVID-19 solutions in the quarter were supported by Shingrix up 11% and meningitis up 25%. Shingrix delivered another record quarter of sales and a fifth consecutive quarter of growth, including increasing contributions across all geographies. Shingrix is now available in 31 countries with 39% of sales coming from outside the U.S. In specialty medicines, including HIV, which Deborah will speak about shortly, we increased sales by 13%, excluding Xevudy to GBP 2.2 billion. In immunology and respiratory, we continue to see growth from our market-leading medicines enlisted for SLE and lupus nephritis and Nucala for severe asthmas and other eos-driven diseases. Benlysta continues to be the leader across all major markets However, there's still plenty of growth with about 25% of bio penetration in the U.S. and even less in other key markets. Nucala remains the first and only biologic approved in 4 Eosinophilic diseases with new indications driving growth and differentiation. In China, the NRDL listing for EGPA has accelerated momentum, setting the foundation for our upcoming launch in severe asthma, and we look forward to our Phase III COP data in 2024. In oncology, sales grew 2% to GBP 136 million despite U.S. label changes for Blenrep Zejula and we remain focused on execution across the portfolio and look forward to the anticipated launch of momelotinib in myelofibrosis following the U.S. PDUFA date in June. Our General Medicines portfolio grew 9% to GBP 2.7 billion and the performance was predominantly reflecting the strong growth of Trelegy across all regions, which grew 28% this quarter. We also saw a benefit from the strong allergy season in Japan and continued post pandemic recovery of our antibiotic Augmentin, which contributed GBP 177 million further emphasizing our expertise in this space as we move forward with novel antibiotics emerging from our pipeline and BD efforts. Considering this Q1 performance, we now expect General Medicine sales to be broadly flat to slightly down in the full year. We remain on track to deliver our existing 2023 sales outlook for vaccine and specialty medicines. And you can find these on Slide 35 of the presentation. Please now move to Slide 18. As Tony mentioned, we expect an FDA decision for our candidate RSV vaccine very soon and RSV disease remains a significant unmet medical need, and our vaccine data showed exceptional overall efficacy, particularly in the most vulnerable populations. And we expect to be the first approved RSV vaccine in major markets, including the U.S., Europe and Japan. Our teams have begun disease awareness activities were needed, and our launch preparations are well underway. Overall, we have a competitive vaccine profile with compelling clinical evidence and multibillion Shingrix-like annual sales potential, and we look forward to keeping you updated as we launch this important vaccine. With that, let me now hand over to Deborah on Slide 19.

Thanks, Luke. Our HIV business delivered sales of GBP 1.5 billion in the quarter in the first quarter of 2023, growing 15%. Our performance benefited from strong patient demand for our oral 2-drug regimens and long-acting injectable medicines, contributing around 10 percentage points of growth. U.S. pricing favorably contributed around 5 percentage points of growth. The inventory build we saw in the U.S. in Q4 of last year has been slower to burn than initially anticipated. We continue to believe this will burn through during the first half of the year. Dovato delivered GBP 396 million in the quarter. Market performance reflects HCP's belief in Dovato, which has become our #1 best-selling medicine in HIV. We were also pleased to receive EU approval of Triumeq PD in the quarter, the world's first single-tablet dispersible regimen for children with HIV. Turning to Cabenuva. Sales for the quarter were GBP 127 million reflecting strong patient demand with high market access and reimbursement levels across the U.S. and Europe. Our sales and medical teams are reporting positive customer feedback after releasing the SOLAR data at CROI and our new direct-to-consumer advertising campaign is currently rolling out across the U.S. Moving on to prevention. Sales of Apretude, the world's first long-acting injectable for the prevention of HIV delivered GBP 24 million in the quarter, and we're pleased by the growing momentum across the U.S. We're encouraged by the progress of our pipeline, which is focused on innovative long-acting regimens. We have 3 clear target medicine profiles to provide the world's first self-administered long-acting regimen for treatment and to provide ultra long-acting regimens for treatment and prevention with dosing intervals of 3 months or longer. We're excited about the potential of these medicine profiles and we'll be ready to regimen select in H1 2024. In summary, our Q1 performance positions us well to deliver the mid-single-digit growth we expect this year, and we remain very confident in our ambition to achieve a 5-year mid-single-digit CAGR to 2026. The change in mix of our portfolio towards long-acting and the success of our pipeline offers the potential to significantly replace the revenue from the dolutegravir loss of exclusivity. And with that, I will hand it to Iain on Slide 20.

Thanks, Deborah. As I cover the financials, references to growth are in constant exchange rates unless stated otherwise. As Luke and Deborah have covered the primary revenue drivers, I'll focus my comments on the income statement, including main cost drivers, margins, cash flow and guidance for 2023, including our latest phasing expectations. Turning to next slide. Before I go into the details of the quarter, I want to provide some context around the key factors influencing the performance of both total and adjusted results. As noted by the team, excluding COVID-19 solutions, we've shown strong operational delivery across the business, growing sales by 10% in the first quarter. Including Pandemic Solutions, sales were down 8%, mainly reflecting lower sales of Xevudy relative to Q1 of 2022. The 10% sales growth drove 5% adjusted operating profit growth, excluding COVID-19 solutions. This included a 4-point adverse impact from legal charges primarily related to the ZEJULA royalty dispute. Including the impact of COVID-19 solutions and those legal charges, adjusted operating profit was stable at GBP 2.1 billion. On a total basis, the lower sales, along with the Gilead settlement income of GBP 0.9 billion in the comparator resulted in operating profit being down 15%. On earnings per share, excluding COVID-19 Solutions, there was a 14% growth on an adjusted basis. The contribution from COVID Solutions reduced this growth rate by 7 percentage points with adjusted earnings per share up 7% at 37p. Total earnings per share were 36.8p down 8% on a continuing basis. Turning now to the main adjusting items of note between total and adjusted results for continuing operations in the quarter. These weren't transaction related with the net credit primarily reflecting these contingent consideration liability movements, the majority of which relates to foreign exchange. The currency impact was a favorable 5% of sales and 8% in adjusted earnings per share. Turning to Slide 22. Adjusted operating margin was 30.1%. This was a 250 basis point improvement versus Q1 2022 at constant exchange rates. The improvement was primarily a function of the factors I've already described with lower sales of low-margin Xevudy benefiting cost of goods sold, partly offset by higher SG&A, which included the legal charges primarily related to the ZEJULA royalty dispute. In addition to these factors, there was continued commercial pipeline investment behind the key products. Turning to key cost line dynamics for the quarter. Within cost of goods sold, the 9.1 percentage point margin benefit was primarily from lower sales of low-margin Xevudy, but was partly offset by an unfavorable comparator to a onetime benefit from inventory adjustments in Q1 of last year as well as higher freight costs. SG&A growth was ahead of sales and had an adverse 4.9 percentage point margin impact. This primarily reflected launch investment, particularly focused on HIV and Shingrix to drive demand and support market expansion. There was also increased investments in preparation for the anticipated launches of our candidate RSV vaccine and momelotinib later in the year. The aforementioned increased legal charges added 4 percentage points to SG&A growth in the quarter. R&D spend grew 6% with continued investment across a combination of both early and later-stage programs, particularly in vaccines and specialty medicines. Within vaccines, this was driven by pneumococcal, mRNA and Phase II MMR programs. Within Specialty, the early-stage key assets included CCL17 for osteoarthritic pain and IL-18 for immune based diseases. In later clinical phases, there was a higher investment in Jemperli, momelotinib, depemokimab and bepirovirsen as those programs progressed. These dynamics were partially offset by decreases related to the completion of late-stage clinical development programs for otilimab, cell and gene therapy discontinuation and reduced R&D investment in Blenrep versus Q1 of 2022. Royalties benefited from Biktarvy's contribution, which includes an additional month in 2023 versus last year. And note that our GARDASIL royalty stream will cease at the end of this year. Next slide. Moving to the bottom half of the P&L, I'd highlight the net finance expense, mainly driven from the net savings from maturing bonds, including the sterling notes repurchased in the fourth quarter of last year and item plus income and cash. and that noncontrolling interests were lower due to Q1 2022 other noncontrolling interests not repeating. This was as expected. On the next slide, I'll cover cash flow. In the first quarter, there was a free cash outflow of GBP 0.7 billion. Within free cash flow, cash generated from operations decreased to GBP 287 million, down 88%. This primarily reflected an unfavorable comparison due to upfront income from the settlement affiliate received in the first quarter of 2022 and the unfavorable timing of profit share payments to Vir Biotechnology related to sales of Xevudy. There was also an increase in seasonal inventory and lower payable balances reflecting increased investments in 2022. The low cash generated from operations, there were higher tax payments. Q1 performance and cash generation was in line with expectations and are on track to deliver outlooks this year. Turning to Slide 25 and considerations for our guidance for 2023. We delivered a good start to the year and are very much on track to deliver full year guidance. Given Q1 performance, we now expect full year phasing to be slightly different to that shared in February. Our Q1 performance benefited from slower-than-expected HIV inventory burn and particularly strong general medicines delivery due to anti-infectant market recovery and Japan allergy season dynamics, which we don't expect to persist through the year. For the second quarter, we expect to see destocking in HIV and for general medicines growth to moderate due to the seasonal effects. We, therefore, expect sales growth in Q2 to be lower than Q1. With these considerations in mind, we now expect first and second half sales growth to be broadly [ simpler ]. And within this, we now expect general medicines to be broadly flat to slightly down for the year. In the second half, we continue to expect the sales growth to be influenced by the comparator periods. In HIV, these included U.S. channel inventory build and favorable U.S. pricing, particularly in Q4 of last year. In Gen Meds there was a post-pandemic recovery in the antibiotic market and the launch of Flovent anti generic in the U.S. in the second quarter of last year. For this year, we would also expect ongoing pricing pressure in Gen Meds, especially in the U.S. and European pricing [ prefer ] in the HIV market. With respect to operating profit growth, we still expect this to be lower than the first half of the year compared to the second half relative to full year expectations. This is informed by continued investment behind ongoing and anticipated launches, including our RSV vaccine and momelotinib. As such, we expect SG&A to grow ahead of sales in Q2, and we still expect SG&A to increase the rate broadly aligned turnover for the full year. On COVID-19 Solutions, we still do not anticipate significant future sales. However, based on Q1, we are revising the estimate for full year adverse adjusted operating profit impact to be 5 to 6 percentage points. We're off to a good start in 2023 with good momentum. And with that, I'll hand it back to Emma.

Thank you, Iain. Turning to Slide 27. We have made building trust by operating responsibly, an integral part of our strategy and our culture. Ultimately, we are focused on delivering sustainable growth with returns to shareholders, reducing risk, helping our people to thrive and delivering health impact at scale. Our responsible business framework prioritizes 6 material areas. And last month, we published our ESG performance report on our progress in each including a new overall ESG rating that show we're on track based on 83% of all performance metrics being met or exceeded. On access, one of the most material areas of social responsibility in our sector and one where we are committed to lead, we made further progress, again, by expanding availability of our HIV prevention medicine, cabotegravir to 90 countries by signing an agreement with generic manufacturers by the Medicines Patent Pool. And we've also enhanced recruitment of diverse patient populations with 100% of our Phase III clinical trials now including a demographic plan as well as also making great progress in creating a diverse, equitable and inclusive workplace. Turning to the final slide, 28. So we are off to a strong start in 2023 with all our growth drivers performing. We're very focused on our upcoming launches, including our potential RSV older adult vaccine and on continuing to strengthen our pipeline organically and through targeted business development in vaccines and specialty medicines. Our continued momentum commercially and in the pipeline supports our confidence in delivering on our outlook and ambitions to sustain our growth through this decade and beyond, and we look forward to sharing more details at upcoming events. Before closing, of course, I would like to recognize the outstanding contributions made by Iain Mackay as our CFO. This will be his last quarter, indeed, it's his last week before retiring from GSK. Iain has been a fantastic leader, great colleague and has made an enormous impact in his time here. And I really want to sincerely and personally thank him. Julie has been transitioning into the role with Iain and is officially starting in just a few days. And I know she is very much looking forward to spending time with you all as we continue to deliver progress together. With that, ick, now I think you have [indiscernible] coming into the Q&A.

Absolutely. Thanks, Emma. [Operator Instructions] And with that, our first question is coming from James Gordon. Please go ahead, James. [Operator Instructions] Okay. What we'll do is we'll move to Kerry Holford.

Hi. Can you hear me, Nick.

Yes, we can.

We can.

Excellent. Lovely. A couple of questions, please on Camlipixant. Tony, you highlighted that around -- I think you said 28 million people suffer from RCC globally. But I'm wondering, are there specific patient subgroups and on markets that might be most amenable to drug therapy in this disease, perhaps more severe patients. And then I'm wondering whether you're willing to discuss potential peak sales that you might target for this asset? And I might just [ chart ] the last one. [ Competition ] in Merck has clearly faced issues with advocacy measurements in this space. How confident are you that your asset here won't see the same fate?

Thanks very much Kerry, so this is Camlipixant, obviously, delighted to have announced the deal with BELLUS. And I'm going to ask Luke to pick up on the dimensions of opportunities in subgroups, I mean it's 28 million, but there are more than 10 million who have been living with this for more than a year. So we are very excited about the best-in-class potential and a meaningful contribution that will come after '26 launch. But Luke, I know you've been very impressed with all of us from the beginning. So perhaps you could comment on the relative competitiveness...

Sure, thanks, and thanks Kerry. Look, I think the important thing here is there's a temptation to focus on the 28 million. So that's all people that technically had cough for more than 8 weeks. But in our modeling of the peak sales and the uptake, we concentrated exactly to your point on subgroups. So people who have had refractory cough for longer than 1 year, so they're more likely to present at a pulmonologist. And then we've taken various other cuts around access, compliance, et cetera. And then you get -- as we put in our slides announcing the deal, it's about 3.3 million potential patients in the U.S. and around 3 million in Europe and about half of that in Japan. So it's quite a sizable group. And what is interesting when you look at numbers being managed right now by pulmonologists, it's about 1.8 million patients being managed right now by pulmonologists in the U.S. with RCC. Now the true number is actually higher because many of them, unfortunately, are sent back to the primary care unfortunately because there's limited options in terms of resolving that. So that's why we think this is a multibillion product. And what I would encourage you to do is if you have discussions with physicians treating these patients. There are 2 things I'll tell you. One frustration in terms of the options available. And then secondly, unprompted, they'll remark on the large volumes of patients that they see. And so you assemble all these things, it's a very compelling asset. I think, versus Merck, I'll let Tony comment on the filing, but the pharmacological profile and the selectivity around P2X3 versus P2X2. This is an incredibly durable, robust differentiation even if we have equivalent efficacy. And of course, the upside is that we have an edge on efficacy versus Merck. But the tox profile is just so much more compelling for the Merck product. And then again, that's the third thing that physicians make a point around in terms of the class. Tony?

Yes. Luke, just to underscore that point, 2 things about the Merck comparison. Tp put some numbers around selectivity, the unpleasant taste Dysgeusia, which is a significant impact on patients discontinuing therapy is driven by selectivity over the P2X2 receptor class, for which Camlipixant has a 1,500-fold margin. That's an enormous margin relative to the class and of the order of 15x greater than the Merck molecule. So we're very confident in our ability to improve on side effects with regards to that particular selectivity. And indeed, you see that in the Phase II studies, where there's only a 6% incidence of Dysgeusia that can impact exit. The other issue is with regards to a data treatment or analysis issue associated with the cough countering device. We have exactly the same device and approach as Merck. As far as we can tell, their CRL was based on the methodology used to -- for data analysis, where we are on ongoing conversations with the regulator, and we're confident that we will be able to work through that data treatment issue, particularly given the medical need for this area that Luke emphasized.

So next question is from Steve Scala.

Can you hear me?

Yes.

First, I'd like to clarify, when does GSK plan to initiate Phase III trials in adults and infants for the 24 valent pneumococcal vaccine? It is still listed as a 2024 readout. But it's not identified as a catalyst any longer in 2024.

All right, so straight to Luke then.

Yes. So we will start the Phase III study for adults with the pneumococcal 24 valent vaccine at the beginning of next year. That represents an acceleration relative to the acquisition objectives, you have noted that we have a clause in our 24-valent infant program. This is associated with an audit finding with regards to the full finishing presentation of the vaccine. We are still very confident in the overall profile of the vaccine. In fact, our confidence in the technology continues to grow as we see emerging data from competitors in the field. So I'm very confident with progression here. We're working to get the 24 valent infant vaccine study back on track as soon as possible.

So the next question is from Graham Parry, Bank of America.

So firstly, just on RSV vaccine, just any kind of level of confidence you can give over the likelihood of approval into the AdCom next week. And in particular, given Barré syndrome is obviously raised in both the AdCom and the ASA meeting, so whether there's been any further requests or data or information relating to that? And then secondly, the timing of the 2-season data. I think you said data collection ongoing and update midyear. But how has the FDA requested to see any of that data? And do you think you'll have that data in time for the June ACIP meeting? And how does that play into pricing decisions ahead of launch? So if you have that data, but it's not part of a June ACIP recommendation, can you price this for a 2-year vaccine at the outset? Or are you going to have to start thinking about sort of adjusting pricing post launch, for example?

Thanks Graham. So we'll come to Tony first and then Luke on the specific pricing, recognizing that when you're a week away from going through the regulatory process announcing what's going to happen we'll have very clear specificity on that. And likewise, in a competitive situation on pricing, but both of those we should respond to too.

Yes. Where I might start James, is just emphasizing the profile of our vaccine. I'm sure you will recall, particularly with regards to the at-risk populations with regards to hospitalization, where we see 95 -- 94% vaccine efficacy. That profile for efficacy and the overall safety profile, of course, was recognized in the [indiscernible] vaccine, which we're delighted to see. We continue to randomize patients on the Phase III study. We randomized it for the second season to receive second vaccination and placebo, which gives us the opportunity to make an appropriate comparison with regards to second season data. I'll remind you in the first season that our data acquisition is determined by event rate, for the second season is determined by the close of the season. And we remain on track to acquire that data, along with other data that we are building the picture for the quality of our vaccine in particular, data for [indiscernible] and we'll be moving into the high dose in adjuvanted setting. Again, I'd remind you that on the basis of data we have so far, we are the only vaccine for which [indiscernible] shows no impact on the performance of either vaccine. We're also adding data from the At-Risk 50 to 59 population. We expect to have all of those data head of ACIP, as Emma indicated. And Luke, perhaps I can hand over to you with regards to the question for pricing.

Yes. Thanks, Tony. Thanks Graham. And to reinforce, I mean Tony and his team are incredibly focused on this time line. So our working assumption is that we have that in an unusual scenario that we just missed a deadline. As I said, we do not expect. I think it would depend on the robustness of the signal. But my working assumption is if we had that second season, then we would price it at the upper end of the range. And we've signaled in the past, that the range is -- at the time were between high-dose flu, which is in the 60s and Shingrix, which is [ 185 ]. Of course, it's now moving more towards the right-hand side of that midpoint. And if we had that second season, then we'd be very much on the right-hand side of that midpoint.

So next question is from Richard Parkes at BNP Paribas.

Nick, hopefully, you can hear me okay. Just got 2 questions. Firstly, on Shingrix. I just wondered if you could disclose what underlying U.S. volume demand growth was when you ex out the stocking differences? And maybe you could just update us on ex U.S. launches where you're seeing most traction and how that will evolve through the year. Then second question was for Tony on business development and R&D. Many of the recent transactions have added late-stage programs such as momelotinib, Camlipixant that will help cushion patent expiries that you'll experience later in the decade. But they don't necessarily bring platforms or technology that can help to improve GSK's longer-term R&D productivity. So my question for Tony is now that he's been in the seat a little bit longer, if he feels confident GSK has invested in enough through business development to retool the company in terms of technology platforms and capability for it to be competitive and improve internal R&D productivity longer term?

Thanks very much Richard and obviously, I'll ask Luke to comment on Shingrix, but we still see a lot of growth ahead. And then we'll come to Tony. I mean we remain -- you said is it a redundant we need to. This is always an ongoing piece of work and it's always at the core of our strategy in R&D. And you're absolutely right, we are focused both on assets and on platforms, but Tony can make some more specific commentary on where we're at. But Luke to lead the conversation onto ...

Thanks Richard in terms of the market research, if we look at pharmacists, Shingrix is now our #1 priority and some of the challenges that they had around staffing and elements like that have been resolved. If we look at primary care physicians and intention to recommend vaccine, again, it remains unchanged. So all of those things are pointing in the right direction. If we look at TRxs, then over 60% of them are first dose, which again is very consistent. So these are all encouraging elements. In terms of Q1, it was influenced by 2 distinct events, which I think will start to be washed through in Q2. The first one was, we had an inventory unwind versus Q1 '22. So in Q1 '22, it was 0.9%. This quarter, it was 0.6%. And as we've discussed on lots of course before, even the steady state is around 1 to 2 million doses a month. So we expect and there are signs that, that's normalizing now. And then the other thing is linked to that, the strength of retail is very much driven by the 65 and above, which you would expect with the removal of the co-pay. As you know, commercial patients don't have a co-pay. And then the second element influencing this is that we had a lower nonretail quarter 1 performance due to a very specific element, which I won't go into, but it is thoroughly addressable, and we expect to recover those patients in Q2. So you put those 2 things together, that's what explains the numbers. But as I said, very strong. If we look ex-U.S., yes, 39% of the growth, we continue to pick up reimbursement decisions. We've got expansion in Japan. We've just picked up Australia and a number of markets in Europe. We're now really starting to get traction on. Early days in China in terms of the recovery. And then, of course, in the long term, we're very focused on the booster in the IC population, but also potentially people with an additional co-morbidity to come back and rechallenge the original cohort.

Great. And then in terms of technology platforms, I'm delighted with the platform access we have and the progress we're making. I might start actually in the vaccines area and refer again to Affinivax, which I feel is the leading protein complexation technology that's available. We're obviously making great progress in our partnership with CureVac and with regards to RNA, and you saw some of the data that was exciting us in Phase I at least in the context of [indiscernible] covered earlier in the year. Add that to our already existing capacity in vaccines to protein subunit structure-based vaccine design and adjuvants illustrated nicely to the RSV vaccine that we've just been talking about. And I think we're in an extremely solid position with regards to vaccines technologies. You'll remember that we added -- in the medicines part of our business, we added access to what we believe is the strongest oligonucleotide platform at the moment in the context of a multi-target deal with Wave Therapeutics. So as far as what I would refer to as platform technologies, I think we're in excellent position. We obviously, as Emma indicated, remain vigilant in further areas of development. In data technology, I would add collaborations like the one that we signed with Tempus recently, which will be about helping us to identify patients in oncology and to spot the right combinations. Obviously, they go on top of on existing collaborations in data and human genetics and functional genomics like 23andMe and LGR, for example, giving us access to cutting-edge technology. So I think we're extremely well placed across the board with regards to both platform and data technology, although you will continue to see that as a theme of business development as I look to augment capabilities when appropriate target identification and needs merge in the portfolio.

So next question is from Andrew Baum with Citi.

A couple of questions. First for Deborah on ViiV. Could you talk to the anticipated impact of the rollback on continuous enrollment under Medicaid on ViiV. My assumption is the economic impact for the group is going to be limited because of the lower profitability and programs like Ryan White will plug the gap as anyone loses coverage. But if you could tell me if those assumptions are incorrect. And then second, for Luke, you've spoken about the potential for line agnostic indication for momelotinib in MFS. We're waiting obviously the label I'm sure the NCCN has already reviewed the data, assuming that you do get line agnostic approval. Do you have any sense to which category recommendation NCCN will rate if you are to challenge Jakafi in that setting?

All right over to you Deborah?

Great. Thanks Andrew. So I think you're talking about the Braidwood ruling when you're talking about some of the challenges externally in the environment, so if not stop me. But basically, the Affordable Care Act mandates coverage by commercial payers, so that they cover preventative services without cost sharing, which is very, very important. A number of employees with strong religious beliefs don't want commercial insurers to cover drug in HIV a judge in Texas found in favor of the plaintiffs. And therefore, the Biden administration has actually appealed against this judgment because actually, it doesn't just tackle HIV for PrEP, but actually, it's really undermining one of the core claims of the Affordable Care Act that preventative services would be covered by commercial insurers. So it's got a number of different layers and that court case, which I think will go all the way up to the Supreme Court, probably going to take a couple of years. So from our perspective, there's 2 things. We don't think there's going to be short-term impact. We're going to watch and wait to see what happens in the court case. But also, obviously, we work very closely with the community and with the various bodies in the kind of the U.S. administration. And their view is that they are going to put in place policy and other reforms to ensure that the Affordable Care Act mandate around prevention remains in place because of their commitment to it. The other thing that's slightly ironic here is obviously, the government -- and in fact, it's [ harder ] on the commitment to ending the HIV epidemic has set a goal of ensuring that 50% of people who are eligible for PrEP. So that's about 600,000 people of the 1.2 million who were at risk should be prescribed PrEP by 2025. So it's not just butting up against the Affordable Care Act mandate, but it's also undermining the ending the HIV epidemic initiative, which is why we know from all of our government partners now are going to fight to maintain this very strongly and they've got some clear things that they're going to do from a policy perspective and there are furlough options to make sure this isn't impacting their mandates. So for me, it's a watch and wait, but I'm not expecting any short- to medium-term impact. Let's see how it plays out.

Thanks, Deborah. So Luke, momelotinib?

Yes. Thanks Andrew. And as you know, the base case for the deal was second-line anemia patients who are JAK-exposed with anemia, anything if we did get a first-line label there's clearly an upside there. I will have to bite my tongue. I don't want to speculate because you can imagine, we're in discussions with a number of people right now. What I can tell you is that we are very clearly stating that momelotinib, of course, is the only agent with profound clinical and a durable benefit in terms of [ spleen results ] and symptom relief with patients with anemia. I think that is landing incredibly well. If we look at unaided awareness coming out of ASH, it's quite striking. It's around 32%, which is double the typical benchmark in hematology. And when you look at aided awareness it's around 75% of physicians. And what is also interesting, we're not actively out there making this point, but already, you've got 60% of treating physicians indicate that one of the top 3 reasons that they switch patients because of issues with anemia and transfusion. So it's a very fertile environment for us to arrive in, and we're hoping that the NCCN recognize that in terms of the labeling and language in the guidelines.

Yes. Very much looking forward to that launch.

We've got 8 minutes left. I'm mindful that there is another call starting at 1 O'clock, so if you can keep your questions short that would obviously be appreciated. So...

Like the answer too.

Exactly. James, back to you at JPMorgan, please.

James Gordon, JPMorgan. Two questions. One on Zantac and one on M&A. Sort of linked together though, the Zantac said that the Sargon hearing wasn't quite as positive as the [ MDL ] but latest thoughts on what that could mean in terms of liability and when this all could get wrapped up by? And given the need to maybe have some funds to address any potential anti damages, are you a bit [indiscernible] on BD for a while? Is there still room to do much more BD? Or do you have to set aside some funds there? Could you put the Helion strike to work? Could you sell that? So then you've got the ability to do some more BD. And the second question also on BD if I may [indiscernible].

I think that was 3 but yes.

[indiscernible] which is a therapeutic strategy. I think it was more oncology. And then I thought the focus was more infectious disease. But BELLUS, to me, looks a bit more like general meds respiratory. It could be more of a focus now?

There's absolutely no change in our focus here, James. But let me try and succinctly respond to that. So first of all, no news, new news on Zantac, very confident in our position. Obviously, respectfully disagree with the conclusion in California. We're going to work through that case that's coming up in the summer, delighted with the federal dismissal at the end of last year and continue to defend our position vigorously. The independence of that BD remains absolutely core in terms of our R&D strategy. It is part of the way like the rest of the industry that we do R&D. It's been one of the biggest changes we've driven in the company over the last few years, delighted with the deals that we've announced recently. And as you alluded to, it is absolutely core to the structural transformation that we've made of this company with the demerger of Helion, the resetting of the balance sheet, the new step change in operating performance to generate more cash and obviously, competitive for appropriate distributions direct to shareholders as well, which is creating all of this capacity, which we are deploying we think smartly in ways with a lot of financial discipline that contributed meaningfully toward growth. We are confident of great momentum this year, the 5-year outlook, and we're really looking forward to adding to that the growth ahead. And there is total consistency in terms of what we've said we are prioritizing in terms of our BD. That is vaccines and specialty meds as the core priorities. That doesn't mean we haven't taken advantage, particularly in building out our anti-infective priority because we are -- we do have expertise in infectious disease and it's such a core global unmet need, the side of pandemic that will kill 10 million people a year. If the industry doesn't address antibiotics. We've got a nice set of tuck-ins that Luke has led for us there. But the core priority is vaccines and specialty assets and platforms and within our TAs, 4 that we work on infectious diseases, HIV, immunology and respiratory and, of course, oncology, which is a small but emerging area for us where we've been pragmatic, and we'll just talk about momelotinib which we're excited about coming up. So hopefully, that covers all of your questions. And the next one, please.

So next question is going to come from Seamus Fernandez at Guggenheim.

Yes. I'm just getting the instructions on how to unmute. So just one question. I really wanted to get a sense of the company strategy in flu with mRNA and how you're thinking about the competitive landscape? We just got some, I guess, mixed data from competitor Moderna at their recent vaccines day, but we'll get some additional data in the back half of this year. So just love to see how you're thinking about the mRNA flu opportunity for GSK and what you're seeing as it relates to the competitive landscape?

Sure. Well, I mean, let's start by saying we're excited about mRNA technology, the early data and we expect to continue to invest more in mRNA as a portfolio. I think as to the competitive landscape, maybe, Luke, you could just comment a little bit on how you see that?

Sure. So I mean, as you know, we have no presence in high dose. So anything that we can extract and penetrate there is upside. Our working assumption is that there will be a tolerable mRNA vaccine developed. And of course, we have the partnership with CureVac. I think the advantage of mRNA, of course, is just the speed at which you can go from bench to the clinic. And that is not relevant for areas like Shingles, but it is profoundly relevant when you're seeking to select strains and predict a future season. And so any compression enabling greater certainty in terms of the leading hemisphere to select those strains is going to produce a more effective vaccine and hopefully shift it above 50% that we see in a typical year. So our working assumption is it's going to be very disruptive. And I think the combination of COVID in the partnership with CureVac is also a very attractive. And our expectation is that the urgency around COVID is going to be reduced, but flu is going to be durable. And therefore, 2 plus 1 vaccine is attractive. I don't know, Tony, if you want to mention anything in terms of the program that we've got.

Yes. Just to underscore the point that Emma made at the beginning, if we look at the developments in mRNA in the field in general, I think they're all adding up to the need and importance to secure therapeutic index with regards to the gap between immunogenicity and reactogenicity. And as I mentioned earlier, the data that we disclosed or our partner CureVac disclosed earlier this year, I think give us a good start with regards to expectations of both sequence modification and use of modifying basis are going to give us a strong position.

Great. Nick, any time for any more?

Last question. So apologies to those that we weren't able to get to, but our last question comes from Simon Baker at Redburn.

I'll be brief, but just quickly wanted to get a quick note of thanks in for Iain for all the help and assistance he has given us over the years. Two quick questions. Firstly, on Camlipixant. I just -- although RCC is obviously a very big indication. I just wonder if you could give us any thoughts on potential beyond RCC, given P2X3's implications in areas like overactive bladder and endometriosis. And secondly, on gepotidacin, a fabulous job on the development side. Arguably, the big challenge to come is on commercialization. So Luke, I just wondering if you could give us some thoughts on how you think about selling a new differentiated antibiotic, which historically has been somewhat of a commercial challenge?

It's a great point because I know there's been an enormous amount of thinking from Luke and his team on the [indiscernible] across our anti-infectious portfolio, where we are confident we're going to deliver financial returns. So we'll come to you in a moment on this. But perhaps, first, Tony, you can comment on life cycle innovation possibilities on Camlipixant, by the way, also, which is primarily a female patient profile as well in RCC. So in...

Yes. And look, Simon, first of all, of course, our focus on Camlipixant is, it is an increasing degree of penetration into the enormous unmet need for the 30 million patients that suffer from refractory chronic cough I'm sure you've followed this. If you looked at the colocalization of the P2X3 ligand-gated [ ion ] channel with regards to sensory reference, you could imagine in utility in pain, migraine during [ continents ]. But our focus is really to establish the profile of the molecule in Phase III in RCC, where we see the biggest need and immediate opportunity.

Thanks Simon. Yes. And I think we're very excited about the profile that's been achieved in Phase III with Tony's team. If you look at typical broad spectrum antibiotics, they are reserved because as you would expect, people want to retain potency and avoid resistance, there's also incentives around -- in hospital use in terms of DIG disincentives that don't come into play here. And I think that the main argument if someone was to challenge on the risk of resistance is gepotidacin has been developed specifically for pathogens that are resistant in and limited to use in uncomplicated UTI and gonorrhea. So it's not a reagent that's going to be used for postoperative infection, staph, et cetera. So -- and the other problem we have is if you look in the U.S. there is around 15 million episodes a year. About 1/4 of those are recurrent and they're resistant or the patient is allergic or intolerant for 3 or more antibiotics. So this is a growing group. The typical strategy, of course, is to try nitrofurantoin and others, but about 1/4 of these patients -- physicians employ fluoroquinolones which, as you know, are broad spectrum antibiotics. So they're actually contributing to the problem. The argument is displaced fluoroquinolones used gepotidacin which has a much lower risk of resistance. And of course, you're not destroying activity in other pathogens, which could be used for more aggressive infections. And then you've got the commercial scale that we can bring and the logic as Emma's outlined of assembling tebipenem and gepotidacin and Brexafemme is that we get enormous synergy across the specialty groups and the primary doctors that are treating these patients.

Thanks Nick. All right. So I think that wraps up our call today. Great start to 2023 with all growth drivers performing and good momentum, very focused on the upcoming launches and continue to strengthen our pipeline organically and inorganically, all of which underpins our confidence the outlooks ahead. Thank you, everyone. Speak to you soon.