Edgar Filing: GLAXOSMITHKLINE PLC

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the period ending 21^st July 2010

GlaxoSmithKline plc

(Name of registrant)

980 Great West Road,
Brentford,
Middlesex, TW8 9GS
(Address of principal executive offices)

Indicate by check mark if the registrant files or will file annual reports under cover Form 20-F or Form 40-F

Form 20-F þ Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No þ

TABLE OF CONTENTS


SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.


Date: July 21^st, 2010	GlaxoSmithKline plc (Registrant)
	By:	/s/ Victoria Whyte
		VICTORIA WHYTE
		Authorised Signatory for and on behalf of GlaxoSmithKline plc


		Issued: Wednesday, 21st July 2010, London, U.K. Results announcement and interim management report for the second quarter and half year 2010 Q2 EPS before major restructuring* 2.6p (29.3p excluding pre-announced legal charge) Q2 dividend increased 7% to 15p

Results before major restructuring*


	Q2 2010								H1 2010
	£m		CER%			£%			£m		CER%			£%
Turnover		7,025		—			4			14,382		7			6
Earnings per share		2.6p		(99	)		(92	)		33.3p		(46	)		(42	)

Total results


	Q2 2010								H1 2010
	£m		CER%			£%			£m		CER%			£%
Turnover		7,025		—			4			14,382		7			6
Restructuring charges		590								891
(Loss)/earnings per share		(6.0)p		(>100	)		(>100	)		20.4p		(65	)		(60	)

The full results are presented under ‘Income Statement’ on pages 9 and 16.


*		For explanations of the measures ‘results before major restructuring’ and ‘CER growth’, see page 8.

Summary


•		Q2 sales £7.0 billion (level); progress in diversification strategy offsets US decline:

	•		Emerging Markets (+17%), Asia Pacific/Japan (+9%), Europe (+1%), USA (-13%)

	•		Consumer Healthcare (+3%), ViiV Healthcare (+1%)

	•		Q2 sales excluding pandemic products (-2%)

	•		Sales from ‘white pills/western markets’: 26% of Q2 sales (31% in Q2 2009)


•		H1 total sales £14.4 billion (+7%); sales excluding pandemic products +1%

•		Sustained pipeline delivery and development of portfolio:

	•		New products sales (+8%) to £386 million, (+23% to £347 million excluding Rotarix)

	•		3 recent approvals: Prolia (EU), Votrient (EU) and Jalyn dutasteride/tamsulosin combination (USA)

	•		Benlysta filing completed in the USA and EU

	•		5 new assets to progress into phase III development

•		Ongoing efforts to resolve long-standing legal cases; pre-announced Q2 legal charge of £1.57 billion

•		Continued focus on cost control and strong cash generation:

	•		2010 guidance on Cost of Sales, SG&A and R&D unchanged

	•		H1 net cash inflow from operating activities of £4.2 billion (+21% in sterling terms)

GSK’s strategic priorities

GSK has focused its business around the delivery of three strategic priorities, which aim to increase growth, reduce risk and improve GSK’s long-term financial performance:

•		Grow a diversified global business

•		Deliver more products of value

•		Simplify GSK’s operating model

Chief Executive Officer’s Review

Two years ago I set out GSK’s strategic priorities designed to increase growth, reduce risk and improve long-term performance.

We are making good progress to build our group of healthcare businesses which offer sustainable growth and have complementary risk/value profiles. At the same time, we have also taken action to drive improved returns on invested capital in our core R&D operation.

This combination is creating a balanced business with a lower overall risk profile and the option for significant potential upside from the pharmaceutical pipeline.

This is our response to the pressures we identified in our sector; an unprecedented period of genericisation and increasing payer demand for cost-effective healthcare.

This quarter has seen further evidence of these pressures and, to my mind, has reinforced that we have taken the right strategic approach.

For the quarter, GSK sales were impacted by several individual factors and adverse prior year comparisons. For example, we saw an acceleration of generic competition to Valtrex in the USA and temporary suspension of Rotarix in the quarter.

In the first half total sales grew 7% and excluding pandemic products grew 1%. I believe this performance is encouraging and I remain confident in our prospects for the full year.

Our diversified sales base is helping to reduce reliance on sales generated in ‘white pills/western markets’ and offset the decline in sales seen in our US pharmaceuticals business.

In Emerging Markets we have sought to build our current market shares and therapeutic breadth through organic means and targeted acquisitions. During the quarter, for example, we invested in new ‘bolt-on’ business opportunities in Korea and Argentina.

In Consumer Healthcare, total sales were £1.25 billion and grew 3% in the quarter. This was ahead of estimated market growth of 2%. Excluding the impact of European alli launch stocking in the second quarter of last year, underlying sales growth was 6%.

An area particularly worth mentioning is our Oral care business. Sensodyne now accounts for 4 of the top 10 US toothpaste SKUs and grew 19%. This is a clear example of what sustained investment in brand innovation and A&P can achieve.

As I have said previously, reported sales for our Vaccines business are subject to fluctuation due to tender purchasing as well as variability of supply for both GSK and competitors. Both these factors impacted sales reported in the second quarter along with the temporary suspension of Rotarix in the USA. Over the course of the year, I fully expect this business to deliver continued strong growth.

For the last two years, one of our top priorities has been to improve the effectiveness of our US pharmaceutical operations. This is essential given the changing US environment, in which we are seeing fundamental adjustments in pricing, and to meet the needs of our new product portfolio.



Issued: Wednesday, 21st July 2010, London, U.K.		2

This portfolio continues to broaden as we roll out more than 10 products approved by the FDA since the start of 2008.

Going forward we are confident our competitiveness in the US market will improve. However, we also acknowledge that in the short run our underlying US business performance will be somewhat masked by the continued impact of genericisation of Valtrex sales and reductions in pricing resulting from healthcare reform.

Improving returns in R&D is a core element of our strategy.

R&D expenditure is being maintained at around 14% of sales and we are generating major productivity improvements. In the last 3 years, GSK has obtained more FDA approvals for NMEs and vaccines than any other company.

We are doing this by reducing infrastructure costs (for example exiting our R&D site in Italy this quarter) and reallocating capital directly to pipeline asset projects and areas such as biopharmaceuticals and vaccines which offer potentially higher and sustained returns.

We are also focused on best science and innovative working practices to improve the quality of what we do and to raise the prospect of higher value discoveries.

Looking at the pipeline for this quarter, we have seen further momentum with 3 approvals and the filing of Benlysta in the USA and Europe.

I am also very pleased that we have announced today our decisions to progress 5 new assets into phase III development. These include two oncology candidates targeting melanoma, a cancer with significant unmet medical need and potential new assets for HIV and for Duchenne Muscular Dystrophy. We are also progressing a vaccine for prevention of shingles.

Elsewhere in the vaccine pipeline, initial preliminary results from our “new generation flu” programme did not demonstrate sufficient additional efficacy. Nevertheless this programme continues with other approaches currently in development.

Details of all the news flow in our late-stage pipeline are available on pages 12 and 13.

In summary, we continue to make good progress to diversify the company and improve R&D output.

Cash generation also remains strong and we have maintained our progressive dividend policy with a Q2 dividend increase of 7% to 15p.

This quarter, as we continue to control and reduce costs, we have again confirmed that we expect to deliver a broadly stable operating profit margin for 2010 (before legal charges and the 2009 ViiV Healthcare accounting gain).

We also made progress to de-risk our business and reduce financial uncertainty through resolving a broad range of long-standing legal cases.

This notwithstanding we are conscious of the rapid changes occurring in our environment and the need for further transformation of our business model. Further successful execution of our strategic priorities remains critical.



Andrew Witty
Chief Executive Officer

A video interview with Andrew Witty discussing today’s results and GSK’s strategic progress is available on www.gsk.com or www.cantos.com



Issued: Wednesday, 21st July 2010, London, U.K.		3

Trading update

Turnover and key product movements impacting growth — Q2 2010

Total Group turnover for the quarter was level at £7.0 billion, with pharmaceutical turnover level at £5.8 billion and Consumer Healthcare sales up 3% to £1.25 billion.

Within pharmaceuticals, growth in Emerging Markets (+17% to £848 million) and Asia Pacific/Japan (+9% to £727 million) offset a decline in US sales (-13% to £1.9 billion). European pharmaceutical sales were up 1% at £1.6 billion for the quarter.

The US sales decline in the quarter resulted from several factors including: an acceleration of Valtrex’s losses to generic competition, the discontinuation of GSK’s promotion of Boniva, lower Avandia sales, the temporary suspension of Rotarix from the market, and some volatility in other vaccines shipments.

Total Seretide/Advair sales were level at £1.3 billion, with US sales down 3% to £655 million. Excluding the impact of variations in wholesaler stocking patterns, estimated underlying sales in the USA in the quarter were roughly flat. European sales of £392 million were level with last year, while Emerging Markets (+12% to £86 million) and Japan (+23% to £62 million) experienced strong growth.

Several other respiratory products delivered strong growth including Avamys/Veramyst (up 19% to £57 million) and Ventolin (up 16% to £134 million). Flovent sales grew 1% to £201 million.

Total vaccine sales were £939 million (+17%) including £275 million of pandemic H1N1 vaccine sales. Rotarix performance (-49% to £39 million) was significantly impacted by the FDA’s decision to suspend temporarily the product in the USA. Rotarix was back on the market at the end of May, and has been regaining sales and market share since then. Hepatitis vaccine sales (-16% to £170 million) were negatively impacted by heavy customer ordering in the USA in the first quarter (US sales of hepatitis vaccines grew 92% in Q1 2010) and by the Centers for Disease Control and Prevention’s (CDC) withdrawal of vaccines from their stockpile due to a shortage in the market caused by a competitor supply issue. The impact of the CDC withdrawal is expected to reverse later in the year. Synflorix continued to perform strongly with sales of £38 million in the quarter.

Cervarix sales were £50 million (-33%) in the quarter. In the USA, Cervarix received ACIP (the CDC’s Advisory Committee on Immunization Practices) recommendation for funding in April and good progress has been made with funding now secured in 31 states, including 8 of the top 10, covering approximately 80% of the US population. US sales of Cervarix in the quarter were £6 million. In Japan, where Cervarix is the only HPV vaccine on the market, sales were £9 million.

Dermatology sales were £262 million in the quarter, including heritage GSK products and those acquired through the acquisition of Stiefel in July 2009 which saw a 2% growth on a pro-forma basis. In addition, GSK’s heritage consumer dermatology portfolio, reported within Consumer Healthcare, contributed sales of £64 million (+5%).

Other strong pharmaceutical performances in the quarter included Lovaza (+29% to £138 million), Tykerb (+32% to £56 million), Arixtra (+28% to £79 million), and Avodart (+14% to £157 million). Newly launched oncology products Arzerra and Votrient both recorded sales of £8 million in the quarter.



Issued: Wednesday, 21st July 2010, London, U.K.		4

Valtrex sales (-59% to £165 million) were further impacted by generic competition in the USA which began in November 2009, with multiple generics entering the market at the end of May 2010. US sales of Wellbutrin declined 70% to £5 million, reflecting the sale of Wellbutrin XL in the USA to Biovail in Q2 2009. European sales of Wellbutrin rose 43% to £9 million. Boniva reported sales were 70% lower (£20 million) reflecting the transfer to Genentech of the exclusive promotion rights in the USA on 1st January 2010. Avandia sales declined by 26% to £152 million.

Sales of HIV products by ViiV Healthcare grew 1% to £389 million, driven by the inclusion and organic growth of the former Pfizer product Selzentry (sales of £19 million in the quarter) and strong growth from Epzicom/Kivexa (+8% to £140 million). Combivir sales were down 18% in the quarter.

Total Consumer Healthcare sales were up 3% to £1.25 billion. In the second quarter of 2009, alli sales included the initial stocking associated with its launch throughout the region. Excluding alli sales in Europe, the business continued to perform strongly (+6%), significantly outgrowing market growth estimated at approximately 2%.

On a regional basis, sales in the Rest of World markets were particularly strong (+11% to £496 million), with growth across all major categories. In Europe, sales were down 2% to £493 million. Excluding alli, sales in Europe grew 5%, with strong growth in oral care products (+5%) and analgesics (+26%). US sales for the business were level with a year ago at £263 million as strong growth in oral care (+15%) was offset by declines in non-essential OTC medicines which were impacted by economic pressures.

On a category basis, Oral care sales grew 9% to £410 million with growth across all regions. Sensodyne Rapid Relief, which uses a new technology for treating sensitivity, launched in 40 markets across Europe, Middle East and Asia. Nutritional healthcare sales were up 6%, led by strong growth in the Rest of World (+13%). Horlicks continued strong growth (+15%), driven by marketing investment and product innovations. Sales of OTC medicines were £593 million, down 2%, reflecting the impact of the initial stocking of alli in Europe in 2009. Excluding alli, the category grew 5%, led by sales of analgesic products in Europe and the Rest of World.

Operating profit and earnings per share commentary — Q2 2010

Results before major restructuring

Operating profit before major restructuring for Q2 2010 was £641 million, an 80% decline in CER terms primarily due to significant legal costs in the quarter and lower other operating income.

Cost of sales was 23.1% of turnover, slightly lower than prior year (Q2 2009: 24.0%) and significantly lower than the first quarter due to business and product mix, lower stock write-offs in the second quarter and other factors specific to the quarter.

SG&A costs were impacted by legal costs of £1.57 billion (Q2 2009: £85 million). Excluding legal costs, SG&A costs grew 5% and were 32.2% of turnover (Q2 2009: 31.7%) with continued growth of investment in Emerging Markets, Japan and Consumer Healthcare partly offset by operational excellence savings in the USA and Europe.

R&D expenditure was 14.1% of turnover in the quarter (Q2 2009: 13.7%).

Other operating income was £81 million in the quarter, compared with £405 million in the second quarter last year, which benefited from the disposal of Wellbutrin XL. Royalty income was £67 million (Q2 2009: £59 million).



Issued: Wednesday, 21st July 2010, London, U.K.		5

The charge for taxation on profit before major restructuring amounted to £312 million and represents an effective tax rate of 63.2% for the quarter. This was impacted by the significant legal costs in the quarter. Excluding these costs, the tax rate for the quarter would have been 25.7%.

EPS before major restructuring of 2.6p decreased 99% in CER terms (an 92% decrease in sterling terms). The favourable currency impact was primarily due to the weakness of Sterling against most currencies other than the Euro.

Total results after restructuring

Operating profit after legal charges of £1.57 billion and restructuring for Q2 2010 was £51 million. This included £590 million of charges related to restructuring (Q2 2009: £186 million); £31 million was charged to cost of sales (Q2 2009: £71 million); £357 million to SG&A (Q2 2009: £65 million) and £202 million to R&D (Q2 2009: £50 million). The restructuring charges were incurred primarily in relation to ongoing US sales force reorganisations and several R&D site exits.

Loss per share after restructuring was 6.0p compared with earnings per share of 28.3p in Q2 2009.

Cash flow and net debt

Net cash inflow from operating activities for H1 2010 was £4,238 million, up 21% in sterling terms. This was used to fund net interest of £313 million, capital expenditure on property, plant and equipment and intangible assets of £672 million, acquisitions of £163 million, repayment of short-term loans of £1,321 million and the dividend paid to shareholders of £1,682 million. Net debt decreased by £0.9 billion during the period to £8.5 billion at 30th June 2010, comprising gross debt of £15.3 billion and cash and liquid investments of £6.8 billion.

At 30th June 2010, GSK had short-term borrowings (including overdrafts) repayable within 12 months of £0.5 billion with £0.6 billion repayable in the subsequent year.

Dividends

The Board has declared a second interim dividend of 15 pence per share (Q2 2009: 14 pence) making 30 pence for the half year. The equivalent interim dividend receivable by ADR holders is 45.7260 cents per ADS based on an exchange rate of £1/$1.5242. The ex-dividend date will be 28th July 2010, with a record date of 30th July 2010 and a payment date of 7th October 2010.

Currency impact

The Q2 results are based on average exchange rates, principally £1/$1.50, £1/€1.17 and £1/Yen 137. Comparative exchange rates are given on page 29. The period end exchange rates were £1/$1.50, £1/€1.22 and £1/Yen 132. If exchange rates were to hold at these period end levels for the rest of 2010 and there were no exchange gains or losses in subsequent quarters, the estimated positive impact on 2010 sterling EPS growth before major restructuring would be approximately 5 percentage points.

Additional income statement information

To improve transparency and understanding of our increasingly diversified business additional detailed financial information is provided on pages 31 to 34.



Issued: Wednesday, 21st July 2010, London, U.K.		6


Contents	Page

Q2 2010 results summary		1
Chief Executive Officer’s review		2
Trading update		4

Income statement — three months ended 30th June 2010		9
Pharmaceuticals turnover — three months ended 30th June 2010		10
Consumer Healthcare turnover — three months ended 30th June 2010		11
Statement of comprehensive income — three months ended 30th June 2010		11
Late-stage pipeline		12
Income statement — six months ended 30th June 2010		16
Pharmaceuticals turnover — six months ended 30th June 2010		17
Consumer Healthcare turnover — six months ended 30th June 2010		18
Statement of comprehensive income — six months ended 30th June 2010		18
Balance sheet		19
Cash flow statement — six months ended 30th June 2010		20
Statement of changes in equity		21
Segmental information		22
Legal matters		25
Additional information		26
Directors’ responsibility statement		30
Investor information		30
Additional income statement information		31
Auditors’ review report		35



Issued: Wednesday, 21st July 2010, London, U.K.		7

GlaxoSmithKline (GSK) together with its subsidiary undertakings, the ‘Group’ — one of the world’s leading research-based pharmaceutical and healthcare companies — is committed to improving the quality of human life by enabling people to do more, feel better and live longer. GlaxoSmithKline’s website www.gsk.com gives additional information on the Group. Information made available on the website does not constitute part of this document.


Enquiries:	UK Media	Philip Thomson	(020) 8047 5502
		Claire Brough	(020) 8047 5502
		Alexandra Harrison	(020) 8047 5502
		Stephen Rea	(020) 8047 5502
		Jo Revill	(020) 8047 5502

	US Media	Nancy Pekarek	(919) 483 2839
		Mary Anne Rhyne	(919) 483 2839
		Kevin Colgan	(919) 483 2839
		Sarah Alspach	(919) 483 2839

	European Analyst / Investor	David Mawdsley	(020) 8047 5564
		Sally Ferguson	(020) 8047 5543
		Gary Davies	(020) 8047 5503

	US Analyst / Investor	Tom Curry	(215) 751 5419
		Jen Hill Baxter	(215) 751 7002

Results before major restructuring

Results before major restructuring is a measure used by management to assess the Group’s financial performance and is presented after excluding restructuring charges relating to the Operational Excellence programme, which commenced in October 2007 and the acquisitions of Reliant Pharmaceuticals in December 2007 and Stiefel in July 2009. Management believes that this presentation assists shareholders in gaining a clearer understanding of the Group’s financial performance and in making projections of future financial performance, as results that include such costs, by virtue of their size and nature, have limited comparative value.

CER growth

In order to illustrate underlying performance, it is the Group’s practice to discuss its results in terms of constant exchange rate (CER) growth. This represents growth calculated as if the exchange rates used to determine the results of overseas companies in Sterling had remained unchanged from those used in the comparative period. All commentaries are presented in terms of CER growth, unless otherwise stated.

Brand names and partner acknowledgements

Brand names appearing in italics throughout this document are trademarks of GSK or associated companies or used under licence by the Group.

White pills/western markets

White pills/western markets refers to sales of tablets and simple injectables (excluding biopharmaceuticals and vaccines) in North America and Europe.

Cautionary statement regarding forward-looking statements

Under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, the company cautions investors that any forward-looking statements or projections made by the company, including those made in this Announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Factors that may affect the Group’s operations are described under ‘Risk Factors’ in the ‘Business Review’ in the company’s Annual Report on Form 20-F for 2009.

GlaxoSmithKline plc, 980 Great West Road, Brentford, Middlesex TW8 9GS, United Kingdom Registered in England and Wales. Registered number: 3888792



Issued: Wednesday, 21st July 2010, London, U.K.		8

Income statement

Three months ended 30th June 2010


	Results												Results
	before major						Major						before major			Major
	restructuring						restructuring			Total			restructuring			restructuring			Total
	Q2 2010			Growth			Q2 2010			Q2 2010			Q2 2009			Q2 2009			Q2 2009
	£m			CER%			£m			£m			£m			£m			£m


TURNOVER		7,025			—						7,025			6,747						6,747

Cost of sales		(1,626	)		(2	)		(31	)		(1,657	)		(1,621	)		(71	)		(1,692	)

Gross profit		5,399			1			(31	)		5,368			5,126			(71	)		5,055

Selling, general and administration		(3,845	)		71			(357	)		(4,202	)		(2,227	)		(65	)		(2,292	)
Research and development		(994	)		5			(202	)		(1,196	)		(923	)		(50	)		(973	)
Other operating income		81									81			405						405

OPERATING PROFIT		641			(80	)		(590	)		51			2,381			(186	)		2,195

Finance income		19									19			18						18
Finance expense		(188	)					(1	)		(189	)		(166	)		(2	)		(168	)
Share of after tax profits of associates and joint ventures		22									22			17						17

PROFIT/(LOSS) BEFORE TAXATION		494			(86	)		(591	)		(97	)		2,250			(188	)		2,062

Taxation		(312	)					157			(155	)		(652	)		51			(601	)
Tax rate %		*63.2*	%								*>100*	%		29.0	%					29.1	%

PROFIT/(LOSS) AFTER TAXATION FOR THE PERIOD		182			(96	)		(434	)		(252	)		1,598			(137	)		1,461


Profit attributable to non-controlling interests		52									52			26						26
Profit/(loss) attributable to shareholders		130						(434	)		(304	)		1,572			(137	)		1,435

		182						(434	)		(252	)		1,598			(137	)		1,461


EARNINGS/(LOSS) PER SHARE		2.6p			(99	)					(6.0)p			31.0p						28.3p


Diluted earnings/(loss) per share		2.5p									(5.9)p			30.8p						28.1p



Issued: Wednesday, 21st July 2010, London, U.K.		9

Pharmaceuticals turnover

Three months ended 30th June 2010


	Total					USA					Europe					Emerging Markets					Rest of World
	£m		CER%			£m		CER%			£m		CER%			£m		CER%			£m			CER%

Respiratory		1,829		2			868		1			535		(1	)		166		19			260			2
Avamys/Veramyst		57		19			20		11			21		31			9		>100			7			(30	)
Flixonase/Flonase		50		21			18		>100			12		—			10		10			10			(33	)
Flixotide/Flovent		201		1			109		8			39		(9	)		12		50			41			(15	)
Seretide/Advair		1,286		—			655		(3	)		392		—			86		12			153			10
Serevent		52		(14	)		17		(6	)		24		(17	)		1		—			10			(18	)
Ventolin		134		16			45		38			35		3			31		25			23			(5	)
Zyrtec		20		6			—		—			—		—			4		33			16			—
Anti-virals		286		(50	)		118		(66	)		26		(64	)		59		10			83			(14	)
Hepsera		34		7			—		—			—		—			15		8			19			6
Relenza		8		(97	)		5		(84	)		2		(96	)		—		—			1			—
Valtrex		165		(59	)		94		(69	)		16		(59	)		8		33			47			2
Zeffix		62		7			4		(40	)		6		(13	)		36		21			16			8
Central nervous system		450		(4	)		131		(11	)		137		(3	)		53		11			129			(1	)
Imigran/Imitrex		52		(25	)		18		(45	)		21		(9	)		2		100			11			(9	)
Lamictal		123		15			60		29			37		(3	)		14		17			12			13
Requip		60		16			11		83			36		6			1		—			12			11
Seroxat/Paxil		133		(9	)		12		(8	)		22		(15	)		20		(14	)		79			(5	)
Treximet		16		17			15		25			—		—			—		—			1			—
Wellbutrin		21		(33	)		5		(70	)		9		43			3		—			4			100
Cardiovascular and urogenital		654		10			403		8			154		8			36		26			61			19
Arixtra		79		28			46		36			27		22			2		—			4			—
Avodart		157		14			88		2			44		19			9		60			16			78
Coreg		44		(16	)		44		(16	)		—		—			—		—			—			—
Fraxiparine		57		(3	)		—		—			39		(7	)		14		40			4			(60	)
Lovaza		138		29			138		29			—		—			—		—			—			—
Vesicare		30		12			30		12			—		—			—		—			—			—
Volibris		10		>100			—		—			9		>100			—		—			1			—
Metabolic		213		(33	)		77		(51	)		55		(23	)		31		(9	)		50			(8	)
Avandia products		152		(26	)		75		(33	)		34		(22	)		18		(14	)		25			(13	)
Bonviva/Boniva		20		(70	)		—		—			17		(22	)		1		—			2			—
Anti-bacterials		337		(4	)		21		(29	)		120		(12	)		153		8			43			(2	)
Augmentin		144		(3	)		2		(91	)		53		(13	)		69		15			20			33
Oncology and emesis		175		2			94		2			47		(4	)		16		—			18			21
Arzerra		8		—			7		—			—		—			—		—			1			—
Hycamtin		40		(12	)		24		(4	)		12		(20	)		2		—			2			(50	)
Promacta		8		>100			7		>100			1		—			—		—			—			—
Tyverb/Tykerb		56		32			18		—			22		28			7		17			9			—
Votrient		8		—			8		—			—		—			—		—			—			—
Vaccines		939		17			143		(31	)		365		14			179		18			252			>100
Boostrix		43		8			26		19			11		10			1		(80	)		5			67
Cervarix		50		(33	)		6		—			21		(65	)		6		50			17			>100
Fluarix, FluLaval		—		—			—		—			—		—			1		(89	)		(1	)		—
Flu Pandemic		275		>100			—		—			92		>100			43		—			140			—
Hepatitis		170		(16	)		62		(33	)		63		(13	)		25		9			20			29
Infanrix, Pediarix		176		14			40		3			109		22			11		11			16			(6	)
Rotarix		39		(49	)		9		(64	)		8		(42	)		20		(34	)		2			(75	)
Synflorix		38		>100			—		—			14		40			14		—			10			>100
Dermatologicals		262		>100			74		>100			63		>100			69		74			56			76
Bactroban		30		(6	)		14		(13	)		7		—			7		14			2			(33	)
Dermovate		19		—			—		—			5		—			7		—			7			—
Duac		29		—			15		—			6		—			2		—			6			—
Soriatane		17		—			17		—			—		—			—		—			—			—
Zovirax		33		(6	)		5		25			7		(13	)		8		—			13			(14	)
Other		239		12			6		>100			78		26			86		24			69			(17	)

		5,384		—			1,935		(13	)		1,580		1			848		17			1,021			16

ViiV Healthcare (HIV)		389		1			176		3			145		(4	)		19		(17	)		49			24
Combivir		86		(18	)		39		(16	)		30		(19	)		7		(36	)		10			—
Epivir		27		(13	)		10		(9	)		10		(17	)		2		(33	)		5			—
Epzicom/Kivexa		140		8			57		10			61		5			6		50			16			—
Lexiva		39		(12	)		20		(17	)		13		(13	)		2		50			4			—
Selzentry		19		—			9		—			9		—			1		—			—			—
Trizivir		36		(29	)		19		(24	)		14		(25	)		—		—			3			(100	)

		5,773		—



Issued: Wednesday, 21st July 2010, London, U.K.		10

Pharmaceutical turnover includes co-promotion income.

Consumer Healthcare turnover

Three months ended 30th June 2010


			Total
	£m		CER%


Over-the-counter medicines		593		(2	)
Oral healthcare		410		9
Nutritional healthcare		249		6

		1,252		3


			Total
	£m		CER%


USA		263		—
Europe		493		(2	)
Rest of World		496		11

		1,252		3

Statement of comprehensive income


	Q2 2010			Q2 2009
	£m			£m

(Loss)/profit for the period		(252	)		1,461

Exchange movements on overseas net assets and net investment hedges		(417	)		(385	)
Fair value movements on available-for-sale investments		(47	)		(25	)
Deferred tax on fair value movements on available-for-sale investments		2			(8	)
Reclassification of fair value movements on available-for-sale investments		(5	)		(1	)
Deferred tax reversed on reclassification of available-for-sale investments		3			1
Actuarial losses on defined benefit plans		(389	)		(785	)
Deferred tax on actuarial movements in defined benefit plans		133			212
Fair value movements on cash flow hedges		(2	)		(3	)
Deferred tax on fair value movements on cash flow hedges		—			2
Reclassification of cash flow hedges to income statement		4			—

Other comprehensive expense for the period		(718	)		(992	)

Total comprehensive (expense)/income for the period		(970	)		469


Total comprehensive (expense)/income for the period attributable to:
Shareholders		(1,021	)		477
Non-controlling interests		51			(8	)

		(970	)		469



Issued: Wednesday, 21st July 2010, London, U.K.		11

GSK’s late-stage pharmaceuticals and vaccines pipeline

The table below is provided as part of GSK’s quarterly update to show events and changes to the late stage pipeline during the quarter and up to the date of announcement.

The following assets were listed as approved or terminated in the last quarterly update and are no longer included in the table: Arzerra refractory CLL, Revolade ITP, pazopanib+Tykerb IBC, Arixtra ACS.

The table includes five new assets that are now due to progress into Phase III development:

2402968 (PRO051) for Duchenne muscular dystrophy
1120212 (MEK Inhibitor) for metastatic melanoma
2118436 (BRAF Inhibitor) for metastatic melanoma
Herpes zoster vaccine for shingles prophylaxis
1349572 (Integrase Inhibitor) for HIV, being developed by Shionogi-ViiV Healthcare LLC


Biopharmaceuticals		USA	EU	News update in the quarter
Arzerra (ofatumumab)	CLL (first line & relapsed)	Ph III	Ph III	Relapsed maintenance study commenced. Three CLL studies now ongoing.

	NHL (FL)	Ph III	Ph III	Bendamustine combination study in rituximab refractory NHL to commence in Q3.

	NHL (DLBCL)	Ph III	Ph III

	RA	Ph III	Ph III	Strategy to be reviewed following amended contract with Genmab.

Benlysta (belimumab)	Systemic lupus	Filed Jun 2010	Filed Jun 2010	Filed in EU on 7th June 2010 and in USA on 10th June 2010. BLISS-76 data presented at EULAR 17th June 2010.

otelixizumab	Type 1 diabetes	Ph III	Ph III	Second Phase III study (DEFEND-2) commenced June 2010.

Syncria	Type 2 diabetes	Ph III	Ph III	All 8 Phase III studies now commenced; 5 fully recruited.

Prolia (denosumab)	Post menopausal osteoporosis	n/a	Approved May 2010	Approved in the EU on 28th May 2010.

Cardiovascular & Metabolic		USA	EU	News update in the quarter

Avandamet XR	Type 2 diabetes	Ph III	Ph III	Filing strategy under review.

Avandia + statin	Type 2 diabetes	Ph III	Ph III	Filing strategy under review.

darapladib	Atherosclerosis	Ph III	Ph III

Neurosciences		USA	EU	News update in the quarter

Horizant	RLS	Filed	Ph III	Expect to respond to FDA Complete Response letter in H2 2010.

almorexant	Primary insomnia	Ph III	Ph III

Potiga (ezogabine)/Trobalt (retigabine)	Epilepsy	Filed	Filed	FDA AdCom announced for 11th August 2010.

2402968 (PRO051)	Duchenne muscular dystrophy			Expect to commence recruitment into Phase III in H2 2010.

Oncology		USA	EU	News update in the quarter

Promacta/Revolade	Hepatitis C	Ph III	Ph III

	CLD	Ph III	Ph III	Next steps under review.

Avodart	Prostate cancer prevention	Filed	Filed

	Duodart/Jalyn (fixed dose combination with tamsulosin)	Approved Jun 2010	Approved Mar 2010	Jalyn approved in the USA on 14th June 2010.



Issued: Wednesday, 21st July 2010, London, U.K.		12


Oncology / contd.		USA	EU	News update in the quarter
Votrient (pazopanib)	Renal cell cancer	Approved	Approved Jun 2010	Approved in the EU on 15th June 2010.

	Sarcoma	Ph III	Ph III

	Ovarian	Ph III	Ph III	Recruitment completed in July.

Tykerb	First-line metastatic	Approved Jan 2010	Approved Jun 2010	Approved in the EU on 23rd June 2010.

	Adjuvant breast cancer	Ph III	Ph III

	Head & neck cancer	Ph III	Ph III

	Gastric cancer	Ph III	Ph III

1120212 (MEK inhibitor)	Metastatic melanoma			Commit to Phase III decision taken June 2010.

2118436 (BRaf inhibitor)	Metastatic melanoma			Commit to Phase III decision taken June 2010.

Respiratory & Immuno-inflammation		USA	EU	News update in the quarter

Relovair HORIZON (‘444 & ‘698)	COPD	Ph III	Ph III

	Asthma	Ph III	Ph III

Vaccines		USA	EU	News update in the quarter

Menhibrix (HibMenCY-TT)	MenCY and Hib prophylaxis	Filed	n/a	FDA Complete Response letter received 11th June 2010. Expect to respond to FDA in H2 2010.

MAGE-A3	Melanoma	Ph III	Ph III

	NSCLC	Ph III	Ph III

Nimenrix (MenACWY)	MenACWY prophylaxis	Ph III	Ph III	Plan to file in EU in H1 2011.

New generation flu	Influenza prophylaxis	Ph III	Ph III	Initial results did not demonstrate sufficient additional efficacy. Programme continues with alternate approaches currently in development.

Simplirix	Genital herpes prophylaxis	Ph III	Ph III

Herpes zoster	Shingles prophylaxis	Ph III	Ph III	Phase III commencing Q3 2010.

Mosquirix	Malaria prophylaxis	n/a	n/a	Phase III study ongoing in Africa.

HIV (ViiV Healthcare)		USA	EU	News update in the quarter

1349572	HIV integrase inhibitor			Commit to Phase III decision taken July 2010.



Issued: Wednesday, 21st July 2010, London, U.K.		13

Turnover and key product movements impacting growth — H1 2010

Total Group turnover grew 7% to £14.4 billion, with pharmaceutical turnover up 7% to £11.9 billion and Consumer Healthcare sales up 6% to £2.5 billion.

On a regional basis, US pharmaceuticals sales declined -7% to £3.8 billion, primarily due to the impact of generic competition to Valtrex, the discontinuation of GSK’s promotion of Boniva, the sale of Wellbutrin XL in 2009 and lower Avandia sales, only partially offset by the acquisition of Stiefel. The decline was more than offset by growth in all other regions: Europe (+9% to £3.5 billion), Emerging Markets (+30% to £1.7 billion) and Asia Pacific/Japan (+27% to £1.6 billion).

Seretide/Advair sales grew 4% in the first half of the year to £2.6 billion. US sales grew 1% to £1.3 billion and Europe sales were up 5% to £815 million. Sales growth of Seretide/Advair was strong in both Emerging Markets (+20% to £166 million) and Asia Pacific/Japan (+19% to £183 million).

Total vaccine sales grew 70% to £2.4 billion, including £973 million of H1N1 vaccine sales. Sales of Synflorix, which was launched in 2009, were £83 million, while sales of Cervarix grew 4% to £127 million. Hepatitis vaccines grew 7% to £367 million and the Infanrix franchise grew 5% to £342 million. Rotarix performance (-19% to £104 million) was significantly impacted by the FDA’s decision in March to suspend temporarily the product in the USA. Rotarix was back on the market at the end of May, and has been regaining sales and market share since then.

Relenza sales were £92 million, down 68%, after significant government orders throughout 2009.

Dermatology sales were £527 million during the first half of the year, including heritage GSK products and those acquired through the acquisition of Stiefel in July 2009 (5% growth on a pro forma basis). In addition, GSK’s heritage consumer dermatology portfolio, reported within Consumer Healthcare, contributed sales of £126 million (+8%).

Other strong pharmaceutical performances included Lovaza (+19% to £245 million), Tykerb (+45% to £109 million), Arixtra (+27% to £149 million), and Avodart (+17% to £296 million). Newly launched oncology products Arzerra and Votrient both recorded sales of £13 million during the first half of the year.

Valtrex sales declined 53% to £341 million, primarily due to the impact of generic competition in the USA which began in November 2009. Reported sales of Wellbutrin declined 56% to £41 million, reflecting the sale of Wellbutrin XL in the USA to Biovail in Q2 2009. European sales of Wellbutrin rose 46% to £18 million. Boniva reported sales were 66% lower at £43 million reflecting the transfer to Genentech of the exclusive promotion rights in the USA on 1st January 2010. Avandia sales declined by 18% to £321 million.

Sales of HIV products by ViiV Healthcare were down 3%. The impact of competition to established products such as Combivir (-21% to £168 million) was not fully offset by contributions from the former Pfizer product Selzentry (sales of £38 million in the half year) and growth from Epzicom/Kivexa (+3% to £271 million).

Total Consumer Healthcare sales rose 6% (to £2.5 billion). Sales in the Rest of World were particularly strong (+12% to £1,010 million). Europe sales grew 3% to £964 million, while US sales grew 1% to £509 million.

On a category basis, Oral care sales grew 7% to £791 million, with growth across all regions. Nutritional healthcare sales grew 9% to £482 million, with strong growth in Rest of World (+14%). Sales of OTC medicines were £1,210 million, up 4%, reflecting growth of analgesic products in Europe and the Rest of World and growth of smoking control products.



Issued: Wednesday, 21st July 2010, London, U.K.		14

Operating profit and earnings per share commentary — H1 2010

Results before major restructuring

Operating profit before major restructuring for H1 2010 was £3,036 million, a 34% decline in CER terms primarily due to significant legal costs incurred in the second quarter.

Cost of sales increased to 24.7% of turnover (H1 2009: 24.2%) principally reflecting the impact of generic competition to higher margin products in the USA. The company continues to expect cost of sales as a percentage of turnover to be around 26% for the full year.

SG&A costs were impacted by legal costs of £1.8 billion (H1 2009: £136 million). Excluding legal costs, SG&A costs grew 7% and were 30.3% of turnover (H1 2009: 31.2%) reflecting the benefits of the restructuring programme offset by expansion in developing markets. The company continues to expect SG&A costs excluding legal charges to be around 29% of turnover for the full year.

R&D expenditure at 13.4% of turnover (H1 2009: 14.8%) reflected the phasing of project expenditure, good progress on efficiency savings and a positive comparison to prior year which included a higher level of intangible asset write-offs. The company continues to expect R&D costs as a percentage of turnover to be around 14% for the full year.

Other operating income in the first half was £280 million (H1 2009: £459 million), including royalty income of £145 million (H1 2009: £126 million). The first half of 2009 benefited from the disposal of Wellbutrin XL.

The charge for taxation on profit before major restructuring amounted to £930 million and represents an effective tax rate of 34.1% for the half year. The company now expects, as a result of the recently announced legal charge of £1,578 million, the effective tax rate for the full year to be 30.5%.

EPS before major restructuring of 33.3p decreased 46% in CER terms (a 42% decrease in sterling terms). The favourable currency impact primarily reflected stronger US and international currencies partly offset by a weaker Euro.

Total results after restructuring

Operating profit after legal charges of £1.8 billion and restructuring for H1 2010 was £2,145 million, down 50% CER and 45% in sterling terms. This included £891 million of restructuring charges (H1 2009: £450 million); £59 million was charged to cost of sales (H1 2009: £214 million), £409 million to SG&A (H1 2009: £136 million) and £423 million to R&D (H1 2009: £100 million).

The Group’s operational excellence programme remains on track to deliver £2.2 billion of cumulative annual cost savings by 2012, with £1.5 billion expected by the end of 2010.

EPS after restructuring of 20.4p decreased 65% CER and 60% in sterling terms compared with H1 2009.



Issued: Wednesday, 21st July 2010, London, U.K.		15

Income statement

Six months ended 30th June 2010


	Results												Results
	before major						Major						before major			Major
	restructuring						restructuring			Total			restructuring			restructuring			Total
	H1 2010			Growth			H1 2010			H1 2010			H1 2009			H1 2009			H1 2009
	£m			CER%			£m			£m			£m			£m			£m

TURNOVER		14,382			7						14,382			13,516						13,516

Cost of sales		(3,550	)		9			(59	)		(3,609	)		(3,265	)		(214	)		(3,479	)

Gross profit		10,832			6			(59	)		10,773			10,251			(214	)		10,037

Selling, general and administration		(6,143	)		45			(409	)		(6,552	)		(4,356	)		(136	)		(4,492	)
Research and development		(1,933	)		(2	)		(423	)		(2,356	)		(1,997	)		(100	)		(2,097	)
Other operating income		280									280			459						459

OPERATING PROFIT		3,036			(34	)		(891	)		2,145			4,357			(450	)		3,907

Finance income		36									36			46						46
Finance expense		(392	)					(2	)		(394	)		(368	)		(3	)		(371	)
Profit on disposal of interest in associate														115						115
Share of after tax profits of associates and joint ventures		47									47			31						31

PROFIT BEFORE TAXATION		2,727			(39	)		(893	)		1,834			4,181			(453	)		3,728

Taxation		(930	)					239			(691	)		(1,212	)		114			(1,098	)
Tax rate %		*34.1*	%								*37.7*	%		29.0	%					29.5	%

PROFIT AFTER TAXATION FOR THE PERIOD		1,797			(43	)		(654	)		1,143			2,969			(339	)		2,630


Profit attributable to non-controlling interests		107									107			64						64
Profit attributable to shareholders		1,690						(654	)		1,036			2,905			(339	)		2,566

		1,797						(654	)		1,143			2,969			(339	)		2,630


EARNINGS PER SHARE		33.3p									20.4p			57.3p						50.6p


Diluted earnings per share		33.0p									20.2p			56.9p						50.3p



Issued: Wednesday, 21st July 2010, London, U.K.		16

Pharmaceuticals turnover
Six months ended 30th June 2010


	Total					USA					Europe					Emerging Markets					Rest of World
	£m		CER%			£m		CER%			£m		CER%			£m		CER%			£m		CER%
Respiratory		3,595		4			1,673		2			1,104		3			309		24			509		4
Avamys/Veramyst		103		32			37		—			34		40			14		>100			18		55
Flixonase/Flonase		95		(12	)		24		33			22		(8	)		19		11			30		(40	)
Flixotide/Flovent		397		3			208		8			84		(8	)		26		63			79		(10	)
Seretide/Advair		2,550		4			1,285		1			815		5			166		20			284		16
Serevent		103		(15	)		33		(8	)		50		(17	)		1		(50	)		19		(18	)
Ventolin		250		9			80		17			72		1			55		20			43		(3	)
Zyrtec		40		11			—		—			—		—			6		50			34		6
Anti-virals		644		(47	)		272		(55	)		61		(74	)		106		9			205		(23	)
Hepsera		63		9			—		—			—		—			27		4			36		13
Relenza		92		(68	)		35		20			4		(97	)		1		(75	)		52		(57	)
Valtrex		341		(53	)		201		(63	)		39		(51	)		13		17			88		1
Zeffix		114		6			7		(22	)		13		(7	)		65		16			29		—
Central nervous system		867		(8	)		267		(24	)		277		(2	)		98		12			225		1
Imigran/Imitrex		109		(17	)		42		(30	)		43		(10	)		3		50			21		(5	)
Lamictal		243		—			121		(5	)		74		(3	)		26		12			22		36
Requip		115		15			21		57			72		9			1		—			21		5
Seroxat/Paxil		239		(10	)		22		(19	)		44		(18	)		35		(8	)		138		(6	)
Treximet		29		12			28		12			—		—			—		—			1		—
Wellbutrin		41		(56	)		13		(81	)		18		46			6		25			4		—
Cardiovascular and urogenital		1,224		10			740		7			307		10			64		25			113		20
Arixtra		149		27			85		32			53		22			4		33			7		—
Avodart		296		17			164		7			84		18			16		60			32		82
Coreg		86		(14	)		86		(14	)		—		—			—		—			—		—
Fraxiparine		113		—			—		—			82		(3	)		25		32			6		(38	)
Lovaza		245		19			245		19			—		—			—		—			—		—
Vesicare		55		12			55		12			—		—			—		—			—		—
Volibris		19		>100			—		—			17		>100			—		—			2		—
Metabolic		443		(26	)		166		(43	)		116		(15	)		62		3			99		(4	)
Avandia products		321		(18	)		164		(23	)		72		(17	)		37		(5	)		48		(6	)
Bonviva/Boniva		43		(66	)		—		—			37		(14	)		1		—			5		—
Anti-bacterials		693		(5	)		45		(19	)		262		(17	)		299		10			87		2
Augmentin		304		(7	)		10		(63	)		116		(19	)		139		13			39		15
Oncology and emesis		344		12			186		20			97		(2	)		28		4			33		24
Arzerra		13		—			12		—			—		—			—		—			1		—
Hycamtin		80		(6	)		48		(2	)		25		(13	)		4		33			3		(33	)
Promacta		14		>100			13		>100			1		—			—		—			—		—
Tyverb/Tykerb		109		45			35		29			46		34			12		33			16		>100
Votrient		13		—			13		—			—		—			—		—			—		—
Vaccines		2,350		70			314		2			978		64			451		66			607		>100
Boostrix		73		12			41		31			20		17			3		(50	)		9		(22	)
Cervarix		127		4			8		—			80		(21	)		10		—			29		>100
Fluarix, FluLaval		5		(82	)		1		(80	)		—		—			1		(93	)		3		(33	)
Flu Pandemic		973		>100			—		—			396		>100			195		—			382		>100
Hepatitis		367		7			154		14			124		(6	)		45		13			44		25
Infanrix, Pediarix		342		5			72		(5	)		213		9			21		—			36		3
Rotarix		104		(19	)		36		—			21		(16	)		37		(30	)		10		(31	)
Synflorix		83		>100			—		—			26		>100			40		—			17		>100
Dermatologicals		527		>100			171		>100			125		>100			131		74			100		84
Bactroban		57		(6	)		25		(17	)		13		—			13		—			6		20
Dermovate		34		—			—		—			9		—			12		—			13		—
Duac		56		—			32		—			12		—			5		—			7		—
Soriatane		35		—			35		—			—		—			—		—			—		—
Zovirax		82		27			31		>100			14		(13	)		14		—			23		(15	)
Other		450		16			10		43			146		25			166		27			128		(5	)

		11,137		7			3,844		(7	)		3,473		9			1,714		30			2,106		26

ViiV Healthcare (HIV)		762		(3	)		335		(5	)		304		(3	)		37		(10	)		86		9
Combivir		168		(21	)		73		(24	)		63		(18	)		13		(38	)		19		6
Epivir		55		(14	)		20		(13	)		20		(19	)		5		—			10		(10	)
Epzicom/Kivexa		271		3			105		(1	)		125		6			8		14			33		7
Lexiva		80		(10	)		41		(16	)		28		(12	)		4		67			7		20
Selzentry		38		—			17		—			20		—			1		—			—		—
Trizivir		74		(28	)		38		(29	)		31		(27	)		1		100			4		(40	)

		11,899		7



Issued: Wednesday, 21st July 2010, London, U.K.		17

Pharmaceutical turnover includes co-promotion income.

Consumer Healthcare turnover

Six months ended 30th June 2010


	Total
	£m		CER%

Over-the-counter medicines		1,210		4
Oral healthcare		791		7
Nutritional healthcare		482		9

		2,483		6


	Total
	£m		CER%

USA		509		1
Europe		964		3
Rest of World		1,010		12

		2,483		6

Statement of comprehensive income


	H1 2010			H1 2009
	£m			£m
Profit for the period		1,143			2,630

Exchange movements on overseas net assets and net investment hedges		(214	)		(599	)
Fair value movements on available-for-sale investments		(23	)		(4	)
Deferred tax on fair value movements on available-for-sale investments		3			(9	)
Reclassification of fair value movements on available-for-sale-investments		(18	)		(5	)
Deferred tax reversed on reclassification of available-for-sale investments		3			1
Actuarial losses on defined benefit plans		(554	)		(920	)
Deferred tax on actuarial movements in defined benefit plans		186			249
Fair value movements on cash flow hedges		(2	)		(6	)
Deferred tax on fair value movements on cash flow hedges		—			2
Reclassification of cash flow hedges to income statement		4			—

Other comprehensive expense for the period		(615	)		(1,291	)

Total comprehensive income for the period		528			1,339


Total comprehensive income for the period attributable to:
Shareholders		392			1,321
Non-controlling interests		136			18

		528			1,339



Issued: Wednesday, 21st July 2010, London, U.K.		18

Balance sheet


	30th June			30th June			31st December
	2010			2009			2009
	£m			£m			£m
ASSETS
Non-current assets
Property, plant and equipment		9,180			8,875			9,374
Goodwill		3,545			2,015			3,361
Other intangible assets		8,378			5,787			8,183
Investments in associates and joint ventures		1,071			448			895
Other investments		495			463			454
Deferred tax assets		2,639			2,570			2,374
Derivative financial instruments		106			61			68
Other non-current assets		560			493			583

Total non-current assets		25,974			20,712			25,292

Current assets
Inventories		4,070			3,910			4,064
Current tax recoverable		42			55			58
Trade and other receivables		6,015			5,363			6,492
Derivative financial instruments		134			283			129
Liquid investments		225			290			268
Cash and cash equivalents		6,574			5,346			6,545
Assets held for sale		19			2			14

Total current assets		17,079			15,249			17,570

TOTAL ASSETS		43,053			35,961			42,862

LIABILITIES
Current liabilities
Short-term borrowings		(453	)		(1,185	)		(1,471	)
Trade and other payables		(6,568	)		(5,161	)		(6,772	)
Derivative financial instruments		(209	)		(400	)		(168	)
Current tax payable		(1,347	)		(875	)		(1,451	)
Short-term provisions		(3,425	)		(1,413	)		(2,256	)

Total current liabilities		(12,002	)		(9,034	)		(12,118	)

Non-current liabilities
Long-term borrowings		(14,848	)		(13,067	)		(14,786	)
Deferred tax liabilities		(668	)		(497	)		(645	)
Pensions and other post-employment benefits		(3,773	)		(3,664	)		(2,981	)
Other provisions		(1,618	)		(1,276	)		(985	)
Derivative financial instruments		(6	)		—			—
Other non-current liabilities		(594	)		(392	)		(605	)

Total non-current liabilities		(21,507	)		(18,896	)		(20,002	)

TOTAL LIABILITIES		(33,509	)		(27,930	)		(32,120	)

NET ASSETS		9,544			8,031			10,742


EQUITY
Share capital		1,417			1,416			1,416
Share premium account		1,388			1,341			1,368
Retained earnings		4,914			4,257			6,321
Other reserves		1,050			703			900

Shareholders’ equity		8,769			7,717			10,005
Non-controlling interests		775			314			737

TOTAL EQUITY		9,544			8,031			10,742



Issued: Wednesday, 21st July 2010, London, U.K.		19

Cash flow statement

Six months ended 30th June 2010


	H1 2010			H1 2009			2009
	£m			£m			£m
Profit after tax		1,143			2,630			5,669
Tax on profits		691			1,098			2,222
Share of after tax profits of associates and joint ventures		(47	)		(31	)		(64	)
Profit on disposal of interest in associates		—			(115	)		(115	)
Net finance expense		358			325			713
Depreciation and other non-cash items		928			767			1,271
Decrease/(increase) in working capital		464			228			(106	)
Increase/(decrease) in other net liabilities		1,525			(488	)		(45	)

Cash generated from operations		5,062			4,414			9,545
Taxation paid		(824	)		(915	)		(1,704	)

Net cash inflow from operating activities		4,238			3,499			7,841

Cash flow from investing activities
Purchase of property, plant and equipment		(474	)		(655	)		(1,418	)
Proceeds from sale of property, plant and equipment		46			12			48
Purchase of intangible assets		(198	)		(195	)		(455	)
Proceeds from sale of intangible assets		32			353			356
Purchase of equity investments		(147	)		(44	)		(154	)
Proceeds from sale of equity investments		12			2			59
Purchase of businesses, net of cash acquired		(163	)		(673	)		(2,792	)
Investment in associates and joint ventures		(43	)		(7	)		(29	)
Proceeds from disposal of interest in associates		—			178			178
Decrease in liquid investments		56			58			87
Interest received		39			59			90
Dividends from associates and joint ventures		4			8			17

Net cash outflow from investing activities		(836	)		(904	)		(4,013	)

Cash flow from financing activities
Proceeds from own shares for employee share options		6			3			13
Issue of share capital		21			16			43
Shares acquired by ESOP Trusts		(58	)		(48	)		(57	)
Increase in long-term loans		—			—			1,358
Repayment of short-term loans		(1,321	)		(471	)		(748	)
Increase in short-term loans		38			—			646
Net repayment of obligations under finance leases		(24	)		(23	)		(48	)
Interest paid		(352	)		(385	)		(780	)
Dividends paid to shareholders		(1,682	)		(1,586	)		(3,003	)
Distributions to non-controlling interests		(99	)		(91	)		(89	)
Other financing items		(201	)		(208	)		(109	)

Net cash outflow from financing activities		(3,672	)		(2,793	)		(2,774	)


(Decrease)/increase in cash and bank overdrafts in the period		(270	)		(198	)		1,054

Exchange adjustments		80			(240	)		(158	)
Cash and bank overdrafts at beginning of period		6,368			5,472			5,472

Cash and bank overdrafts at end of period		6,178			5,034			6,368


Cash and bank overdrafts at end of period comprise:
Cash and cash equivalents		6,574			5,346			6,545
Overdrafts		(396	)		(312	)		(177	)

		6,178			5,034			6,368



Issued: Wednesday, 21st July 2010, London, U.K.		20

Statement of changes in equity


											Share-			Non-
	Share		Share		Retained			Other			holder’s			controlling			Total
	capital		premium		earnings			reserves			equity			interests			equity
	£m		£m		£m			£m			£m			£m			£m
At 1st January 2010		1,416		1,368		6,321			900			10,005			737			10,742

Profit for the period		—		—		1,036			—			1,036			107			1,143
Other comprehensive (expense)/income for the period		—		—		(611	)		(33	)		(644	)		29			(615	)
Distributions to non-controlling interests		—		—		—			—			—			(99	)		(99	)
Dividends to shareholders		—		—		(1,682	)		—			(1,682	)		—			(1,682	)
Changes in non-controlling interests		—		—		—			—			—			1			1
Shares issued		1		20		—			—			21			—			21
Consideration received for shares transferred by ESOP Trusts		—		—		—			6			6			—			6
Shares acquired by ESOP Trusts		—		—		—			(58	)		(58	)		—			(58	)
Write-down on shares held by ESOP Trusts		—		—		(235	)		235			—			—			—
Share-based incentive plans		—		—		85			—			85			—			85

At 30th June 2010		1,417		1,388		4,914			1,050			8,769			775			9,544


At 1st January 2009		1,415		1,326		4,622			568			7,931			387			8,318

Profit for the period		—		—		2,566			—			2,566			64			2,630
Other comprehensive expense for the period		—				(1,225	)		(20	)		(1,245	)		(46	)		(1,291	)
Distributions to non-controlling interests		—		—		—			—			—			(81	)		(81	)
Changes in non-controlling interests		—		—		—			—			—			(10	)		(10	)
Dividends to shareholders		—		—		(1,589	)		—			(1,589	)		—			(1,589	)
Shares issued		1		15		—			—			16			—			16
Consideration received for shares transferred by ESOP Trusts		—		—		—			3			3			—			3
Shares acquired by ESOP Trusts		—		—		—			(48	)		(48	)		—			(48	)
Write-down on shares held by ESOP Trusts		—		—		(200	)		200			—			—			—
Share-based incentive plans		—		—		83			—			83			—			83

At 30th June 2009		1,416		1,341		4,257			703			7,717			314			8,031



Issued: Wednesday, 21st July 2010, London, U.K.		21

Segmental information

GSK has revised its segmental information disclosures to reflect changes in the internal reporting structures with effect from 1st January 2010. ViiV Healthcare is now shown as a separate segment. Stiefel has been integrated with the GSK heritage dermatology business and is reported within the relevant geographical pharmaceutical segments. The other trading and other unallocated pharmaceuticals information has been combined. Comparative information has been restated onto a consistent basis.

GSK’s operating segments are being reported based on the financial information provided to the Chief Executive Officer and the responsibilities of the Corporate Executive Team (CET). Individual members of the CET are responsible for geographic regions of the Pharmaceuticals business, ViiV Healthcare and for the Consumer Healthcare business as a whole, respectively.

R&D investment is essential for the sustainability of the pharmaceutical businesses. However, for segment reporting, the USA, Europe, Emerging Markets and Asia Pacific/Japan pharmaceutical operating profits exclude allocations of globally funded R&D as well as central costs, principally corporate functions and unallocated manufacturing costs. GSK’s management reporting process allocates intra-Group profit on a product sale to the market in which that sale is recorded, and the profit analyses below have been presented on that basis.

The Other trading and unallocated pharmaceuticals segment includes Canada, Puerto Rico, central vaccine tender sales and contract manufacturing sales, together with costs such as vaccines R&D and central manufacturing costs not attributed to other segments.

The Pharmaceuticals R&D segment is the responsibility of the Chairman, Research & Development and is therefore being reported as a separate segment.

Corporate and other unallocated costs and disposal profits include corporate functions, costs for legal matters, fair value movements on financial instruments and investments and profits on global asset disposals.

Turnover by segment


			Q2 2009
	Q2 2010		(restated)		Growth
	£m		£m		CER%
US pharmaceuticals		1,935		2,140		(13	)
Europe pharmaceuticals		1,580		1,588		1
Emerging Markets pharmaceuticals		848		693		17
Asia Pacific/Japan pharmaceuticals		727		587		9
ViiV Healthcare		389		379		1
Other trading and unallocated pharmaceuticals		294		191		37

Pharmaceuticals turnover		5,773		5,578		—
Consumer Healthcare turnover		1,252		1,169		3

		7,025		6,747		—



Issued: Wednesday, 21st July 2010, London, U.K.		22

Operating profit by segment


				Q2 2009
	Q2 2010			(restated)			Growth
	£m			£m			CER%

US pharmaceuticals		1,234			1,769			(34	)
Europe pharmaceuticals		886			864			5
Emerging Markets pharmaceuticals		317			203			39
Asia Pacific/Japan pharmaceuticals		406			300			14
ViiV Healthcare		201			263			(25	)
Pharmaceuticals R&D		(802	)		(770	)		(2	)
Other trading and unallocated pharmaceuticals		(50	)		(225	)		(55	)

Pharmaceuticals operating profit		2,192			2,404			(16	)
Consumer Healthcare operating profit		230			204			5

Segment profit		2,422			2,608
Corporate and other unallocated costs and disposal profits		(1,781	)		(227	)		>100

Operating profit before major restructuring		641			2,381			(80	)
Major restructuring		(590	)		(186	)

Total operating profit		51			2,195			>(100	)

Finance income		19			18
Finance costs		(189	)		(168	)
Profit on disposal of interest in associate
Share of after tax profits of associates and joint ventures		22			17

(Loss)/profit before taxation		(97	)		2,062			>(100	)

Segmental commentary

US pharmaceuticals operating profit decreased by 34% in the quarter on a turnover decline of 13%. This reflects generic competition to Valtrex, the discontinuation of promotion of Boniva and the temporary suspension of Rotarix. In addition asset sales were much lower compared with the previous year.

Europe pharmaceuticals turnover increased 1% and operating profit increased 5% reflecting a 5% reduction in SG&A costs.

Emerging Markets turnover increased by 17%, while operating profit, which included the disposal of several tail products in Latin America, grew by 39%.

Asia Pacific/Japan pharmaceuticals turnover increased by 9% and operating profit rose by 14%, principally as a result of good cost containment, resulting in costs increasing more slowly than sales.

In ViiV Healthcare, higher SG&A costs adversely impacted operating profit, which was down 25%. The higher SG&A costs were primarily due to an increase in phase IV trial expenditure and the amortisation of acquired intangible assets.

Pharmaceuticals R&D costs increased by 2%, reflecting the phasing of project expenditure, partially offset by lower intangible impairments.

Other trading and unallocated pharmaceuticals turnover increased by 37% and operating loss reduced 55%, primarily reflecting sales of flu pandemic products and factors specific to the quarter.

Consumer Healthcare sales grew 3% and operating profit grew 5%, as SG&A costs grew more slowly than sales.

Corporate and other unallocated costs increased primarily as a result of the higher legal charges of £1.57 billion in the quarter (Q2 2009: £85 million).



Issued: Wednesday, 21st July 2010, London, U.K.		23

Turnover by segment


			H1 2009
	H1 2010		(restated)		Growth
	£m		£m		CER%

US pharmaceuticals		3,844		4,228		(7	)
Europe pharmaceuticals		3,473		3,257		9
Emerging Markets pharmaceuticals		1,714		1,332		30
Asia Pacific/Japan pharmaceuticals		1,612		1,206		27
ViiV Healthcare		762		798		(3	)
Other trading and unallocated pharmaceuticals		494		375		21

Pharmaceuticals turnover		11,899		11,196		7
Consumer Healthcare turnover		2,483		2,320		6

		14,382		13,516		7

Operating profit by segment


				H1 2009
	H1 2010			(restated)			Growth
	£m			£m			CER%
US pharmaceuticals		2,529			3,118			(17	)
Europe pharmaceuticals		2,024			1,782			16
Emerging Markets pharmaceuticals		630			408			51
Asia Pacific/Japan pharmaceuticals		931			629			40
ViiV Healthcare		413			554			(24	)
Pharmaceuticals R&D		(1,567	)		(1,655	)		(4	)
Other trading and unallocated pharmaceuticals		(177	)		(379	)		(9	)

Pharmaceuticals operating profit		4,783			4,457			4
Consumer Healthcare operating profit		428			388			7

Segment profit		5,211			4,845
Corporate and other unallocated costs and disposal profits		(2,175	)		(488	)		>(100	)

Operating profit before major restructuring		3,036			4,357			(34	)
Major restructuring		(891	)		(450	)

Total operating profit		2,145			3,907			(50	)
Finance income		36			46
Finance costs		(394	)		(371	)
Profit on disposal of interest in associate		—			115
Share of after tax profits of associates and joint ventures		47			31

Profit before taxation		1,834			3,728			(56	)



Issued: Wednesday, 21st July 2010, London, U.K.		24

Segmental commentary

US pharmaceuticals operating profit decreased by 17% on a turnover decline of 7%. This reflects increasing generic competition to Valtrex, the discontinuation of promotion of Boniva and the temporary suspension of Rotarix, partially offset by the receipt of a payment from Genentech for the exclusive promotion rights to Boniva for 2010 in the USA.

Europe pharmaceuticals operating profit increased 16% on a turnover increase of 9%, benefiting from strong H1N1 sales, and a 5% reduction in SG&A costs.

Emerging Markets operating profit grew by 51% on a turnover increase of 30%, reflecting strong H1N1 sales and increased investment in this segment.

Asia Pacific/Japan pharmaceuticals operating profit rose by 40%, principally as a result of significant H1N1 sales; turnover increased by 27%.

In ViiV Healthcare, lower sales and higher SG&A costs adversely impacted operating profit, which decreased by 24%. The higher SG&A costs were primarily due to an increase in phase IV trial expenditure and the amortisation of acquired intangible assets.

Pharmaceuticals R&D costs decreased by 4%, reflecting lower intangible asset write-offs and the phasing of project expenditure.

Other trading and unallocated pharmaceuticals operating loss reduced 9%, reflecting a number of factors including flu pandemic products and factors specific to the half year.

Consumer Healthcare operating profit grew 7%, broadly in line with the turnover increase of 6%.

Corporate and other unallocated costs increased primarily as a result of the higher legal charges of £1.8 billion in the half year (H1 2009: £136 million).

Legal matters

The Group is involved in various legal and administrative proceedings principally product liability, intellectual property, tax, anti-trust and governmental investigations and related private litigation concerning sales, marketing and pricing which are more fully described in the ‘Legal proceedings’ note in the Annual Report 2009.

At 30th June 2010, the Group’s aggregate provision for legal and other disputes (not including tax matters described under ‘Taxation’ on page 26) was £3.5 billion (31st December 2009: £2.0 billion), which includes an additional provision of £1.57 billion for legal and other disputes for Q2. In respect of a number of legal proceedings in which the Group is involved, it is not possible to make a reasonable estimate of the expected financial effect, if any, that will result from ultimate resolution of the proceedings. In these cases, the Group may disclose information with respect to the nature and facts of the cases but no provision is typically made.

The ultimate liability for legal claims may vary from the amounts provided and is dependent upon the outcome of litigation proceedings, investigations and possible settlement negotiations. The Group’s position could change over time, and there can, therefore, be no assurance that any losses that result from the outcome of any legal proceedings will not exceed the amount of the provisions reported in the Group’s financial accounts by a material amount.

On 15th July 2010, the Group issued a press release which provided updates on the progress of litigation and government investigations on the following matters:

The Group has reached an agreement in principle with the US Attorney’s Office for the District of Massachusetts and the United States Department of Justice with respect to the investigation of the company’s manufacturing facility in Cidra, Puerto Rico. The company expects to pay a total of $750 million (£500 million) in civil and criminal penalties as part of a comprehensive settlement of this investigation. The terms of the settlement are subject to the final negotiation and execution of definitive agreements.

The company continues to work to resolve an investigation commenced by the US Attorney’s Office for the District of Colorado into the Group’s sales and promotional practices.



Issued: Wednesday, 21st July 2010, London, U.K.		25

With respect to Avandia product liability litigation, the Group has reached agreements to settle the substantial majority of pending claims. The terms of the settlements are confidential. A number of Avandia claims still remain pending in US Federal and State courts.

With respect to Paxil product liability litigation, the Group has now reached agreements to settle the vast majority of the US claims currently pending. Other matters have been dismissed without payment. Some lawsuits remain scheduled for trial and there remains purported class action litigation in Canada.

Following a court ordered mediation in the second quarter, the Group resolved all claims by and against Apotex in the Paxil/Seroxat patent infringement and antitrust litigation venued in the US District Court for the Eastern District of Pennsylvania. The litigation has been dismissed with respect to all parties.

Other significant developments since the date of the 2009 Annual Report (including those previously reported in the Q1 Results Announcement) are as follows:

With respect to the Poligrip product liability litigation, the Group has reached agreement in principle to settle the vast majority of cases.

On 23rd March 2010, Genentech and Biogen Idec filed suit against the Group in the Southern District of California alleging that the Group’s sale of Arzerra induces and contributes to infringement of a US patent that claims the treatment of chronic lymphatic leukaemia with an anti-CD-20 monoclonal antibody. The Group believes that the there are numerous defences to the suit and has answered their complaint. The litigation is in its early stages.

With respect to Avodart, the Group and Barr Laboratories Inc. reached a settlement in March 2010. On 12th May 2010, the district court dismissed the case. Pursuant to the settlement, Barr will obtain a licence to enter the US market with a generic dutasteride product in the fourth quarter of 2015.

With respect to Combivir, the Group, ViiV Healthcare Ltd., ViiV Healthcare Company and Teva Pharmaceuticals reached a settlement in April 2010. The court dismissed the case on 26th May 2010. Under the terms of the settlement, Teva will obtain a licence from ViiV to enter the US market in the fourth quarter of 2011, or earlier under certain circumstances. A second case brought by the Group against Lupin, which was stayed awaiting the outcome of the case against Teva, is pending.

On 23rd February 2010, revocation actions brought by Mylan dura GmbH, Hexal AG, Neolab Ltd. and IVAX International BV against the Group’s German Seretide combination patent were heard together by the Federal Court in Munich. A decision was received on 19th May 2010, revoking the Group’s patent for lack of inventive step. An appeal has been filed on behalf of the Group with the German Supreme Court. The appeal against an injunction granted against Neolab under the combination patent by the Regional Court in Dusseldorf, which was due to be heard on 8th July 2010, has been stayed pending a decision on the appeal of the revocation actions.

Developments with respect to tax matters are described in ‘Taxation’ below.

Taxation

Transfer pricing and other issues are as previously described in the ‘Taxation’ note to the Financial Statements included in the Annual Report 2009. There have been no material changes to tax matters since the publication of the Annual Report.

GSK continues to believe that it has made adequate provision for the liabilities likely to arise from open assessments. The ultimate liability for such matters may vary from the amounts provided and is dependent upon the outcome of litigation proceedings and negotiations with the relevant tax authorities.

A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement. The Finance (No 2) Act 2010 is expected to include legislation to reduce the main rate of corporation tax from 28% to 27% from 1st April 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per year to 24% by 1st April 2014. The changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements. The company is currently assessing the impact of these changes.



Issued: Wednesday, 21st July 2010, London, U.K.		26

Dividends


	Paid/	Pence per
	payable	share		£m

2010
First interim	8th July 2010		15		764
Second interim	7th October 2010		15		763


2009
First interim	9th July 2009		14		701
Second interim	8th October 2009		14		713
Third interim	7th January 2010		15		763
Fourth interim	8th April 2010		18		919

			61		3,096

Weighted average number of shares


	Q2 2010		Q2 2009
	millions		millions
Weighted average number of shares — basic		5,085		5,069
Dilutive effect of share options and share awards		41		38

Weighted average number of shares — diluted		5,126		5,107


	H1 2010		H1 2009		2009
	millions		millions		millions
Weighted average number of shares — basic		5,082		5,067		5,069
Dilutive effect of share options and share awards		44		39		39

Weighted average number of shares — diluted		5,126		5,106		5,108

Net assets

The book value of net assets decreased by £1,198 million from £10,742 million at 31st December 2009 to £9,544 million at 30th June 2010. This reflects a decrease in net assets arising from the dividend payments, an increase in the pension deficit and the increased provision for legal charges, partially offset by the operating activities in the period. The increase in the pension deficit arose predominantly from a decrease in the rate used to discount UK pension liabilities from 5.70% to 5.40% and the rate used to discount US pension liabilities from 5.75% to 5.0%, partly offset by a decrease in the estimated long-term inflation rate. At 30th June 2010, the net deficit on the Group’s pension plans was £2,262 million compared with £1,745 million at 31st December 2009.

The carrying value of investments in associates and joint ventures at 30th June 2010 was £1,071 million, with a market value of £1,764 million.

At 30th June 2010, the ESOP Trusts held 108.4 million GSK shares against the future exercise of share options and share awards. The carrying value of £955 million has been deducted from other reserves. The market value of these shares was £1,240 million.

GSK did not purchase any shares for cancellation in the period. At 30th June 2010, the company held 474.2 million Treasury shares at a cost of £6,286 million, which has been deducted from retained earnings.



Issued: Wednesday, 21st July 2010, London, U.K.		27

Capital expenditure

In the period to 30th June 2010 there were additions to property, plant and equipment of £484 million (H1 2009: £639 million) and additions to intangible assets of £216 million (H1 2009: £147 million).

In the period to 30th June 2010 there were disposals of property, plant and equipment with a book value of £18 million (H1 2009: £21 million) and disposals of intangible assets with a book value of £nil (H1 2009: £nil).

Reconciliation of cash flow to movements in net debt


	H1 2010			H1 2009			2009
	£m			£m			£m
Net debt at beginning of the period		(9,444	)		(10,173	)		(10,173	)

Increase in cash and bank overdrafts		(270	)		(198	)		1,054
Cash inflow from liquid investments		(56	)		(58	)		(87	)
Net increase in long-term loans		—			—			(1,358	)
Net repayment of short-term loans		1,283			471			102
Net repayment of obligations under finance leases		24			23			48
Debt of subsidiary undertakings acquired		(18	)		—			(9	)
Exchange adjustments		29			1,337			1,041
Other non-cash movements		(50	)		(18	)		(62	)

Decrease in net debt		942			1,557			729

Net debt at end of the period		(8,502	)		(8,616	)		(9,444	)

Business acquisitions and disposals

On 10th June 2010, GSK acquired 100% of the issued share capital of Laboratorios Phoenix, a branded generics business in Latin America, for £174 million in cash, which was represented by approximately £191 million of goodwill and intangible assets and £17 million of other net liabilities. These are provisional amounts and may change in the future.

Related party transactions

The Group’s significant related parties are its joint ventures and associates as disclosed in the Annual Report 2009, apart from JCR Pharmaceutical Co. Limited, a Japanese pharmaceutical company, is now being accounted for as an associate following the acquisition of further shares in May 2010.

There were no material transactions with any of the Group’s joint ventures and associates in the period. There were also no material transactions with directors.

Contingent liabilities

There were contingent liabilities at 30th June 2010 in respect of guarantees and indemnities entered into as part of the ordinary course of the Group’s business. No material losses are expected to arise from such contingent liabilities.



Issued: Wednesday, 21st July 2010, London, U.K.		28

Exchange rates

The Group operates in many countries and earns revenues and incurs costs in many currencies. The results of the Group, as reported in Sterling, are affected by movements in exchange rates between Sterling and other currencies. Average exchange rates, as modified by specific transaction rates for large transactions, prevailing during the period are used to translate the results and cash flows of overseas subsidiaries, associates and joint ventures into Sterling. Period-end rates are used to translate the net assets of those entities. The currencies which most influenced these translations and the relevant exchange rates were:


	Q2 2010		Q2 2009		H1 2010		H1 2009		2009
Average rates:
£/US$		1.50		1.56		1.53		1.50		1.56
£/Euro		1.17		1.13		1.15		1.11		1.12
£/Yen		137		150		140		143		146

Period end rates:
£/US$		1.50		1.65		1.50		1.65		1.61
£/Euro		1.22		1.17		1.22		1.17		1.13
£/Yen		132		159		132		159		150

During Q2, average Sterling exchange rates were stronger against the Euro but weaker against the US Dollar and the Yen compared with the same period in 2009.

During H1 average Sterling exchange rates were stronger against the US Dollar and the Euro but weaker against the Yen compared with the same period in 2009. Period end Sterling exchange rates were stronger against the Euro but weaker against the US Dollar and the Yen.

Principal risks and uncertainties

The principal risks and uncertainties affecting the Group are those described under the headings below in the ‘Risk Factors’ section of the ‘Business Review’ of the Annual Report 2009.

Risk that R&D will not deliver commercially successful new products
Patent infringement litigation
Potential changes in intellectual property laws and regulations
Weakness of intellectual property protection in certain countries
Risk of substantial adverse outcome of litigation and government investigations
Product liability litigation
Anti-trust litigation
Sales, marketing and regulation
Third party competition
Governmental and payer controls
Regulatory controls
Risk of interruption of product supply
Risk from concentration of sales to wholesalers
Global political and economic conditions
Taxation and treasury
Pandemic influenza
Environmental liabilities
Accounting standards
Failure of third party providers
Protection of electronic information and assets
Alliances and acquisitions
Attraction and retention
Implementing the Group’s strategic priorities



Issued: Wednesday, 21st July 2010, London, U.K.		29

Accounting presentation and policies

This unaudited Results Announcement containing condensed financial information for the three and six months ended 30th June 2010 is prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority, IAS 34 ‘Interim financial reporting’ and the accounting policies set out in the Annual Report 2009, except that GSK has implemented IFRS 3 (Revised) ‘Business combinations’, IAS 27 (Revised) ‘Consolidated and separate financial statements: recognition and measurement’ and IFRIC 17 ‘Distributions of non-cash assets to owners’. None of these changes has had a material impact on the results for the periods under review.

This Results Announcement does not constitute statutory accounts of the Group within the meaning of sections 434(3) and 435(3) of the Companies Act 2006. The balance sheet at 31st December 2009 has been derived from the full Group accounts published in the Annual Report 2009, which has been delivered to the Registrar of Companies and on which the report of the independent auditors was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

Directors’ responsibility statement

The Board of Directors approved this document on 21st July 2010.

The directors confirm that to the best of their knowledge this unaudited condensed financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the Interim Management Report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

The directors of GlaxoSmithKline plc are as listed in the company’s Annual Report 2009.


By order of the Board

Andrew Witty		Julian Heslop
Chief Executive Officer		Chief Financial Officer

21st July 2010

Investor information

Financial calendar

The company will announce third quarter 2010 results in October 2010.

Internet

This Announcement and other information about GSK are available on the company’s website at: http://www.gsk.com.

Contact information

Copies of this interim management report may be obtained from the company’s registrars on 0871 384 2991 or by writing to, Equiniti Limited, at Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA.



Issued: Wednesday, 21st July 2010, London, U.K.		30

Additional income statement information

Three months ended 30th June 2010


															Other
						Cost of			SG&A			R&D			operating			Operating			Operating
			Turnover			sales			costs			costs			income			profit			margin %
US pharmaceuticals	Q2 2010	£m		1,935			(219	)		(504	)		—			22			1,234			63.8
	Q2 2009 (restated)	£m		2,140			(222	)		(499	)		—			350			1,769			82.7
	Growth CER	%		(13	)		(2	)		(4	)		—			(96	)		(34	)

Europe pharmaceuticals	Q2 2010	£m		1,580			(322	)		(375	)		—			3			886			56.1
	Q2 2009 (restated)	£m		1,588			(333	)		(393	)		—			2			864			54.4
	Growth CER	%		1			(2	)		(5	)		—			100			5

Emerging Markets pharmaceuticals	Q2 2010	£m		848			(281	)		(281	)		—			31			317			37.4
	Q2 2009 (restated)	£m		693			(247	)		(244	)		—			1			203			29.3
	Growth CER	%		17			12			17			—			>100			39

Asia Pacific / Japan pharmaceuticals	Q2 2010	£m		727			(138	)		(179	)		(8	)		4			406			55.8
	Q2 2009 (restated)	£m		587			(128	)		(158	)		(5	)		4			300			51.1
	Growth CER	%		9			5			3			20			—			14

ViiV Healthcare	Q2 2010	£m		389			(89	)		(75	)		(20	)*		(4	)		201			51.7
	Q2 2009 (restated)	£m		379			(75	)		(35	)		(3	)*		(3	)		263			69.4
	Growth CER	%		1			16			>100			>100			33			(25	)

Pharmaceuticals R&D	Q2 2010	£m		—			—			(38	)		(763	)		(1	)		(802	)
	Q2 2009 (restated)	£m		—			—			(45	)		(728	)		3			(770	)
	Growth CER	%		—			—			(18	)		2			>(100	)		(2	)

Other trading and unallocated pharmaceuticals	Q2 2010	£m		294			(84	)		(172	)		(142	)		54			(50	)
	Q2 2009 (restated)	£m		191			(149	)		(190	)		(129	)		52			(225	)
	Growth CER	%		37			(52	)		8			10			6			(55	)

Total pharmaceuticals	Q2 2010	£m		5,773			(1,133	)		(1,624	)		(933	)		109			2,192			38.0
	Q2 2009 (restated)	£m		5,578			(1,154	)		(1,564	)		(865	)		409			2,404			43.1
	Growth CER	%		—			(4	)		3			5			(75	)		(16	)

Consumer Healthcare	Q2 2010	£m		1,252			(474	)		(507	)		(41	)		—			230			18.4
	Q2 2009 (restated)	£m		1,169			(440	)		(490	)		(36	)		1			204			17.5
	Growth CER	%		3			3			1			8			(100	)		5

Corporate and other unallocated costs	Q2 2010	£m		—			(19	)		(1,714	)		(20	)		(28	)		(1,781	)
	Q2 2009 (restated)	£m		—			(27	)		(173	)		(22	)		(5	)		(227	)
	Growth CER	%		—			(30	)		>100			(9	)		>100			>100

Results before major restructuring	Q2 2010	£m		7,025			(1,626	)		(3,845	)		(994	)		81			641			9.1
	Q2 2009 (restated)	£m		6,747			(1,621	)		(2,227	)		(923	)		405			2,381			35.3
	Growth CER	%		—			(2	)		71			5			(82	)		(80	)


*		Note: This excludes HIV discovery research (pre-Phase IIb) which is conducted by GSK and Pfizer and R&D expenditure related to the Shionogi JV and Phase IV clinical expenditure which are reported within the ViiV Healthcare OOI and SG&A lines respectively.



Issued: Wednesday, 21st July 2010, London, U.K.		31

The following table provides additional financial analysis for worldwide vaccines and worldwide dermatologicals which are not segments for financial reporting purposes and are managed within the geographical pharmaceutical segments. Consequently, these results are included within the financial information of the relevant geographical pharmaceuticals segments as reported to the CEO and presented in the tables on pages 22 to 25.

Three months ended 30th June 2010


															Other
						Cost of			SG&A			R&D			operating			Operating			Operating
			Turnover			sales			costs			costs			income			profit			margin %
Worldwide vaccines	Q2 2010	£m		939			(260	)		(152	)		(126	)		19			420			44.7
	Q2 2009 (restated)	£m		756			(251	)		(162	)		(111	)		23			255			33.7
	Growth CER	%		17			4			(10	)		14			(17	)		45

Worldwide dermatologicals	Q2 2010	£m		262			(68	)		(78	)		(12	)		—			104			39.7
	Q2 2009 (restated)	£m		120			(28	)		(3	)		—			—			89			74.2
	Growth CER	%		>100			>100			>100			—			—			10

All other pharmaceuticals	Q2 2010	£m		4,572			(805	)		(1,394	)		(795	)		90			1,668			36.5
	Q2 2009 (restated)	£m		4,702			(875	)		(1,399	)		(754	)		386			2,060			43.8
	Growth CER	%		(6	)		(10	)		—			3			(78	)		(25	)

Total pharmaceuticals	Q2 2010	£m		5,773			(1,133	)		(1,624	)		(933	)		109			2,192			38.0
	Q2 2009 (restated)	£m		5,578			(1,154	)		(1,564	)		(865	)		409			2,404			43.1
	Growth CER	%		—			(4	)		3			5			(75	)		(16	)



Issued: Wednesday, 21st July 2010, London, U.K.		32

Six months ended 30th June 2010


															Other
						Cost of			SG&A			R&D			operating			Operating			Operating
			Turnover			sales			costs			costs			income			profit			margin %
US pharmaceuticals	H1 2010	£m		3,844			(428	)		(1,026	)		—			139			2,529			65.8
	H1 2009 (restated)	£m		4,228			(419	)		(1,048	)		—			357			3,118			73.7
	Growth CER	%		(7	)		4			—			—			(61	)		(17	)

Europe pharmaceuticals	H1 2010	£m		3,473			(718	)		(738	)		—			7			2,024			58.3
	H1 2009 (restated)	£m		3,257			(688	)		(791	)		—			4			1,782			54.7
	Growth CER	%		9			6			(5	)		—			100			16

Emerging Markets pharmaceuticals	H1 2010	£m		1,714			(598	)		(516	)		(1	)		31			630			36.8
	H1 2009 (restated)	£m		1,332			(475	)		(450	)		(1	)		2			408			30.6
	Growth CER	%		30			25			22			—			>100			51

Asia Pacific / Japan pharmaceuticals	H1 2010	£m		1,612			(330	)		(343	)		(14	)		6			931			57.8
	H1 2009 (restated)	£m		1,206			(267	)		(307	)		(10	)		7			629			52.2
	Growth CER	%		27			22			6			30			(14	)		40

ViiV Healthcare	H1 2010	£m		762			(172	)		(143	)		(27)	*		(7	)		413			54.2
	H1 2009 (restated)	£m		798			(154	)		(76	)		(8)	*		(6	)		554			69.4
	Growth CER	%		(3	)		11			88			>100			33			(24	)

Pharmaceuticals R&D	H1 2010	£m		—			—			(80	)		(1,488	)		1			(1,567	)
	H1 2009 (restated)	£m		—			—			(93	)		(1,569	)		7			(1,655	)
	Growth CER	%		—			—			(12	)		(4	)		(86	)		(4	)

Other trading and unallocated pharmaceuticals	H1 2010	£m		494			(305	)		(204	)		(284	)		122			(177	)
	H1 2009 (restated)	£m		375			(330	)		(254	)		(276	)		106			(379	)
	Growth CER	%		21			(8	)		31			4			17			(9	)

Total pharmaceuticals	H1 2010	£m		11,899			(2,551	)		(3,050	)		(1,814	)		299			4,783			40.2
	H1 2009 (restated)	£m		11,196			(2,333	)		(3,019	)		(1,864	)		477			4,457			39.8
	Growth CER	%		7			10			7			(2	)		(36	)		4

Consumer Healthcare	H1 2010	£m		2,483			(957	)		(1,022	)		(78	)		2			428			17.2
	H1 2009 (restated)	£m		2,320			(884	)		(980	)		(69	)		1			388			16.7
	Growth CER	%		6			7			4			13			100			7

Corporate and other unallocated costs	H1 2010	£m		—			(42	)		(2,071	)		(41	)		(21	)		(2,175	)
	H1 2009 (restated)	£m		—			(48	)		(357	)		(64	)		(19	)		(488	)
	Growth CER	%		—			(13	)		>100			(34	)		16			>(100	)

Results before major restructuring	H1 2010	£m		14,382			(3,550	)		(6,143	)		(1,933	)		280			3,036			21.1
	H1 2009 (restated)	£m		13,516			(3,265	)		(4,356	)		(1,997	)		459			4,357			32.2
	Growth CER	%		7			9			45			(2	)		(38	)		(34	)


*		Note: This excludes HIV discovery research (pre-Phase IIb) which is conducted by GSK and Pfizer and R&D expenditure related to the Shionogi JV and Phase IV clinical expenditure which are reported within the ViiV Healthcare OOI and SG&A lines respectively.



Issued: Wednesday, 21st July 2010, London, U.K.		33

Six months ended 30th June 2010


															Other
						Cost of			SG&A			R&D			operating			Operating			Operating
			Turnover			sales			costs			costs			income			profit			margin %
Worldwide vaccines	H1 2010	£m		2,350			(649	)		(322	)		(243	)		47			1,183			50.3
	H1 2009 (restated)	£m		1,381			(452	)		(312	)		(229	)		47			435			31.5
	Growth CER	%		70			46			3			7			—			>100

Worldwide dermatologicals	H1 2010	£m		527			(121	)		(156	)		(20	)		1			231			43.8
	H1 2009 (restated)	£m		232			(53	)		(6	)		—			—			173			74.6
	Growth CER	%		>100			>100			>100			—			—			32

All other pharmaceuticals	H1 2010	£m		9,022			(1,781	)		(2,572	)		(1,551	)		251			3,369			37.3
	H1 2009 (restated)	£m		9,583			(1,828	)		(2,701	)		(1,635	)		430			3,849			40.2
	Growth CER	%		(5	)		(3	)		2			(4	)		(41	)		(16	)

Total pharmaceuticals	H1 2010	£m		11,899			(2,551	)		(3,050	)		(1,814	)		299			4,783			40.2
	H1 2009 (restated)	£m		11,196			(2,333	)		(3,019	)		(1,864	)		477			4,457			39.8
	Growth CER	%		7			10			7			(2	)		(36	)		4



Issued: Wednesday, 21st July 2010, London, U.K.		34

Independent review report to GlaxoSmithKline plc

Introduction

We have been engaged by the company to review the condensed financial information in the Interim Management Report for the six months ended 30th June 2010, which comprises the income statement and statement of comprehensive income for the three and six months ended 30th June 2010, the cash flow statement and statement of changes in equity for the six months ended 30th June 2010, the balance sheet as at 30th June 2010 and related notes (excluding the late-stage pharmaceuticals and vaccines pipeline table, Pharmaceuticals turnover table and the additional income statement information for the three and six months ended 30th June 2010). We have read the other information contained in the Interim Management Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed financial information.

Directors’ responsibilities

The Interim Management Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Management Report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed financial information included in the Interim Management Report for the six months ended 30th June 2010 has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed financial information in the Interim Management Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed financial information in the Interim Management Report for the six months ended 30th June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants
21st July 2010
London

Notes:

(a)		The maintenance and integrity of the GlaxoSmithKline plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the condensed financial information since it was initially presented on the website.

(b)		Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.



Issued: Wednesday, 21st July 2010, London, U.K.		35

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