葛蘭素史克 (GSK) 2010 Q4 法說會逐字稿

Good afternoon everybody.

Welcome to the GSK results session for 2010.

We will get underway just in a couple of seconds.

I thought before we did I just wanted to -- slightly unusual bits of information I wanted to share with you.

The first is just to let you know who is here with me today, because you will see there one or two people in here who probably don't quite look like investors and analysts, although I can assure you they all own GSK stock.

So not in any special order, but just to let you know who is here, because they may -- they will be available for you to chat to afterwards in coffee.

I thought it was a great chance for you to meet some of our most senior management and the people who are leading some of the biggest bits of the Company.

So if I worked down the room, Darrell Baker, who is the head of our Research and Development organization for all of our advanced inhaled respiratory products.

And you seen some announcements on that today.

In front of Darrell is Eddie Gray, who is the President of our European operation.

Let's see, I've got Moncef Slaoui, who many of you know, the head of our R&D global operation.

Back into the middle there I've got Patrick Vallance, who essentially runs all of the pharma R&D within Moncef's shop.

In front of Patrick I've got Deirdre Connelly, who is the President of our US operation.

David Redfern, who runs our M&A operation, and who also now looks after our Stiefel dermatology business, and is also -- will be taking over the Chairmanship of our other specialty businesses going forward.

So Simon Dingemans at the front here who is our newly announced CFO taking over at the end of March.

And of course, I've got Julian Heslop here as well.

I don't think I've missed anybody else.

The second bit of news really affects Julian.

As you know, Julian is retiring at 31 March, and I just think right from the beginning just in case it all goes horribly wrong for the next couple of hours now will be a good time for me to acknowledge in front of this audience who have got to know Julian, I think, very well over many years that this is his last session.

He became CFO at GSK on April 1, 2005.

It turned out not to be an April Fools' joke.

And he has done a fantastic job since.

And in fact, I think this is your 24th quarter.

CFOs at GSK measure their tenure in quarters.

And that is because of you guys.

So, anyway, it is obviously great to have Julian here by my side again today, but I just thought absolutely important to mark that milestone, both for you, Julian, and for the team at GSK and for the Company as a whole.

You have been a terrific support for us over the last several years, both as CFO and of course also as controller before that.

So let me get on with the rest of the day.

Let me talk to you a little bit about what is happening at GSK.

And the way we will play this I will present really for the first half and then Julian will come and give you a summary of 2010 and some sense of the margins and things going forward.

Before I get into the slides though, and you'll see the book is mercifully thin in terms of slides, before I get into the detail of the slides and giving you some feel of going forward, I do want to pick up on one or two key points in terms of what we have announced today in the results.

2010 was clearly a very strange year in some ways, because you had this continued delivery and execution of the strategy we have been focused on since I took over in 2007.

But that has been to some degree masked by the events which have come from outside of the Company.

At the sales line the loss of the Valtrex business obviously to generics and the loss of Avandia to regulatory intervention, combined with the washout of pandemic vaccine and Relenza.

And then at the earnings line, of course, the legal charge that we took during 2010 in the [two slices], clearly has a very big impact on that reported earnings charge.

I am going to make a couple of comments, particularly about the legal charge, the rest I will refer to as I go through going forward.

Clearly what we are trying to do at GSK is deal with some very long-standing litigation.

We have made great progress on that litigation over the last two or three years.

As I made clear before, large chunks of our significant litigation has been really put behind us, Leaving behind two significant areas, the Avandia product liability cases, and of course the federal investigation, so-called Colorado case, which has been running now for seven, eight years or so and covers a period going back about 10 years.

So what we have been trying to do is obviously get crystallization around those exposures for the Company.

But just like everything else, trying to get closure and certainty as rapidly as we can, and of course, as effectively as we can from a shareholder perspective.

Now these numbers, of course, are big.

None of us are happy about the numbers that we have had to announce.

But it is important for you to, I think, understand how we do this.

We, both Julian and I in particular, are very focused on trying to ensure that at any given quarter we are providing sufficiently to cover all of our legal exposures, all cases for what we believe to be the most likely cost of settlement or finalization of those cases.

And that is when from time to time as new facts come along we have to adjust our provisioning.

Now the adjustment we had to make two or three weeks ago was driven essentially through a change in trend of the number of cases that we've seen on Avandia through the period of August/September/October of last year, particularly associated with a lot of press in the US, a doubling of advertising by plaintiff's attorneys, and the actions of FDA during the third and fourth quarter of 2010 in terms of restricting the product.

That, of course, created a lot of noise and it created a change in the trend of the number of cases which came through.

As we said previously, we spent at the end of Q3 getting those cases validated, if you will -- are they real, aren't they real, is there anything they were not -- and that is what led us to then have to review our provision at the beginning of this year.

We obviously understand that was not welcome news by anybody.

I think though it is really important to just put it into context.

The context being trying to close off litigation in the most efficient and effective way possible.

And we are obviously striving to do that as quickly as possible.

We have continued to make extremely good progress in doing that on a variety of cases.

And we continue to make good progress in the Avandia product liability cases.

We are now in a position where we settled more than the majority of the cases that we are aware of.

And as you know, in the provision we set we put in there an expectation of what we thought might come, even cases we weren't currently aware of specifically.

We brought an expectation in there to try and to pick up any potential new cases that might come along.

But it is fair to say also that it is impossible for us to provide for the unknown unknown.

We can provide for what we think is there, what we know is there and what we believe is a reasonable expectation.

So I just want to put that into context.

None of us are happy about it, but we are working very hard, and we do think it is in the interest of shareholders to get this crystallized and resolved as fast as possible, just as we did with all the other pieces of litigation in the second half of last year or the second quarter of last year.

I am going to start now and really get into the business and talk to you a little bit about what is going on at GSK, because despite those headline noises, which in many ways, although substantial, are clearly one-off impacts on the business.

I think the real key is to focus on what is going on in the substance of this organization.

And the substance of this organization things are going pretty well in terms of the way in which GSK is operating.

I'm going to very quickly recap where we are up to in terms of our strategy, what we are building.

And then I'm going to give you a little bit more depth in terms of some of the things that have changed at GSK and why we believe we are absolutely well-positioned going forward in what is obviously a super challenging environment.

There is no question that this environment is a tough one.

And you only have to look at every other company's report in the last two or three weeks and you get very much the same sense of people being under pressure in this sector.

And it has been that way for quite a while obviously.

What is key is which companies are going to emerge from this period first and which companies are going to get the balance of tailwinds and headwinds back in their favor having had a period where obviously the headwinds have overwhelmed the tailwinds for many of us in the past.

Now three years ago we set out what our view of the environment would be, and bluntly speaking, very little has happened that we didn't anticipate.

Some of it has happened more quickly.

Some of it might have happened a degree sharper or blunter.

But very little has happened that we didn't anticipate.

In terms of pricing, in terms of the development of the emerging market pharma businesses, all of those things were very much behind the strategy we laid out three years ago.

Strategy focused on delivering a business which would deliver sustainable sales growth, a R&D operation which would fix the economics of R&D and deliver products of value to patients and to payers.

And a strategy which would simplify GSK's take-out costs and allow that cost to be reinvested behind growth opportunity, all focused on delivering a greater return to our shareholders as we went forward.

That was the strategy we laid out based on the environment that we had.

If we look today at the business that we have, what is GSK?

So we can talk about GSK in all sorts of labels, but actually what is GSK?

It is a company which essentially has presences or products in four distinctly important areas of healthcare.

We have differentiated pharmaceutical products, medicines and vaccines in the developed market, our US and European business in Japan, of course.

We have built up a very substantial emerging market business by getting the right prices into the evolving emerging markets.

And we either are, or we are very close to being the biggest volume supplier of medicines and vaccines to the emerging market of all companies.

It is really a striking achievement for a branded pharmaceutical company.

Our volumes in the emerging markets either are the largest selling or they are very close to being the largest selling of anybody in the emerging market.

We have a very broad vaccine business that we have built up.

And of course we have an excellent fast-growing consumer healthcare business.

Those are the four portfolios that this business really have.

As a corporation what we look like is essentially those businesses of growth that you have today, where we have been investing in consumer in Japan, have developed businesses, all of those businesses delivering new growth surrounding a core pharma operation where the future obviously depends on the pipeline.

So we talk about the pipeline at GSK being an option.

Because you have got all of the growth coming from these other businesses, and yet in the center of the organization is this reengineered R&D operation delivering a stronger pipeline, as you have seen today, with great potential, very much coming to the front of our minds in terms of the timing when these products have the potential to come to market.

That is essentially the business.

All of that business wrapped in a set of disciplines around efficient allocation of capital and resources to our growth businesses, a really strict discipline on looking for improved return on investment, and a real commitment to make R&D efficient and to solve the problem which has blighted the industry for the last 10 or 15 years.

So what has actually changed?

That is kind of the story of what we are.

A lot has changed in the last two and a half or three years.

This slide just gives you a little bit of a sense of that.

And there are obviously a variety of measures.

I am just going to quickly touch on them.

Turnover.

These numbers exclude pandemics.

So you're not trying to big up our performance through the pandemic impact of the last couple of years.

Excluding pandemic, sales turnover for the group up from GBP22 billion to just over GBP27 billion.

In the same period the Group lost GBP5 billion of turnover to generics and to Avandia sales because of regulatory intervention.

So that net number GBP5 billion actually hides a gross number of GBP10 billion.

It shows you the strength of the organization sales capacity.

But it really emphasizes that degree of head and tailwinds that we have been dealing with in the last few years.

But a good sales growth performance, of course, muzzled by the impact of generics and Avandia, but those impacts now rapidly waning.

And you can see during 2010 that underlying sales performance, only excluding Avandia, Valtrex and pandemic products, plus 4.5%.

We set out right from the beginning to make this business a more sustainable business, less exposed to volatility of patent expiration.

What does that mean?

It means we need to have less exposure to the classic businesses in the high-priced developed markets, white pills/western markets.

So you can see over the last three years that exposure has gone down from 40% to 25%.

I will talk more about that in a few minutes.

We had been reallocating resources rapidly across the organization.

51% of our SG&A now spent in the investment area, emerging markets, Japan, consumer, vaccine.

Rapid movement of money and investment away from the developed businesses into the developing businesses, that is what the restructuring program has done.

Huge reductions in spending in the developed market, big investments in the growth market.

You might be interested to know that 62% of our pharmaceuticals salesforce is now outside of America and Europe.

The vast majority now of our salesforce organizations for pharmaceutical sits in the fast-growing markets.

Both Europe and America have reduced their salesforces over the last three years by roughly 50%, a very significant change in the structuring of our primary sales operation.

Our headcount down, you can see there.

What that hides is that the actual growth headcount for GSK has come down by 22,000 people, and we have hired back the delta here.

So this is a consequence of very significant headcount reduction in the developed businesses, the traditional businesses, the above country operations, and then a hire back program in vaccines, emerging markets and consumer.

Support functions completely transformed.

We used to be a company of hundreds of subsidiaries each with their own operations.

We are now a company moving rapidly towards a single central core support organization.

We just created now a formal core business services in which all of our transactional operations go.

We are well on the way to putting in place all of the systems to facilitate that.

And as you can imagine, that has the capacity to drive out not just cost savings, because you do things once instead of a hundred times, but also drive standardization, efficiency, greater control, eliminate risk in the organization.

A massive cultural transformation well on the way to being completed.

Sales of new products, dramatically up, GBP1.7 billion in 2010.

2010 over 2009 up 36%, a significant increase in rate.

Again, just to make sure you don't think I'm exaggerating this, this excludes any contribution from pandemic vaccine, which obviously, was a further GBP1 billion, so this is the ongoing sales number up 36% for the year.

If you adjust, by the way, for the Rotarix temporary suspension, which is a major new product, of course, then that plus 36% would have been plus 54%.

So there is a very good growth momentum behind our new products.

The pipeline itself continues to look very strong.

I will talk more about pipeline shortly, but what you can see in the pipeline is a very significant trend, advancement, progression, low rates of attrition, high rates of novelty, high rates of differentiation, high rates of potential, not just to improve patients' well-being but to meet payers' needs in the way that they are currently being expressed.

You can see a big shift in terms of how we emphasize both internal and external discovery operations.

You can see here the number of external biotech companies we collaborate with in our discovery operations.

Today about 50% of what we do in discovery is outside of the Company, about 50% of what we do is inside of the Company.

You can see very significant continued cash generation.

Before the legal charge -- legal payout in 2010, GBP8.8 billion of cash generated by the Company, both through robust operations, but also obviously through the impact of a very focused working capital program, which allowed us to reduce our working capital by GBP1.3 billion, or by GBP700 million if you simply exclude the pandemic receivable, over the period '09 to '10.

Very significant, allowing us despite all of the various outflows, the dividends, acquisitions and paying GBP2 billion out on legal last year, we were still able to reduce net debt by GBP600 million.

Very good evidence, I think, of the organic cash generation spend for the Company.

And also the impact we have had on being able to be much more efficient in terms of working capital.

And now of course, I'm very pleased that we have been able to continue to increase the dividend today by another 7% to 65p.

Now let's just look at one or two of these investment businesses, because I think it is worthwhile just focusing on exactly what we are doing in these marketplaces.

So emerging markets, the place where where we identified great growth opportunity, the place where we have invested, and this is what has happened.

So over the periods '02 to '06 we averaged a CAGR growth rate in the [year] under 7%.

We are now averaging 14%.

As you have seen in the results today, we are actually now much faster than that.

So we are can seeing a continued acceleration of our emerging market business, broad-based across all the geographies.

And we have used the bolt-on acquisition strategy to fill out the gaps that we had in key bits of the geography around the world, particularly in Latina, somewhat in China, and particularly in the Middle East.

Those have given us now a very, very good platform for emerging markets.

Strong growth coming from all of those businesses, very nicely balanced across the world.

In terms of how we look at where we spend money, it is interesting to look in the emerging markets.

On an ongoing investment basis if we look at our businesses in the EM, we range from for every pound spent from worst-case GBP1.50 returned within 12 months, the best case GBP3 returned within 12 months, depending on how developed the business is.

So the bigger our business, the bigger our platform, like in India, where we are able to invest on the back of great presence and leverage, we get very high returns.

Even in the markets where we have not got that strength necessarily, you can see you still get extremely healthy fast returns.

Stiefel, obviously the most significant acquisition we have made, makes us the world's leading dermatology company.

We have been very pleased with this acquisition.

We are ahead of our targets.

We are ahead of our targets on taking cost out of this business.

About GBP60 million ahead of where we expected to be at this point in time.

We are absolutely in line with our expectations for the return rates of this acquisition.

I think it is also maybe a surprise to some of you when I tell you that the operating margin for this business is actually 42%, and when you exclude amortization it is 47%.

So this is a very robust part of the business.

It is a profitable part of the business, growing part of the business.

And of course, it has great application, not just in the developed world, but also particularly in emerging market.

And as you know, we also believe in the future in the consumer space.

U.S.

pharma, probably a part of the business we haven't talked about so much in the last few years.

The US pharma is absolutely turning a corner in terms of its future.

What we can see in that business -- first of all like everybody in the US, we are having to deal with tremendous challenges from the environment.

The US is changing very rapidly, the way customers are structured, who owns the customers, Who controls the customers, where decisions are taken is changing extremely rapidly.

The whole industry is trying to figure out a new model to fit with that.

I think we have made great progress on a number of the dimensions of that model.

So our new payer model, how we work with payers, how we contract with payers, how we price protect payers, all of those dynamics are changing the way that we are able to acquire business in the US.

Our specialty organizations are already deployed, and we are in the process of now of deploying a new general pharmaceutical approach.

This business last year underlying, only excluding pandemic, Avandia and Valtrex grew 3%.

That includes the impact of healthcare reform, which is $470 million.

So you can see that the US business is back to growth.

It is under-reported because of those same big hits I described earlier.

And if you look at the 80% of the business, which are the promoted products, the places we actually invest our energy, that business was up 8% during 2010.

So the US business is turning the corner.

It is clearly still a marketplace where innovation will get rewarded, and we're starting to see competitiveness pickup.

I was particularly delighted last year when GSK was voted by the physicians in all the surveys to be the number one salesforce.

I think given all the changes and all the obvious noise about whether change is going to demoralize or destabilize the organization, when we have changed the incentive comp system for our US salesforce to then be credited by the customers as being the best salesforce, I think is a real vote of confidence for the leadership in the US, and also the way in which we have been able to develop this organization into a much more mature, thoughtful organization fit for the future.

Our Consumer business, as you are seeing, continues to perform very well.

The same analysis as the emerging market.

Before we started ramping up investment, growing a CAGR of about 3%, since we have ramped up investments, growing a CAGR of 7%.

Again, rate of returns here are fantastic.

20% rate of return on R&D.

That is why we have been ramping up our R&D spending consumer.

To give you an idea, during 2010 the amount of money we spend on project R&D in consumer was up 17%.

A very significant increase, because we know innovation drives this business forward.

We are good at it, and we get great returns when we make that.

So our return rates in consumer absolutely demand that we continue to ramp up our investments in this area.

A great example of that would be the new Sensodyne products.

As you know, Sensodyne is one of our fastest-growing products.

It is actually our biggest product in consumer.

It grew last year 18% worldwide.

It has really taken the fight, if you will, to the oral care giant companies, some of whom have tried to compete with their own versions.

We then, obviously, tried to compete back with new improved versions of Sensodyne, like Sensodyne Rapid Relief.

And it was very impressive last year to see that we are able to launch Sensodyne Rapid Relief in 50 countries over a period of six months.

This shows you the global scale of this Company in terms of consumer healthcare, innovation, great brands.

And when me get that all lined up together we do a terrific job in the consumer business.

That is why we have made the decision to find a way to make that even more focused.

If you look at our current consumer business, 90% of the current turnover is in the top 15 or so global brands and the emerging market.

That is where all the growth is in this business.

You are either in a big global brand like a Sensodyne or a Panadol or a Lucozade or a Horlicks, where you can really leverage platforms across multiple countries, or you're in an India or a China where the growth is just phenomenal, and you're able to access great distribution synergy with our pharmaceutical business.

That leaves 10% of the business.

That 10% of the business is basically very nice brands, but they tend to be more regional or maybe one country or two countries or three countries, and they tend to be OTC.

They tend to be smaller, and they don't have, for us, the focus which would give you the growth.

Somebody else, I am sure, could make that business grow better than we could.

We've got a better place to focus our attention on those priority brands and on the emerging market.

That is why we announced today our intention to divest ourselves of this portfolio of 10% of the business, plus or minus GBP500 million worth of sales.

Our goal is to get that transaction done obviously as soon as we can, sometime hopefully before the end of this year, depending on buyer interest.

And then the intention is to return the proceeds of that transaction to shareholders as soon as the transaction is completed.

I think, again, it is an absolutely appropriate thing for us to do to try and find ways to really release and visibly release the fast growth that sits inside this Consumer business, and this is an important way for us to do it.

Now, if we just look at 2010 for the overall business, I have mentioned already that the underlying sales growth for the business last year, excluding Avandia, pandemic and Valtrex, was 4.5% positive.

And this just shows you where the hits and the gains are.

You can see the first three columns on the red columns coming down on the waterfall basically show the three products which are -- I just mentioned.

If you look than to the right, you can see the impact of other generics.

Now this is all the other rats and mice generics going on around the business.

And then you see where the growth is coming from.

I want you to just note, we have not excluded price from this.

Remember, last year we took $470 million of price hit in the US through healthcare reform.

And in Europe we took about 2.5% price hit through the various business as usual/austerity price cuts, which the European government inflicted has on us.

You can see that despite that we got very good growth across the rest of our business, and that is really that underlying 4.5%.

And as we have said in the release, we expect to be able to continue underlying sales growth during 2011.

As we go through toward the end of 2011, obviously, the washouts of the three discontinuing business comes to an end, and obviously, that underlying sales growth will start to then look like reported growth going forward.

So we are clearly coming to a point where visibility on the future of the Company becomes clearer, and where we are able to be a little bit more confident about how things are going to line up as some of these big pieces drop out of the mix.

If we look at some of the key pieces of that global performance, particularly the pharma business, I think the first thing I would say on this slide is you've got Europe delivered a very solid flat performance, very solid against a lot of price pressure.

Remember, a low single-digit growth environment in any case.

Good solid performance.

Look at the rest.

All other regions growing on underlying level.

I have already talked about the US, very good performance.

Very encouraged by the initial launches of new products, two of which are in the specialty oncology area, Votrient, in particular starting very well.

Jalyn, our combination product, tamsulosin and Avodart starting very well.

Certainly in the top five or six launches that we have seen in the US from the whole industry in the last two or three years, so we are encouraged by that.

The American business, as I have said already, starting to strengthen, has been able to deliver that performance while absorbing tremendous price hits from the government's Health Care Reform Act.

You can see in the emerging markets 20% up, GBP3.3 billion now, growing ahead of the marketplace.

Strong growth, particularly in areas where we have been able to add in businesses.

I just thought I would mention the BMS and UCB acquisitions.

These are now growing on an annualized rate not -- so this is on a pro forma basis, if you will, at 28%.

So you can see, those are business we acquired and we have been able to drive really superior growth for them as they have come into the business.

Very strong performance on volume, excellent evidence of our price sensitivity work that we been doing where we have been able to cut prices and drive absolutely impressive and dramatic improvements in volume.

Vaccines, of course, is a key part of that business.

Japan, has continued to be a tremendous deliverer.

This, of course, excludes the enormous pandemic contacts that we won in Japan and were delivered during the year.

But even so, very strong continued performance.

We had a series of brands which doubled their marketshare during the year.

And we continue to be in a position where we are able to deliver very significant innovation to the marketplace.

We launched Xyzal, this is the new antihistamine; levocetirizine, licensed from UCB that we market in Japan.

We launched it in October and by December we already have 11% marketshare.

A very effective company at gaining share.

Three years ago I stood up and said we were going to launch somewhere around 40 products in the next three or four years.

We have launched the vast majority of that -- of course, some more are to come.

I'm delighted to tell you that today we expect to launch another 42 products in Japan in the next four years.

So that bolus of products that we talked about two or three years ago actually isn't a bolus, it is a level, which at least through 2015, we expect to be in a position where we can launch somewhere between eight and nine new products or major new indications every single year in Japan.

That is the perfect moment to be doing that because the pricing regime in Japan, as many of you know, has changed to be much more pro-innovation.

We are in a very good position to benefit from that.

And during 2010 the inflicted price cut from the government in the normal biannual system, which was influenced by the newsfeed, was only 50% on -- GSK took a price reduction of only 50% of the average pharmaceutical company, because of the innovative profile that we have.

So all regions performing well.

All performing well against their environment and underlying levels.

And as these three businesses washout, those performances we expect to reflect through.

We have talked a lot about trying to create a business which is not so vulnerable to some of the volatilities, the non-white pills/western markets.

Obviously business in the emerging markets has a different emphasis, but just look at where the business is coming from in terms of form and formulation.

You can see here 60% of our business now comes from non-white pills.

Add onto that the business you have in the emerging market, that is what gets you to the 75% of business, which is non-white pills, non-Western market.

You can see here continued sustainable growth in all of those areas.

Pipeline.

Pipeline continues to be a major focus for us.

This is an area where we have continuously emphasized the efficiency, but also the quality of decision-making.

I am delighted that during 2010 we were able to put 10, these 10, new assets into Phase 3 development.

Of course, we continue to have around 30 assets in full development.

We had no attrition last year in our advanced development.

We have just terminated Mepolizumab in the last week.

During 2010 we have no attrition in the 12-month period.

We have very strong performance.

The maintenance of our advanced pipeline looks very, very good.

We have 30 in Phase 3 or registration.

20 of those 30 are new chemical entities or novel vaccines, so very significantly differentiated.

And during the next two years 15 of the 30 will report out important Phase 3 data.

Now it is a drug business, so we know some of these drugs and vaccines won't make it.

But you can see both the scale, the progression, the differentiation and the novelty of this pipeline really adds up the potential.

It really adds up to something which over the next couple of years I hope we will be able to crystallize into what that potential truly is.

All of that performance has not come by throwing more and more money into the mix.

As you know, R&D as a percent of sales is broadly stable, around 14%.

We would expect that 14% to carry on into the future.

But if you actually look at what is going on in this part of our organization, what we're actually doing is we are spending less on our pharma R&D operation, more and more efficiency, we are releasing that money to increase spend in vaccines, increase spend in consumer, increase spend in dermatology.

The pharma is getting more efficient.

Both on nominal and on real terms probably substantially ahead of the numbers you're seeing.

How are we doing that?

Very sharp focus on rate of return, very sharp focus on the levers that can drive that rate of return.

Can we drive down attrition?

Can we make better high-quality decisions early, being more ruthless at the beginning, create more accountability on decision-making through the smaller units that we have created?

Some of the outputs of that.

Almost one-third reduction in headcount for R&D over the last few years; down to about 11,300.

One-third reduction in space.

We closed six R&D centers in the last 12 months alone.

Late stage development, where most of the value sits in the advanced pipeline, 60% of our resources now go to the late development, much less spent on earlier discovery.

Of course, we still have a good discovery operation, but we want to emphasize the delivery of the late stage pipeline.

37 internal discovery performance units that Patrick created and build and lead.

And 54 external biotech companies who we have optionality over their drug development program and assets.

And in last three years something that I think Moncef should be very proud of, biopharm now accounts for over 20% of our clinical pipeline, as we have really come from nowhere to have a very substantial biopharmaceutical set of assets, both in advanced, medium and early development, because they represent very different profile of risk.

So that is a quick summary of where we have been.

In terms of how we see the future going, clearly from a sales growth perspective, underlying sales momentum, we have said we expect to continue during 2011.

It is obviously going to be masked by the Avandia, Valtrex and pandemic events, particularly in the first half of the year.

But as they wash through, the underlying sales growth is going to shine through in the business, we fully anticipate.

We, of course, expect that to translate to reported growth in 2012.

Operating and financial leverage, we continue to focus on ways we can drive out more savings.

GBP1.7 billion already saved, on track for the GBP2.2 billion target in 2012.

Strong cash generation, I have already mentioned.

Clearly very effective working capital program.

And we have obviously been focused on how we can divest non-core assets, because what is the point of GSK holding assets which aren't adding to our growth, aren't adding to our mission.

So last year, for example, we divested Wellbutrin.

We divested -- in America we divested Biovail -- not Biovail -- Boniva last year as well.

This year you have seen us divest the Zovirax cream right in America.

And you have also seen us divest our remaining shareholding in Quest.

All of those things are absolutely part of what we think is the right thing to do.

When the value looks good, when we think the value is right, then we are going to divest ourselves of those non-core assets.

That is exactly what we have been focused on doing.

I think just on the operating and financial leverage point, also important to make just a couple of comments about margin.

As we go forward into 2011, two things I think.

One is that because of the effect of pandemic flu Valtrex and Avandia, actually quarter-to-quarter margins are going to be a bit all over the place, because you're going to have some periods where on a year-to-year basis you're going to see some very strange sorts of numbers.

So I think there will be probably a bit more volatility than normal.

Then as a general point, because you've got this block of sales washing out from '10 to '11, we expect a temporary dip in the operating margin in 2011 of about 1%.

Now that is not because we are increasing investment, it is because those sales have disappeared, and didn't have any cost attached to them.

So if those sales drop out of the mix, you're left with two choices.

You either let them drop out of the mix, and you have a temporary dip in the margin, or you have to go taking cost out somewhere else, which has nothing to do with the businesses you have lost.

That would clearly not make any sense if you believed those other investments are driving your growth elsewhere.

It makes no sense at all to cut investments in consumer, simply because Avandia is not there in 2011 when it was there in 2010.

So that is what drives that 1% reduction in operating margin.

We then expect in '12, '13 and '14 for the operating margin to recover quite well going forward into the future as everything I have just described starts to click in.

Of course, sales growth, leverage, drive of cash, dividend return to shareholders, I think many of you, and I have certainly had lots of conversations with the investors where lots of people weren't quite sure what the word progressive meant.

We always felt like we knew what progressive dividend meant, not everybody else quite knew exactly what we meant by progressive dividend.

I think we have tried to sharpen that up today by saying our priority is to grow the dividend year in, year out.

So hopefully we have taken away any ambiguity about what the word progressive means, and our commitment is to grow the dividend.

Today, as well, we are announcing the start of a new share buyback program, long-term, steady buyback program, which we believe is a appropriate moment to do it.

Now why are we doing this now?

It is very simple.

One, we are starting to get real clarity about where we think the future of the Group is.

Two, we are generating a lot of cash, and 2010 was a great example of that.

And, three, it is clear that there are less bolt-on acquisitions that meet our financial hurdles then there were two years ago.

Last year in 2010 we spent about one-third on acquisitions of what we spend in 2009.

That wasn't because we weren't looking for lots of acquisitions, but there weren't acquisitions which fitted our goal, our target and met our financial hurdle.

Sou our anticipation is that there will be less acquisitions, therefore more cash available to return to shareholders, and hence now is the right time to start this program.

And I think it is exactly the right thing for us to do.

So, obviously, what we are looking to do is now come through this period we have been in for the last few years.

It is a new phase for the Company.

It is a phase where we are starting to see the underlying sales growth come to the surface over the next year or so.

We believe we can continue the very good track record we've got of operating and financial leverage and discipline.

Of course, that it's going to drive dividends.

And now we are making it clear it is going to drive further superior returns to shareholders through all the cash generation that we have and the shareholder return that we believe we can then deliver.

With that, I'm going to hand over to Julian to give you more detail of the performance in 2010, and then we will have Q&A.

Thank you, Andrew.

Good afternoon.

I want to start by looking at a summary of the financial performance for 2010.

You can see that sales were down 1% at constant exchange rates, and I intend to focus on CER for all the movements I talk about, so albeit at actual rates sales were pretty much the same as the previous year.

You can see if you look at EPS that we clearly suffered from a GBP4 billion legal charge, and that compared to just under GBP600 million in the year before.

What we have done on the line below is to show you the impact of eliminating that legal charge.

And to the right you will see an 11% decline in earnings on that adjusted basis.

That 11% reflects 6%, which is points of lower other operating income, and 5 percentage points, which reflect the sales decline, the slightly higher cost of goods margin, and lower SG&A cost.

But net, net, net it all averaged out at about 5 percentage points decline.

You can see before legal settlements that we generated another GBP1 billion of free cash flow.

That free cash flow was enough to pay those legal settlements, to pay out about GBP600 million on acquisitions, to cover the dividend, and also to reduce net debt for the year.

If you look at that chart it emphasizes the diversified business that we have.

If you turn to the left you can see good growth from emerging markets, from Asia-Pac and from consumer healthcare.

If you eliminate, as Andrew has done, flu pandemic, Avandia and Valtrex, you lose about a couple of percentage points of growth on emerging markets in Asia-Pac, clearly no impact from consumer healthcare.

The decline in ViiV reflects competition to material brand only partly offset by both the acquisition of the Pfizer brands into the joint venture and also organic growth from those brands.

Turning to the right of that chart you can see declines of 11% and 6% in the US and Europe.

And as Andrew said to you, again stripping out pandemic, Avandia and Valtrex, that becomes plus 3% in the US despite healthcare reform and despite the loss of Boniva, and broadly flat in Europe.

I think this chart shows nicely the impact of those three products that we keep referring back to.

I think there is a number of points on this chart.

First of all, the underlying growth, if you strip those three out, is the 4.5%.

I think that is the first point.

I think the second point is GBP1.4 billion of sales lost in 2010 from those products.

I think the third important point is in 2011 we expect minimal pandemic and Avandia sales, and we expect a further significant decline in Valtrex sales, overall 4.5% underlying growth.

If we switch to pharmaceuticals, and we focus solely on pharmaceuticals and exclude consumer healthcare, we see a 4% underlying growth, but clearly that product categorization that you see above.

Advair 2% up overall, flat in the US, up 2% in Europe, up 16% in emerging markets, up 10% in the rest of the world.

You turn to vaccines, up 10%.

Half that growth came from Synflorix.

Most vaccine brands grew during the year, probably the only exception being Rotarix, whose temporary suspension really caused a decline as it recovered.

You can see strong growth in dermatological.

That is organic growth of 6%, stripping out the acquisition effect, really reflecting the broader product portfolio, but also the really disciplined and skilled management that the Stiefel people brought to us, improving our overall portfolio.

You can see strong growth from Avodart, Lovaza and Arixtra.

And even encouragingly some brands like Tykerb and Veramyst, newer products, who each quarter grow and are beginning to be quite significant in terms of the overall sales mix.

Inevitably we have a portfolio here down 3%, which brings the overall growth down, but net 4% overall.

New products are vital to both the pharmaceutical business and the consumer healthcare business.

It is obvious to state that the pipeline is critical.

Andrew has taken you through that, but you can see these products make an increasing contribution to our business.

And importantly, it is quite a diversified contribution.

We are not talking about one or two products here, we are talking about a number of products, and that diversification makes the business much more robust in the future and much less vulnerable to surprises.

If you look at the consumer healthcare business, looking on the left see strong growth in our international market.

You can see the impact of challenging economic times in our US and European businesses.

If you look to the right, you can see category analysis, you can see strong growth from nutritional healthcare and from oral care.

Oral care strongly driven by Sensodyne, nutritional healthcare, strongly driven by Horlicks in international markets.

Slightly lower growth in the OTC area.

We had good growth from our analgesics business, but reduced by lower alli growth, to give 3% overall.

Now to the P&L, cost of goods, 26.1%, pretty much in line with what I told you a year ago.

And our expectation is that we will deliver around about a 26% cost of goods in 2011.

If you look at SG&A, I would make two points.

Firstly, SG&A costs in aggregate down 2%.

And that is despite increasing the amortization arising from acquisitions which get reported in that line by about GBP80 million during the year.

So that GBP80 million adds another 1%to growth, so 2% saving despite that.

However, margin 29.5%, slightly above where I guided you.

Really I think, to Andrew's point, the denominator was lower than we originally thought as we were depressed clearly by Avandia and other assets.

As you are looking forward to 2011, I expect SG&A, excluding legal, as a percentage of sales to be around 30.5% of sales.

Legal clearly GBP4 billion, much higher than the previous year.

This tracks on the left 2009 actual, on the right for 2010 actual.

GBP578 million of cost taken out of the business.

That is slightly flattened by about GBP20 million of currency benefit, but that is pretty immaterial.

But a lot of cost coming out of GSK.

In America we took 11% of cost out.

In Europe we took 11% of cost out.

We reinvested behind investment markets GBP176 million there.

And we also clearly had a full-year impact from Stiefel, but we also reinvested in our total [REMS] portfolio.

So I think we in a sense had the best of both worlds.

We saved money, but reinvested for the future, but ultimately returned profit to the bottom line at the end of the day.

Turning to R&D.

R&D tracked very much in line with expectations, 14% of sales, flat year-on-year.

Guidance for 2011, 14% broadly around the 14% mark.

If you look at other operating income, remember in 2009 we had the Wellbutrin XL sale.

We had this slightly odd accounting gain on the formation of the GBP296 million non-cash gain, which we talked about last year.

We had a much lower level of other operating income in 2010, about GBP300 million, just under GBP300 million of that GBP493 million is royalties.

A sort of sustainable royalty stream we have seen over the past few years.

Looking forward to 2011, I expect around GBP600 million of other operating income in 2011, excluding the consumer healthcare divestment.

That is not in that number.

Overall operating profit depressed, as you can see, by the legal charge.

We have expressed operating margin, excluding legal and excluding other operating income.

We do believe that is probably the way to look at the business.

Legal, clearly very high in 2010, very low in 2009 relative to 2010, and therefore distorting the margin.

Other operating income reflecting whether there were long core assets for sale, it doesn't really make sense to talk about margin including it, given its volatility.

Strip them about out, 2009 to 2010, a 0.3% drop in the margin.

This is the margin that Andrew talked about when he said he expects a 1 percentage point drop in that margin in 2011, it is that margin there.

Interest, as you can see from the chart, pretty steady year-on-year and around about the GBP710 million mark.

An important point here, where we have cash on deposit we earn in today's financial environment very, very low rates of interest.

So sadly it doesn't make much difference if you adjust that cash balance in terms of the interest payable.

My expectation for 2011 is you will see again a broadly similar interest charge for 2011, much as you did in 2010 and 2009.

Profit on disposal of interest associates high in '09 when we sold some Quest shares, low in 2010, we hardly did anything.

In 2011 we will report approximately GBP600 million profit on the disposal of the Quest stake, which we executed a few days ago.

With it will come GBP350 million of tax, because the base value for tax purpose is much lower than the book value for accounting purposes, hence what will seem to be a very high rate of tax on the booked profit.

Net impact on earnings GBP250 million.

Share of associates to joint venture profit you can't sell Quest on the one hand and associate account for the profit on the other into the future.

GBP79 million was reported as part of that GBP81 million from accounting for our Quest equity stake.

That is gone.

Profit before tax exactly as you see it.

Tax rate of 34.3%, high in 2010, because we had the low tax relief on the legal charges of about 15%.

That brought the overall tax rate up.

If we look at 2011 we expect an effective tax rate of 29.5%.

There is two elements of our effective tax rate.

First of all, there is 27% on the underlying business.

That is what we would call our underlying tax rate.

Then because we sold the Quest shares, because we have this relatively high profit on book profit, tax on the book profit, that I talked about, because of that that brings the effective tax rate up to 29.5%.

So core business, tax rate 27%, 29.5% for 2011 because of the Quest disposal.

This chart shows you the impact of restructuring charges.

We have had these charges for a number of years.

2011 we will have them again, but I expect that will be the last year that you will see significant restructuring charges in GSK.

If you look from the summary, on track to the total program cost of GBP4.5 billion, three-quarters of the way through, GBP1.1 billion to go and exactly in line in terms of the overall cost saving.

Cash flow, cash flow clearly impacted that total operating profit impacted by GBP4 billion of legal charges.

But, of course, you say GBP4 billion of legal provisioning doesn't have any cash effect at all, does it?

So where do you adjust for that?

If you go about four lines down increase and decrease in other net liabilities for GBP1.480 billion, we bring back the provisioning of GBP4 billion into that line, so that would give you a GBP4 billion positive.

Now we have paid out GBP2 billion of legal settlement, so that has to be deducted from that GBP4 billion, to give you GBP2 billion.

We have paid another GBP0.5 billion, just under GBP0.5 billion to our pension funds in respect of deficit repair contribution.

So hopefully I have made what is usually a very complicated line as simple as I can.

That is the GBP1.480 billion.

Working capital, GBP1.3 billion of cash generation.

You may recall last year I told you we reported a GBP100 million [adverse] I told you, but that is not really fair, because that GBP600 million of receivables in respect to flu pandemic sitting there didn't result in the phasing of flu pandemic sales.

Well, if it was unfair last year, it is also unfair this year in a sense the other way around.

To get a better view of our economic progress you should move about GBP600 million, those receivables, into 2009.

So that should really show GBP500 million of progress.

You should take that GBP600 million off this year to show GBP700 million of progress.

Bottom line over those two years, whichever way you do it, about GBP1.2 billion generated for the business.

Now if you want to know what would have happened if we had done nothing, the general trend of the business moving sales into emerging markets, taking them away from the US, it would have probably increased working capital by GBP250 million.

If we had done nothing, we would be showing you GBP250 million going out every year.

We have done [a lot] of the things out there to bring that over working capital down.

CapEx, GBP1 billion -- GBP1.1 billion, again lower than the previous year; again, helping the cash line.

Bottom line, excluding legal settlement, GBP1 billion extra free cash flow, clearly having paid GBP2 billion out this year, compared to GBP2.50 billion last year, that is the reason for the free cash flow decline as you see there.

This chart shows you the working capital summary.

The encouraging thing on this chart, even if you strip out that GBP600 million of receivables from the total of GBP905 million, is each part of the working capital number is improving.

We have talked many times to you about a lot of work being done on inventory -- a lot of work.

But every time I have presented that to you and told you that, I have never shown you an inventory saving.

Hopefully you had faith, because even I may have lacked it on occasion.

But inventory is driving savings.

Both the work that has gone on in our manufacturing is going to continue.

We are now starting to see the benefits of what I think probably even I failed to recognize takes quite a long time to deliver.

But once that starts to work, it will start to continue to deliver.

So what that chart shows you is action in each of the key areas.

I would be fooling you if I was to suggest anything other than that thousands of individual actions throughout the Company.

People are bonused on working capital.

They think about working capital.

They talk about working capital.

The only way to stop it going up is the only way to get it down.

Free cash flow GBP4.5 billion, as you can see from there.

We have paid an increasing dividend.

We did acquisitions of GBP633 million, including equity interest.

We basically finished up by reducing debt by GBP600 million.

So net debt ended the year -- and if you were to look at the GBP8.8 billion of net debt what you would see is about GBP6 billion of cash, and you would see the rest being gross debt.

As we settle legal matters in 2011, you will see that GBP6 billion of cash come down.

Its impact on the interest line won't be very great, because it is not earning very much interest, but you'll see that cash come down.

I have talked to you about returning cash to shareholders in the past.

I have talked to you about the importance of increasing dividend.

As they say, actions speak louder than words.

So over the last five years that is what we have done.

That is the dividend we have paid or the final dividend we have announced, 8% compound growth over that period.

With that, I will hand back to Andrew.

Thanks, Julian.

So that really brings to an end the presentation.

Just to remind you really of the summary of the business, and particularly in terms of how we are viewing the business going forward in terms of underlying sales growth, continuing to drive operating and financial leverage, allowing us to make a priority of growing the dividend, and then for a new long-term share buyback program as a way to deliver returns to our shareholders.

With that, I think what we will do is go to Q&A now.

Maybe, Julian, if you want to come and join me up hear.

I am very happy to open up the floor to questions.

I may elect to advance questions to other members, other executive directors, who I introduced at the beginning.

So if I see any of them looking vaguely distracted, they will be the first one to get the question, I suppose.

But let me open up to the first question.

I was just wondering in terms of your R&D, you said you had the headcount has come down to 11,300.

Within research I wondered how many people you've actually got working for GSK, either internally or externally, who are actually focusing on generating innovation that you can then use in the future?

So not just the R&D headcount, but what is [bit of the R], the innovation headcount done over the last few years?

Great question.

Well, so I will ask Patrick, because he obviously built, run an obviously continues to have oversight of that, in a second.

Just very quickly, one of the key things we have done structurally and strategically is to try and strike a balance between in-house and out-house.

I know there is kind of ideological debate going on that drug companies either should be massive -- do all the business themselves or none of it themselves.

I think we are much in that middle space where we are seeing this tremendous economic and creative leverage to be gained from working with the networks, the biotechs, academics, spin-outs, all of that.

And if you look at who our partners are on the outside it is very diverse, very diverse in how they are structured, where they come from, what turns them on.

It is a very interesting set of different partners.

So we truly believe it is important to have real excellence in your own discovery operations, both in terms of applied discovery, so in focused drugs DP, discovery performance units, but also in platforms.

So there are -- we do believe there are certain dimensions of research where there is real opportunity if you're right to capture whole sways of potential novelty in the future.

So we do that inside.

What that means, obviously, you have a nice balance in terms of mix, control.

You keep balance of what your future exposures are going to be.

Because can remember, today you pay for your internal R&D on the P&L.

You pay for your external R&D through milestones and royalties, which will appear in the gross margin 10 years from today.

I think is really important to keep those things in balance.

Now having said all of that let me ask Patrick to give you a more specific question to the people.

Yes, so we have gone to 37 discovery performance units, and they are the research innovation engines of GSK, with a number externally, as well as Andrews said, and links with academia.

Those 37 discovery performance units represent a decrease in headcount in the research specific parts of GSK over the last few years of several hundred individuals.

We are now about -- so there is a relatively small group.

37 groups ranging from the smallest being about 10 people, the largest being about 70 people, following this philosophy of integrated groups in a much more biotech-like environment, pulling on the big platforms of GSK to allow them to innovate and develop it into products, and being focused and having chosen specific areas to work in.

So we have reduced that.

At the same time we have gone, as Andrew said, to about 50% internal, 50% external in the way that is run.

And, of course, those engines build on the platform support as well.

Thanks, Patrick.

Our next question.

[Frasier Hall], Berenberg.

Andrew, a couple questions.

Just firstly in the context of margins, you have obviously indicated some of the issues leading to margin pressure in the short term in 2011, but your remarks seem to imply not only a return to growth in margins in 2012, but clearly beyond that, i.e., that margin growth is something that you're looking for over the medium to longer term.

So I just wondered, firstly, whether you could talk about some of the moving parts around that.

A second question, just in the context of the share buyback that you have announced today, this is at a point in time where you've got massive legal charges to pay, significant cash outflows.

Going forward from here those are, we hope, unlikely to be repeated.

At the same time you have talked about this possibly being the last year where we will see major charges associated with restructuring, consumer disposals are to come.

Can you just talk a little bit about going forward how you look at free cash flow in the context of returning part of that in the form of a share buyback and what the outlook might be, again, longer-term?

Again, I will ask Julian to comment on that in just a second.

I think overall in terms of margin pressure and where we're going, I just think it is -- we spent so long putting together the right strategy for this Company, and the big structural changes that I have described to you and we have talked about previously, I think you can really see crystallizing both in terms of substance and then in delivery of different parts of the business.

It would make absolutely no sense at all for us to react to, albeit, the big change in portfolio that these businesses represent, but it would be totally the wrong thing to then react to that by cutting from areas we know deliver value to the business.

Which is why I think it is appropriate, not great, but it is appropriate that we have this temporary blip in the margin.

The other thing, by the way, which contributes to that blip is the charges in the US, the new tax, pharma tax in the US, which obviously comes in for the first time.

Going forward as that underlying sales growth starts to come back through reported sales growth, and as you continue to focus on cost control in the way we are doing, that is what gives us the confidence to say what we said about the future on the margin.

And I think I used the phrase in the lectern very carefully that structurally we don't think there is any kind of issue at the margin.

It is a temporary issue.

We do think it will start to recover.

Let me give you a couple of very specific examples.

If you think back to -- let's go back a long way -- 15 years when the industry was growing.

What do the industry do when it was growing?

It built massive R&D facilities, big office buildings, all sorts of attribute of a fixed infrastructure.

That is not going to happen again.

So we have restructured the operation.

We see ways where we can operate much more efficiently.

And actually we think the opportunities for financial leverage in the P&L, once the sales growth starts to kick in and be reported, is much higher than it has been in the past because all the changes we made over the last few years.

Moving from hundreds of decentralized finance organizations to a single finance operation is a good example.

It can give you real control.

In the last two years we have taken GBP330 million of cost out of our support structure, finance, HR, real estate, security, services.

That is on its way to a full end of 2012 target where we said we would take 20% of our total support costs out of the Company.

We are already far down the road on that.

By doing that isn't just by squeezing, it is by completely changing the way we provide support in the organization, much more efficiently, much leaner.

Now the goal, even after that reduction, that the support operation of GSK has to eat inflation every single year as a minimum standard for year in, year out efficiency.

So you can imagine as that -- if you start to model what that looks like against an expectation of underlying and then reported sales, that is what gives you some confidence over the years of '12, '13, '14, '15 you would anticipate improvement in margin.

Now on the cash flow let me ask Julian to talk about how we view cash flow.

Obviously, we have been very thoughtful about where we came out of 2010, the kind of liabilities we are going to need to deal with in 2012 before we made the decisions we've made.

But let Julian talk you through more (multiple speakers).

Yes, in terms of cash flow, clearly we have this GBP6 billion of cash which we will use as we come to settle what are GBP4 billion of liabilities at the closing balance sheet.

So to add more to your question, as restructuring falls away, as we get more cash generative, I think our focus is very clear.

Number one, an increasing dividend.

We have done in the past.

We are going to do it in the future.

I think number two, repurchasing shares or giving back cash to shareholders in whatever form is the most efficient.

Or if the return is higher, I emphasize it is almost like underlining if the return is higher, we will make selective acquisitions.

But we are not in the business of making other people's shareholders rich.

We are making in the business of making our own shareholders rich.

That is our strategy.

So I think that balance between the two is, I think, a pretty fair way for you to look at it.

Gbola Amusa with UBS.

Thanks for taking my question.

A couple of questions.

First, on legal, you made the comment that you plan to close out controversies efficiently and effectively.

We see another Avandia case in Utah.

Would you comment on the timing of closing that one out, and whether it could be another tip of a big legal iceberg?

Secondly, on R&D, just given Pfizer's comments this week, clearly they're a different organization, but there are similarities in your DNA, for example, ability to invest in vaccines R&D.

Assuming that their decision might be right for them, what about Glaxo's difference that makes keeping a 14% margin the right thing to do?

Good question.

As far as legal is concerned, I think what I would say is that the US litigation and legal environment often leads to lots of subsequent cases.

If you look at many of the areas of litigation we have dealt with over the last several years it is not simply one case with one plaintive, you often have peripheral cases.

So in the commercial field, for example, you can have cases which involve all sorts of classes of consumers, wholesalers, retailers, payers.

You get proliferation around the core -- whatever the core issue was.

Clearly the same is potentially true in areas like federal investigations where you start to see states begin to get involved.

Obviously, as I said at the beginning, it is impossible for us to give you certainty on unknown unknowns and how things are going to evolve.

But the general pattern of expectation is that these sorts of things typically do not lead to very substantial further issue.

Now, we have to resolve the primary issues and get all of those settled, as we have signaled, but generally speaking that has been the track record.

But clearly as things are only just starting, we should be a little cautious to be too presumptive one way or the other.

But I would reiterate what I said at the beginning.

What we are required to do, unlike some of our US competitors, because of different rules and guidances, we are required to provide what we realistically believe is the most likely number to settle all of our litigation.

So the legal provision we have -- it is not that we just look at the legal provision and say, well let's just have a provision just for case A case B.

The legal position, which is built up every single case that the Company has, and that is what delivers the number.

And that is the view we took for these results.

Now if lots of facts change, hopefully they don't, if they do, of course we have to review it.

I think we tried to make that very clear that that is a risk.

As of today we think the provision we have is absolutely the appropriate one for all the facts we have at our disposal today, which of course are laid out in the letter you got today.

Actually, sorry, that second question on Pfizer, I should have responded.

That is amazing, you are not the first person to ask me about Pfizer in the UK since yesterday.

It is a really good question, actually, I have always been very resistant -- we don't have a target that we will spend 14% of sales.

That is not how we do it.

It happens to work out to be 14% of sales.

What we actually do is a very bottom-up approach to what we think is worth investing in in all our different R&D operations.

To give you some sense of -- actually we end up at 14% of sales, but we are spending much less today in pharma than we used to.

We are spending much more in vaccines, we are spending much more in dermatology, and we are spending much more in consumer.

But the mix, it just happens to come out 14%.

It is not actually a target that we go for.

It may go up a bit; it may go down a bit.

It is not the way we are managing it.

I think what we have done at GSK, and listen, we will either win because we have made great choices on molecules and they turn out to be winners, or we won't because we end up with setbacks just like others have had.

So what we have done is we have bitten the bullet on fundamentally changing the structure of R&D on several dimensions.

So we have already dealt with a lot of the big fixed infrastructure in the operation, which was driving a huge amount of fixed costs.

We have dealt with the reduction, as you have heard, in our discovery operations internally versus externally, which makes you much more flexible to be able to move resources around the operation.

We have been much more focused in creating accountability.

The whole point of the discovery performance unit, there is nothing clever about putting only 30 people in a lab.

What is clever about it is you know who is in charge.

And actually you can choose whether it is a good scientist or not.

And whether he or she makes good decisions, and you can actually get much greater clarity, rather than losing them inside these massive facilities where who is making decisions, is anybody making the decision?

So that is really, I think what we have bit the bullet on.

I think it has been driven through in a very disciplined way.

And I think it has made us a much, much stronger operation.

We are running the pharma business -- it is doing more work than it has ever done.

It is more productive than it has ever been.

It has got a more developed pipeline than it has ever had.

It is more novel than it has ever been.

We will see whether it ultimately makes it -- all those molecules make it to the finish line.

But in terms of of the substance of what it is doing, it is dramatic.

And it has freed us up to invest in all sorts of other places and so happens to add up to 14%.

Mark Beards, Goldman Sachs.

A couple questions, one on margins, but in terms of emerging markets where you are pricing for volume, how should we think about the pressure on margins in those markets?

And then, secondly, ongoing legal costs that obviously have been a significant part of SG&A, how should we think about that in 2011 and beyond as we model that?

As far as margins are concerned, as you have seen actually our margins in emerging markets continue to be very robust, around about 36% rate.

I think that continues to surprise a lot of people that that is as robust as it is.

I think what it reflexs is that we've got tremendous built leverage going on in lots of those markets.

So India is our lowest-priced marketplace.

One of our best businesses, because we've got such a massive platform.

The efficiency in that business is absolutely phenomenal.

So we are able to compete and actually deliver great margins at and very, very low prices -- very, very low price.

I think now we actually have products we are selling at INR3.

So you can't get -- that means we are actually selling product in the slums.

And I am very proud of that.

I am very proud that we are able to be a company that can bring brands to people at every income level in a country like India.

So I am actually pretty confident around our margin structure.

We are seeing very good responsiveness to price flexibility.

But we have been able to drive great efficiency in those businesses as well.

So at this point in time I think that is a pretty reasonable estimate for those businesses.

The only thing I would watch out for in emerging markets a little bit is of course there are one or two of them which are more -- look a bit more like a Southern European -- like a Turkey.

And those are the ones to watch out for, because you are more likely to be exposed to significant one-off price pressures which, of course, will have an effect.

But putting that to one side, I actually think the margin is pretty indicative of where you want to be.

I personally don't think you want to be too much higher than that in these high-growth markets, because it would tell them you are not investing enough per share in growth.

But I think that is a pretty reasonable position.

In terms of the legal guidance, Julian, why don't you take (multiple speakers).

I will give you my usual answer, which is that you can't predict legal charges.

I guess, history would prove to be right.

We continue to work hard to resolve the legal cases we have.

We do everything we can to ensure that we don't have future legal cases.

I think that is all I can leave you with.

I can't predict them.

Well, Jo and then Graham.

I did promise Jo the next one, Graham.

Three quick ones.

Can you tell us a little bit about the outlook for Advair?

It was flat in the US, down in the last bit of the year.

Is this a reflection of the new label sort of biting?

And do you have any visibility on generic Advair in Europe coming through?

The second question was just for Julian.

If you have GBP300 million or so of ongoing royalties, why is your expectation GBP600 million for other work being income?

What is the other GBP300 million and is it sustainable?

And the final one, which is probably the meat of it is R&D productivity.

You say you've got 15 or so assets that will give you Phase 3 results by the end of 2012.

Are these assets ones that were put into Phase 3 with a new sort of harsh realism in them, and therefore will be a good guide of success rates going forward, or realistically are there some legacy projects that had already been started?

Because I think investors need to see something better than the typical 50% Phase 3 success rate.

I think there is about five questions there, but I'm going to give it a go.

And I'm going to ask Moncef in a second to answer the R&D question, and, obviously, Julian on the ROI.

As far as Advair is concerned in the US, yes, I think there has been an effect from the labeling changes from FDA.

Clearly it is FDA's intention to see a reduction in the use of combination products in asthma.

Continue to see good performance in COPD, but there is no question there has been an impact from the labeling.

That is the first thing to say.

The second thing to say, which I think is much more just one of those things is clearly Q4 '09 respiratory market in the US is very high, and [Q10] '09 isn't.

So there is also just a -- if you look at all products, all products growth rates are down.

So some of it is specific to Advair.

And it is, I think it is label.

Some of it is much more general.

The other thing I would say though, which is easy to miss, is actually our script marketshare for the category of Advair plus Flovent went up July to December.

So, yes, we are losing some growth and some share, not much, but some share from Advair, actually we are picking up that share very rapidly on Flovent, which as you know, is the market-leading monotherapy steroid.

So, yes, Advair is not quite where we like it to be.

Now now going forward I think the biggest issue is really where is the respiratory market going to go?

So what kind of impact are we going to see in the respiratory market.

In terms of generics, there has been no sign of anything at all in America.

I think 2010 was a very positive year for GSK in terms of clearing some of those clouds out of the way and fleshing out the truth in what was really going on.

So I think that -- the US side is good.

We don't see any aerosols in Europe, which is important for the UK business, because it is a very big aerosol business.

There are, we think, putative filings for DPI, but we don't know where they are in their process.

And whether they get approved or not, we have to wait and see.

But I would say you went back year there is a heck of a lot less out there now than there was a year ago being talked about.

And in the US it is very hard to see anything.

Graham.

Oh sorry, I can't do that.

Julian, and then Moncef.

GBP300 million, just under GBP300 million from royalties.

GBP190 million from the sale of (inaudible), which we have just announced.

We are pretty much at (inaudible) we are only GBP110 million short.

We will do what we always do.

We will look for non-core assets where we believe there is greater value in divestment than in retention.

If there is greater value in retention, we will keep them.

If divestment gives the greater value, we will sell them.

So that is our estimate today.

And obviously Simon will update you to the extent that changes.

But, that obviously excludes consumer healthcare.

Actually, I think more or less that number is probably sustainable.

If you look plus or minus over the last few years, and I suspect over the next few, that royalty income is a very high-quality flow of income, and I think there is -- it is pretty unusual for us not to have a collection of assets one way or another which we plan to get rid of.

So I would be a bit surprised if it went substantially below that, maybe a little bit here and there.

Moncef.

A very good question.

So what we started to do with our R&D strategy is to sharpen discovery, as [much as] explained.

It created our infrastructure cost and fixed cost to give us more flexibility, and critically allocated capital for late stage development to the highest possible standard.

And, in fact, what I say is you shouldn't sell for reasons you could have predicted after the fact.

So in 2006 we actually cleaned the pipeline quite dramatically, for those of you who remember, every single asset in the pipeline today.

By the end of 2006 we had eight -- there are 30 programs in Phase 3.

They have been being selected according to these criteria.

Can I be sure that they will succeed?

No, they should not fail for reasons we should have predicted.

Things may happen.

We could have liver signals, we could have other totally unpredicted observations.

But that is the fact today.

I think the big difference that Moncef and the team have really gone through is we have gone from a business which up until that point was working on the basis of if it is possible then we will do it, to a business which if it is probable then we will do it.

And that is really the shift.

It is really getting judgments to that third, is it really probable.

We believe we have made that move.

Now there is a counterbalance to that, which is everybody wants differentiation.

As everybody knows, if you want to have a high-margin sustainable pharmaceutical business in the future you need to be differentiated.

Otherwise you're not going to get reimbursement, and you're not going to get listed.

Almost by definition differentiation start to ratchet up the risk again on the other side, because you are, of course going into more novelty or maybe less precedented areas.

You've just got to bear that in mind.

So what Moncef's organization has tried to do is to really raise the burden, the hurdle for making those choices.

You just need to be realistic that if you want to have the highly differentiated product, you're probably doing at least something nobody has ever done before.

That is exactly what the market is telling us they want.

Because they are saying, if you are just giving me what somebody gave me five years ago, we are either not going to approve it, because FDA will take the view, it says why take any incremental risk for something which brings no new benefit, or you'll get no price.

So that -- we've just got to be realistic of that counterbalance in the system.

Graham.

Graham Parry, BofA Merrill Lynch.

A couple on Avandia and then one on consumer divestments.

Just on Avandia, I was just wondering if you could give us a feel for how many new Avandia cases you have actually received versus what you were predicting when you took your provision in fourth quarter, so the proportion of that which is actually in-house.

And within that -- if you can include warehouse cases as well.

Second, just going back to this argument of the statute of limitations potentially having passed on these cases, I remember there was quite a lot of discussion about that last year with the discovery event possibly being the Nielsen paper in 2007.

Is the fact we are actually seeing cases make it through to court that you are having to settle now indicative of the fact that that no longer applies, or is that something that would just be rolled up in a judge's final ruling anyway?

Then the third question on consumer divestment, I just wanted to clarify when you say about returning capital to shareholders as quickly as you can from those divestments, are you referring to funding the share buyback or are you even thinking about special dividend here?

On the latter, just very quickly, that would be either further share buyback, so not the current -- so the share buyback we announced today, it didn't depend [all on] the disposal of the consumer products.

When we transact the disposal of the consumer products we will return that to shareholders either through further share buyback or another vehicle like a special dividend, depending on what we think is in the best interest of the majority of the shareholders.

I know this creates tremendous controversy.

But, obviously we have a lot of shareholders who end up paying tax on dividends, both in the US, and small shareholders, other shareholders, are very interested in special dividends.

So we will obviously take some time just to try and figure out how to make the least number of -- or lose the least number of friends in whatever decision we take.

But I am resigned to the fact that I won't keep all my friends.

As far as Avandia is concerned, we are not going to talk about the numbers of cases for completely obvious reasons.

That is part of the negotiations that are going on.

But it is fair to say I think that when we look at all the cases that we are aware of, whether they are in-house or whether they are putatively out there in the ether, we believe we have settled the majority of those, or more than half of those so far.

So I think we're making very good progress on that.

I just think we need to be -- this is a dynamic, or has proven in the past to be a dynamic situation.

We just need to try and get things resolved as quickly as possible.

We have had some very -- made some very good progress in the last couple of weeks.

Feel good about that.

The statue of limitations issue is very complex.

It varies all over the US according to state.

It is not a kind of simple, yes/no, actually, and that is the reason why you are not seeing it have a big impact in the way you might have anticipated.

There are, however, other aspects of the US system which is beginning to reduce in some areas the number of cases.

So it is a rapidly moving environment or it has been.

We are keen to get it closed off as soon as possible.

That is exactly what we are doing.

And we think we have made a sufficient provision to what we can see and what you could reasonably expect based on the trends we have seen over the last six or nine months.

If that trend suddenly changed, obviously we can't guarantee that, but within the context of the trends we have seen, we think we've got the right number.

Florent Cespedes, BNP Paribas.

Two quick questions.

First on the respiratory, could you give us an idea of when you anticipate to submit Relovair in the US?

And what is your view on the fact that you could launch a big safety trial, as Novartis announced a few days ago?

Now in Europe on the respiratory on the generic side, could you maybe give us some flavor which are the most risky countries for new generic competition on Advair in Europe?

And last question on margins.

As we understand that the emerging markets' margins should remain flattish or improve slightly, as you anticipate going forward for the group as a whole, the improvement of the margins where we should see the improvement in Europe, in the US, where you already have some pressure there, could you give us some flavor?

Thanks.

As far as Relovair is concerned, maybe I'll ask Darrell in a second to make a comment about this issue of whether or not big safety studies are going to be needed or not.

Darrell has been involved in the development of Relovair right from day one when we were -- how many b2's do we have in the pool and how many steroids?

Eight b2 agonists and four steroids at one point.

Yes, that is quite important.

This guy has managed 12 molecules to the two which are in Relovair.

I know a lot of people thought we were taking a long time over this, but we have been doing it properly.

I will ask him to comment in a second on that.

In terms of projected filing, we are looking for a 2012 filing for the product.

I am sure you want to know which day; I am not going to tell you.

So generic Seretide in Europe.

There is already a generic on the market in Greece.

It is not doing very well, but there is one out there.

There is -- I wouldn't say there is any particularly higher risk place than any other.

And we just have to wait and see if anybody's got a product which is actually registrable in Europe by anybody.

They are all by definition using new devices.

So they have to prove that their device works and they have to prove is it similar to ours.

As I mentioned, we are not aware of any aerosol products.

So that means in areas where we have very big aerosol businesses that obviously is going to be a little less vulnerable, and that means the UK in particular.

Darrell, why don't you address the safety question, or safety study question, and then I will ask Julian to comment on margin progress.

So the safety study question which has come up recently is in the context of COPD.

And we have consulted as we have moved Relovair in COPD through to the point that it has reached.

It is now in Phase 3.

And also over the LAMA/LABA, the beginning of Phase 3, which was announced today.

So we have had ongoing consultations with the FDA on that.

The programs we have designed are completely aligned to their advice.

And we just don't have the same inference from those discussions as the inference which Novartis drew about the need for large safety studies prior to approval in COPD.

Julian, do you want to make a comment on margin?

Yes, on margin our strategy clearly is through a combination of pipeline success, emerging markets, consumer healthcare to drive sales growth as fast as we can.

We believe that will lead to that improvement that Andrew talked about.

We don't want to be any more specific in terms of statements at this stage.

Okay, next question.

Yes, please.

And then we will go there, and then Kevin, and then, I think, Alexander, do you have in your hand up at the back?

Three.

How are we doing on time?

Do we have time?

Mark Purcell, Barclays Capital.

Just on the LAMA 719, I just wondered if you could help us understand how you think it is going to be positioned in terms of its clinical profile and prices versus Spriva and NVA237?

Second question, how much of a disadvantage, if there is at all, is to not having an in-house companion diagnostics business in developing your targeted oncology agent?

Then lastly, the CHMP guidelines do not explicitly demand a sort of [3,500] patient clinical study through respiratory generics.

But in light of the setbacks we have seen in Europe over last 12 months, do you believe that it's going to be very tough to get approval of a respiratory drug without such a trial?

Generics in Europe -- generics everywhere for respiratory is tough.

To be honest, I said repeatedly that is their problem to figure out.

We will see whether anybody is able to sort this out.

I think what we have seen over the last three years is that most people who say they're going to do it, and it is easy to [say].

And we will have to see whether anybody is able to spread the needle.

And the US is clearly very very very difficult.

Europe isn't easy, put it that way.

As far as diagnostics are concerned in the [NAS-3] program and related programs in our vaccine organization, we are very active in that field.

Obviously, we don't own, we have no intention of buying a diagnostics company.

But we do own some very substantial IP around a suite of diagnostic tests which would be associated with this.

We have put in place various partner solutions, so that those diagnostics are generated in a timely manner for availability with a vaccine.

If it is successful, obviously, we are going to get data on that over the next couple of years.

So I think we are in very good shape to make sure that, A., there will be a diagnostic.

And it will be very important, there will be at least two layers of critical diagnostics to get to the perfect patient for the vaccine.

I think we are in good shape for that.

We are in good shape to capture the economic benefit of that.

And the last thing I want to do is spend billions of dollars buying a diagnosic business that I know absolutely nothing about, and may or may not have the technology.

I was thinking diagnostically we have a very high chance of buying betamax.

You know they mean?

It looks sexy and great, it turns out everybody wants a VCR or VHS, I am not so sure.

So that is that one.

And 719, Darrell, you're probably the best person to talk about 719, although we have only announced today the start of Phase 3 of combination of the product.

Yes, so the Phase 3 program that will go forward is based upon the data that we have generated in Phase 2b with 719 alone.

We also have vilanterol, that is the same b2 agonist that is in the Relovair development.

And the Phase 3 program will look at those in combination.

We will also look at the individual agents.

And we will include in those Phase 3 pivotal studies comparisons with tiotropium.

A lot of patients in COPD who require a bronchodilator, and perhaps don't need an inhaled steroid, are appropriate for these bronchodilator agents.

And they all respond variably depending upon the extent of sort of b2 responsiveness they have and the extent of cholinergic tone.

So we think of the population overall in the combination we will -- we expect to see patients who benefit better from the combination from Spiriva, and that is a very obvious route for us to go in terms of further development.

The question as to whether the LAMA alone, 719 alone, has a role I think will be established when we see the data from those Phase 3 studies.

Kevin Wilson, Citi.

Andrew, in the context of the drug industry generating a lot of cash, and you have illustrated how you improve your cash generation today, and governments being very short of cash and trying to access the cash that you have, what comfort can you give shareholders that the environment is not actually going to get worse from where we are today?

And also I have interest in your perspective over the three years or so you have been charge has it got worse?

And how should you lead us to think about how it is going to be going forward?

And where you in that continuum of the companies giving cash back to governments in a variety of ways.

I'm trying to sense if whether the industry is about to get clobbered, if you like.

And you have dealt with quite a lot of your issues, should we worry in the broader sense more of this to come or is it just part of doing business in the drug industry?

Well, that is one of those questions where almost whatever I say, you're going to be back in a year saying, you said.

It is a very difficult question.

So if you think about the overall stance of governments there is no doubt, I am actually sure that the last three or four years we have seen lots of governments saying, ah ha, now let's cut some prices rather than make a tough downsizing decision of a government department, or can we ratchet up our [vested] services to try and yield greater fines?

If you look at the ratio of all fines paid in the US, how much comes from the drug industry, it is pretty striking what has happened in the last three or four years.

But no doubt about that.

I think the closure -- bluntly, I think the closure yesterday of Sandwich is a pretty clear signal the government has nothing to do with the assigned space of the UK.

I think it has everything to do with the pressure that has been brought on the industry, mostly by government.

I think that gradually governments will start to realize that company cutting prices, limiting access, reducing patents and raising fines perhaps somewhere down the line there is a breaking point, right, where things start happening, which you don't like as a government.

And I think actually Pfizer's decision yesterday seems to me a completely rational decision in the context of all the pressures that companies like Pfizer and we are under.

So I do think that governments are -- and particularly in the current macroeconomic environment we are in, I think governments are more and more thoughtful about this.

And I think we are beginning to see a little bit of (inaudible).

Maybe they need to just be a little more thoughtful.

In Europe, where initial very draconian price increases quite often get rolled back or redirected to old rather than innovative products or retitrated slightly, I think we may start to see some improvement there.

I don't know about things like litigation, where everybody else fits, because other people have different provisioning standards throughout.

Our obligation is to tell you in advance what we think is the most likely number we're going to have to pay.

So before we've got the settlement we make a provision.

That is what we do every quarter.

As you know, particularly companies in the US, are obliged to make a provision within a range of possible outcomes.

And the range of outcomes could include zero, which is why quite often in the States you will find a company announce settlement and the number on the same day without having previously had it in a provision.

It is almost impossible for me to tell you where everybody else is.

Having said that, you look at even the things we have been talking about, when you compare that to other companies in recent past there is plenty bigger numbers out there than the numbers we have been dealing with.

So hard to say where it is going to go going forward.

The governments need to be very careful not to overdo it, because I think this is an industry which has very long cycle time, incredibly difficult to rebuild the capability that is quite easy to shut down actually.

And there is a danger that governments, or different elements of government, have a kind of free rider assumption that everything they do has no impact.

But the cumulative effect of hundreds of free riders is very significant, and I think there is a risk of that.

Where we are in all of that?

I think we are -- as a general point, I think we are at the better end of the spectrum.

Why?

Because we have certainly borne the brunt of a lot of the loss of exclusivity impact.

We have gone from being a business which was dominated by exactly those sorts of products where you could no longer depend on the patent being upheld in a courtroom, and you had surprise invalidations of patents.

We have gone from that to a business which is predominantly by far not exposed to that risk, by design of geography and by design of where we focus our R&D investments.

So that I think is a big shift.

So I think going forward our potential exposures there are our diminished rapidly.

I think to the extent to which governments have more pressure on you on pricing, you want to be more differentiated not less.

And I have just described, while there is a risk in that from an R&D perspective because you are unprecedented, it is clear that we are committed to being a more differentiated business, and therefore, we should have more pricing influence than they would otherwise.

I think that is moving us into a much more positive place.

We focus very hard on how we interact with payers.

So Eddie has finally figured out how to get deals done with NICE.

And you have seen the Votrient deal done with NICE.

And in the US Deirdre has put in place price protection contracts with payers which have had a significant impact on our ability to get access in the US.

So on that front I think we are starting to make very good progress.

The litigation fees, I said everything I can say about it, which we are doing everything we can to clean up a lot of historic litigation.

Nobody is happy about it, but we are getting it done.

We've got a lot done.

We've got a couple of big pieces still to get done.

Then if you look at how we're operating our business, we are absolutely focused on making sure we are operating the business which is in step with current expectations.

And that is why we the only company to have -- we are the only drug company I think still not to give political donations to politicians in the US.

We are the only drug company to not reward our reps based on generation of prescriptions.

And then you go on and on and on, all of these different areas where we have over the last three years absolutely had a commitment to get ourselves in a very different place.

That, I believe, puts us in a relatively better position.

Does it make us immune?

Does it mean there isn't something else I don't know about from the past which is going to pop up?

No, I can't promise you that.

Does that mean we are in control of building a stronger company, which can withstand that risk?

Absolutely.

Alexandra Hauber from JPMorgan.

I am looking for some color on the Relovair COPD outcome study which you have announced today.

Things like size, comparators, timelines, but also how it is different from TORCH?

And then the second question I just have is, since you are saying there will be fewer bolt-on acquisitions, do you still think even with fewer bolt-ons you can live up to your forecast that you made in the third quarter that you're going to grow your emerging market line at least in line with the 14% forecast of IMS for that region?

I think on the latter one, I do feel very good about our emerging market business in terms of its organic potential to grow.

And I actually think -- because although we've got -- you know, UCB is a terrific acquisition, Phoenix in Argentina is a terrific acquisition, the BMS business in Pakistan and Egypt, terrific acquisitions, the real core of what is going on in that business is we are pricing our products right in all the different categories.

And what we are seeing is much greater volume movement on our classic brands, the Ventolins, the Augmentins, all of that, as well as our innovative brands.

Some of the biggest response we have had have been on products like Avamys, products like Tykerb, where we are just getting those positionings right in the marketplace.

So, of course, we have had some help from acquisitions.

But I actually think while that has been going on we really got our organic competitive model in great shape there as well.

So I am pretty confident we're going to be able to continue to grow at or better than the marketplace in that part of the world.

I am going to ask Darrell to talk to this.

And, again, in addition to having dealt with all the pool of molecules, he also is involved in the design of TORCH, as well as the new trial, so I think probably the right person to answer the question.

I will stand up so I can answer it this way.

So the Relovair mortality study, which again is starting this week, is a large study.

We will have 16,000 patients.

And we will look at Relovair and its components compared to usual care in COPD.

And the primary outcome that we will be looking at is survival.

The difference from TORCH is important, because this is a moderate population of COPD patients, whereas TORCH was really sort of more moderate to severe.

And these patients have been chosen because they are at cardiovascular risk.

They have existing cardiovascular disease, they have had cardiovascular events, or there are other indicators that they are at risk of cardiovascular events.

There is a lot of signs in the literature to suggest that there is a very clear link between COPD and cardiovascular risk.

Smoking is obviously the common link to that, and the effect of smoking in many cases is through the lungs.

So if you can improve the COPD control, the hypothesis is you can actually affect cardiovascular risk.

We have looked very carefully at the historical data that we have, both from the TORCH study and another very large study which we did, which was called INSPIRE, also to generate a hypothesis.

The way to test the hypothesis is to do this large outcome study, and that is the study that we started today.

Well, 16,000 patients.

We have to select those patients.

We will need to go to a very large number probably over -- it will be over 1,000 centers around the world.

The design of the study is such that the duration will be driven by the number of events that we see.

Tnhat makes it very difficult, frankly, [for us].

We will be following up the vital status of all patients who get recruited into the study.

Patients might be in this study for varying lengths of time.

And we also have to recruit that large number of patients.

So it really makes timelines difficult for us to predict.

Thanks a lot.

Thanks Darrell.

We've got time maybe for one or two more questions and then (inaudible).

Any more questions?

No?

Well, in that case let me say thank you very much for your attention.

We very much appreciate it.

I know I am seeing you many of you for lunch tomorrow.

I look forward to getting a chance to talk to you then, and obviously in various meetings over the next couple of weeks.

In the meantime, thank you for your attention.