GlaxoSmithKline Unveils Strategy for Growth

Press Release

SOURCE: GlaxoSmithKline plc ...

·        Full pipeline of 23 innovative vaccines; 5 to be launched in 2001 ...

“GSK’s Vaccines business is also contributing to both the short and long term prospects of the company through a strong pipeline of new products. In the short-term, growth will be boosted by the launch this year of Infanrix PeNta in the US, as well as Twinrix for adults, the first and only vaccine that protects against hepatitis A and B. GSK has a wealth of late stage development products: for example, a pediatric combination vaccine against meningitis A and C, set to be launched into a market with a $500 million potential; as well as a second generation vaccine against S. pneumoniae and a vaccine against rotavirus, each directed at a $1 billion market. Exciting long-term opportunities include the search for vaccines for global challenges such as HIV and malaria, and the creation of a new generation of therapeutic vaccines.

Jean Stephenne, President and General Manager, GlaxoSmithKline

Biologicals, said: “I am particularly excited about our extremely full

pipeline that includes 23 vaccines, five of which will be introduced

this year: Twinrix adult, Infanrix PeNta and HeXa, Tritanrix HB Hib, and

Boostrix.’”’

http://biz.yahoo.com/prnews/010222/phth007_2.html

Thursday February 22, 5:51 am Eastern Time

Press Release

SOURCE: GlaxoSmithKline plc

GlaxoSmithKline Unveils Strategy for Growth

Company to Leverage Key New Products, Expand on Therapeutic Franchises,

Enhance R&D Productivity, and Capture Merger Synergies to Deliver Strong

Performance

Highlights

·        Despite the 6% adverse impact of product divestments - Kytril and Famvir

·        GSK forecasts 2001 earnings per share (EPS) growth of around 13%

·        2002 EPS growth expected to accelerate to mid-teens

·        161 New Chemical Entities, vaccines and line extensions in development;

117 of these in clinical studies

·        Seretide/Advair (US launch planned for April) and Avandia identified as key drivers of growth

·        Key therapeutic franchises supported by a large number of line extensions, including: Augmentin ES approvable in the US; Augmentin SR filed; further development of Seroxat/Paxil in PMDD; Paxil/Seroxat to be launched for GAD and PTSD in 2001; Coreg to be submitted for severe heart failure; 908 Agenerase pro-drug to be filed in 2002

·        Record number of 9 in-licensed products during the last twelve months - all in clinical development

·        Full pipeline of 23 innovative vaccines; 5 to be launched in 2001

·        New plans outlined to boost R&D productivity

·        Cost savings of at least 1.6 billion pounds sterling from merger and manufacturing plans confirmed

LONDON, Feb. 22 /PRNewswire/ -- At its inaugural meeting for analysts and investors, GlaxoSmithKline plc (NYSE: GSK - news; “GSK”) today outlined its R&D and business strategies for the new company.

Dr. Jean-Pierre Garnier, Chief Executive Officer, said: “Today we have provided compelling evidence that the promise of the merger will be fulfilled. GSK is well positioned to successfully address the key challenges confronting pharmaceutical companies. We are determined to enhance R&D productivity, build a rich pipeline and reduce our costs. We believe GSK has what it takes to achieve financial growth and become an even stronger force in the industry.”

Dr. Tachi Yamada, Chairman, Research and Development, added: “In GSK we have brought together two complementary R&D portfolios to create one of the most exciting and innovative early stage pipelines in our industry. GSK has the skills and resources to harness the potential of the human genome, building on our previous investments in integrated technology platforms. In addition, we are announcing today a radical restructuring of our R&D organization, which will take advantage of scale, while promoting focus and entrepreneurialism.

FINANCIAL OUTLOOK

While improving pharmaceuticals sales growth is a key driver of GSK’s current strong business performance, the company will also benefit from the delivery of at least 1.6 billion pounds in cost savings by 2003 as a result of both the merger and the manufacturing plans already in place prior to the merger.

These benefits of the merger and the performance of the business have led the company to forecast EPS growth (excluding merger and restructuring costs and the effects of currency) for 2001 of around 13%, despite the adverse effect of product divestments and reduced dependency on profits from disposals of investments. Importantly, the divestments required by regulatory bodies in order to complete the merger have had the effect of reducing the company’s EPS expectation for the year by 6%. Additionally John Coombe, Chief Financial Officer, indicated he expects a trading margin improvement of up to 2% in 2001 as well as an improvement in the tax rate of 0.5%.

In 2002, the company expects EPS growth to accelerate to the mid-teens, reflecting strong business performance, boosted by cost savings. For the second year in a row, one-time gains are expected to decline.

John Coombe said: “While we continue to focus on delivering a successful merger, the company has negligible net debt relative to its market capitalization, and its financial strength positions it to take advantage of any opportunities that might arise to build the business.”

STRATEGIES FOR GROWTH

Dr. Garnier indicated that GlaxoSmithKline’s strategy for growth is based on fully supporting new and existing products, strengthening the product pipeline, boosting the company’s output of new products and achieving cost savings from the merger.

ROLLING OUT KEY NEW PRODUCTS

Dr. James Palmer, Senior Vice President, New Product Development, told analysts: “GSK will sustain and enhance its growth by delivering innovative products, maximizing product life cycles through line extensions and new indications, and being a favored partner for in-licensing of promising new medicines.”

GSK is set to benefit from the recent launch of two potential blockbuster drugs, a unique source of strength for the company. Avandia, GSK’s treatment for Type 2 diabetes, has done well with total sales of 462 million pounds in 2000. Avandia offers significant opportunities for growth as it continues to be launched in Europe and the rest of the world during 2001. Moreover, the company is pursuing an extensive clinical program to attempt to demonstrate Avandia’s ability to prevent disease progression and reduce complications associated with Type 2 diabetes. In February 2001 the company received an approvable letter from the FDA for the use of Avandia in combination with insulin.

The company’s other potential blockbuster, Seretide—the combination of a corticosteroid and a long-acting bronchodilator for the treatment of asthma -- is planned for launch in the US under the name Advair in April this year, giving it access to the world’s largest market where the benefits of inhaled steroid treatment are increasingly being recognized. In the US, Advair will have a broad label, allowing usage in asthma patients of all types. New data from 11 key studies will help to sustain Seretide/Advair as the gold standard therapy for asthma treatment worldwide.

Additional studies with Seretide/Advair have provided clear evidence of its benefits in the treatment of COPD (chronic obstructive pulmonary disease).  The company’s strategy for unlocking the COPD market includes gaining COPD indications for Seretide/Advair, and securing regulatory approval for Ariflo, an oral anti-inflammatory treatment for COPD. Regulatory submissions for Seretide/Advair in the treatment of COPD are expected to be filed in the US in March, and September in Europe.

With sales of 2.8 billion pounds in 2000, up 15%, GlaxoSmithKline remains the clear leader of the respiratory market.

GlaxoSmithKline’s newest HIV/AIDS treatment, Trizivir, combines the two established HIV/AIDS medicines Epivir + Retrovir (Combivir), with the potent reverse transcriptase inhibitor Ziagen to offer the power of a triple combination regimen in a single tablet. Trizivir reduces the pill burden to 1 pill twice a day, increasing patient convenience. As a triple regimen that does not contain a protease inhibitor, Trizivir may also preserve future treatment options containing those drugs.

EXPANDING KEY THERAPEUTIC FRANCHISES

The antibiotic Augmentin has always been associated with superior efficacy, and current treatment guidelines include it as one of only a short list of antibiotics recommended for acute otitis media and sinusitis. In a continuing program to increase its competitive advantage, the company is planning to launch extra-strength formulations of the product for both the pediatric (Augmentin ES) and adult (Augmentin SR) markets to meet the challenge of emerging bacterial resistance. This strategic move is intended to enhance Augmentin’s position as the drug of choice in treating PRSP (penicillin resistant S. pneumoniae). Recently the company received an approvable letter from the FDA for the use of Augmentin ES to treat middle ear infection in children. The file for Augmentin SR was submitted to the FDA in December 2000.

In the CNS (Central Nervous System) category, GSK will pursue a dual strategy to continue growing the Seroxat/Paxil business. With its immediate release (IR) formulation, the company will expand into new markets and will offer a complete spectrum of treatment for depression and anxiety disorders. This will include launches in 2001 for GAD (General Anxiety Disorder), and PTSD (Post-Traumatic Stress Disorder). A controlled release formulation of Paxil, Paxil CR, already approved in the US for depression, has recently received an approvable letter from the US FDA for panic disorder. Paxil is also in full clinical development for PMDD (Pre-menstrual Dysphoric Disorder). In 2000, Seroxat/Paxil became the leading SSRI (selective seretonin reuptake inhibitor) in the US in terms of new retail prescriptions, and achieved sales of 1.55 billion pounds worldwide.

Coreg (carvedilol) is the first beta-blocking agent to be indicated for the treatment of mild or moderate heart failure. It is also the only beta-blocking agent to show a mortality benefit in the treatment of severe heart failure, and a filing for this indication is expected to be made with the US FDA later this year.

IN-LICENSING PARTNER OF CHOICE

Even in the midst of merger planning, a record nine significant compounds have been licensed in to GSK in the past twelve months. These are:

·        Merck KGaA  SSRI/5HT1A partial   Depression                   Phase II agonist

·        Sepsicure   Endotoxin binder     Sepsis                       Phase II

·        HGS         Keratinocyte GF-2    Wound care, inflammatory     Phase II bowel disease

·        Taiho       RNA polymerase       Cancer                       Phase II inhibitor

·        Tanabe      Dual Alpha-4         A novel, oral anti-          Phase II

                   integrin             inflammatory with potential

                   antagonist           utility in a range of

                                        disorders including asthma,

                                        rheumatoid arthritis,

                                        inflammatory bowel disease,

                                        multiple sclerosis

·        NeuroSearch 5HT/NA/DA uptake     Depression                   Phase II inhibitor

·        Asahi       Beta-3-adrenoceptor  Obesity/diabetes             Phase I agonist

·        Yuhan       Reversible PPI       GERD                         Phase I

·        Zambon      ACE/NEP inhibitor    Arterial hypertension        Phase I

“We’re committing our considerable development capabilities towards bringing these promising in-licensed compounds to patients,” Dr. Palmer said. “All of these products have the potential to contribute significantly to GSK’s future growth, benefiting from the sales and marketing strength of the new organization.”

DELIVERING CURRENT PIPELINE NCES AND VACCINES TO THE MARKETPLACE

GlaxoSmithKline’s investment in R&D has yielded 161 New Chemical Entities, vaccines and line extensions in development. Of this total, 117 are currently in clinical development (ie. Phase I onwards).

Dr. Allan Baxter, Senior Vice President, Drug Discovery, said: “Far-sighted and imaginative investment in new technologies by both Glaxo Wellcome and SmithKline Beecham has yielded a full and innovative early stage pipeline. This pipeline has the potential both to reinforce our existing areas of therapeutic leadership and to allow us to expand further into other areas with major commercial promise, including obesity, cancer, and cardiovascular disease.”

Among the exciting Phase I/II compounds highlighted by Dr. Baxter are:

·        223412  NK-3 receptor antagonist   The first compound in its class, under development for COPD

·        181771  CCK-A receptor agonist     Novel treatment for obesity (and type 2 diabetes). Works non-centrally. Decreases appetite among obese patients

·        418790  Beta-3-adrenoceptor        A non-centrally acting approach to

               agonist                    treating obesity (and Type 2

                                          diabetes). Stimulates metabolism

                                          in fat cells

·        501516  PPAR agonist               Unique approach to fighting cardiovascular disease by simultaneously targeting two risk factors - low HDL (high density lipoproteins) and elevated triglicerides.  Area currently lacking effective treatment

·        408075  Maytansine antibody        A pioneering approach targeting

               conjugate                  major solid tumors, primarily

                                          colon cancer. Shown in animal

                                          models to reduce tumor volume

                                          below levels of measurability,

                                          without tumor regrowth

·        572016  Kinase dual inhibitor      Major breakthrough in targeting two enzymes on which tumor growth depends (tyrosine kinases linked to erbB2 and EGFR)

·        273005  Vitronectin antagonist     A novel approach to the treatment of osteoporosis and rheumatoid arthritis directed at prevention of bone loss

In the later stages of the development pipeline (Phase III), Dr. Palmer highlighted the progress of several compounds nearing completion of registration:

GW433908 is an improved formulation to deliver Agenerase, an HIV protease inhibitor with proven safety and efficacy. Preliminary evidence from Phase II comparative studies show that ‘908 has a better GI side effect profile than Agenerase, and will allow a significant reduction of the pill burden from 16 to 6 per day. Regulatory filings are expected in Europe and the US in 2002.

GI198745 is a dual 5-alpha reductase inhibitor for the treatment of BPH (benign prostatic hyperplasia) and hair loss. The NDA submission for BPH was filed in December 2000. Clinical trials for hair loss have shown encouraging results for hair restoration after 6 months of treatment.

G1262570 is the first in a new class of non-glitazone PPAR agonists that is being developed for the treatment of Type 2 diabetes. ‘570 is currently in a large Phase III program, data from which will further specify the profile of this product. Two additional GSK compounds in this class are currently in Phase I.

Factive, a broad-spectrum quinolone antibiotic, has the potential to become the most potent product in its class for the treatment of adult respiratory infections caused by S. pneumoniae, a common pathogen that is becoming increasingly resistant to currently marketed antibiotics. The company is in discussions with the FDA with the aim of resolving outstanding issues and gaining approval of its NDA.

Ariflo, a PDE4 receptor inhibitor for COPD, is in Phase III clinical trials with an NDA planned for the second half of 2002.

Tranilast, being developed for restenosis, is also in Phase III clinical studies. Regulatory filings are planned for fourth quarter 2001.

Bexxar a novel therapy for non-Hodgkin’s lymphoma, was submitted and accepted in late 2000, and is under priority review by the US FDA.

GSK’s Vaccines business is also contributing to both the short and long term prospects of the company through a strong pipeline of new products. In the short-term, growth will be boosted by the launch this year of Infanrix PeNta in the US, as well as Twinrix for adults, the first and only vaccine that protects against hepatitis A and B. GSK has a wealth of late stage development products: for example, a pediatric combination vaccine against meningitis A and C, set to be launched into a market with a $500 million potential; as well as a second generation vaccine against S. pneumoniae and a vaccine against rotavirus, each directed at a $1 billion market. Exciting long-term opportunities include the search for vaccines for global challenges such as HIV and malaria, and the creation of a new generation of therapeutic vaccines.

Jean Stephenne, President and General Manager, GlaxoSmithKline Biologicals, said: “I am particularly excited about our extremely full pipeline that includes 23 vaccines, five of which will be introduced this year: Twinrix adult, Infanrix PeNta and HeXa, Tritanrix HB Hib, and Boostrix.”

ENHANCING RESEARCH AND DEVELOPMENT PRODUCTIVITY

The three key elements in increasing the efficiency and output of GSK’s R&D activities are the re-design of its organizational structure, continuing investment in harnessing the potential of the human genome and leveraging our abilities to demonstrate the value of our products.

R&D RESTRUCTURING

“We have created six Centers of Excellence for Drug Discovery (CEDDs) designed to act as small business units within the larger R&D organization,” Dr. Yamada said: “The new structure will maintain the momentum to deliver the existing pipeline, capture the advantages of scale and promote agility and entrepreneurial spirit. At the same time it will create an environment to stimulate the best and the brightest scientists and provide the flexibility to accommodate future change.”

The CEDDs can select the best assets from either internal discovery or in-licensing to move rapidly from the identification of promising compounds to the proof of concept stage. The CEDDs are structured to encompass both discovery and early clinical development. Each CEDD is autonomous, accountable, and entrepreneurial along the lines of a biotech company.

HARNESSING THE POTENTIAL OF THE HUMAN GENOME AND DEMONSTRATING VALUE

In addition to the agility of the CEDDs, the new structure retains the benefit of scale and size in drug discovery and development. In particular, the company is benefiting from its previous investment in technologies in genetics and discovery research such as high throughput gene-sequencing, chemistry and screening. Integrating these technologies further with high throughput biology will be the key to unlocking the value of genomics through a better understanding of gene function.

One exciting opportunity arising from GSK’s genomics effort, described by Dr. Yamada, involves the inhibition of an enzyme, Lp-PLA2, which has been identified as a major new risk factor in cardiovascular disease. A lead compound, 435495, has demonstrated its ability to reduce significantly the level of Lp-PLA2 in man.

GSK has advanced capabilities to demonstrate the economic as well as medical benefits of the company’s products. These include programs in pharmacogenetics, advanced experimental medicinal technologies, and preferential access to large medical databases.

GlaxoSmithKline—one of the world’s leading research-based pharmaceutical and healthcare companies—is committed to improving the quality of human life by enabling people to do more, feel better and live longer.

Under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, GSK cautions investors that any forward-looking statements or projections made by GSK, including those made in this Announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Factors that may affect GSK’s operations are discussed in Annex I to this Announcement.

Inquiries:

GlaxoSmithKline

     UK Media inquiries             Martin Sutton      (020) 8966 8000

                                    Philip Thomson     (020) 8966 8000

                                    Alan Chandler      (020) 8975 2290

     US Media inquiries             Nancy Pekarek      (215) 751 7709

                                    Mary Anne Rhyne    (919) 483 2839

European Analyst/Investor

      inquiries                     Jennie Younger     (020) 8966 8378

                                    Duncan Learmouth   (020) 8966 5961

                                    Joan Toohill       (020) 8966 8715

                                    Anita Kidgell      (020) 8966 8369

US Analyst/Investor

      inquiries                     Frank Murdolo      (212) 308 5185

                                    Tom Curry          (215) 751 5419

Cautionary Factors that May Affect Future Results

(Cautionary Statements under the U.S. Private Securities Litigation

Reform Act of 1995)

The Group’s reports filed with the U.S. Securities and Exchange Commission (the “Commission”), including the release of which this annex is a part (“this release”), contain, and written information released, or oral statements made to the public in the future by or on behalf of the Group may contain, forward- looking statements. Forward-looking statements give the Group’s current expectations or forecasts of future events. An investor can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “intend,” “will,” “project,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

Any or all of the Group’s forward-looking statements in this release, in reports filed with the Commission, or in any other public statements the Group makes, may turn out to be incorrect. They can be affected by inappropriate or inaccurate assumptions the Group might use as a basis for such forward-looking statements or by known or unknown risks and uncertainties. Many factors mentioned in the discussion of the Group’s business in this release will be important in determining future results.  Consequently, no forward-looking statement should be viewed as or can be guaranteed. Actual future results may vary materially.

The Group undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Investors should also note the following cautionary discussion of risks and uncertainties relevant to the Group’s business. The factors listed are those that the Group thinks could cause the Group’s actual results to differ materially from expected and historical results. Other factors besides those listed here could also adversely affect the Group.

This discussion is provided as permitted by the U.S. Private Securities

Litigation Reform Act of 1995.     -- Generic competition as several

products face expiration of patent

protection in the United States and other important markets.  Particularly in Europe competitors may seek to market generic products prior to patent expiration following the expiration of the data exclusivity period for pioneer products through formulations that the competitor claims do not violate the patents related to the pioneer product.  The Group is routinely engaged in disputes over its patented products and processes in order to protect its intellectual property.

·        The ability of the Group to integrate the large and complex Glaxo Wellcome and SmithKline Beecham businesses as well as the Block Drug acquisition and realize synergies and achieve cost savings.

·        Increased competition from other proprietary products (and in certain cases generic equivalents of those proprietary products upon patent expiration) in therapeutic areas important to the Group’s long-term business performance.  Even during the period the Group’s products are protected by patents they may be subject to development by new products by competitors having superior performance or lower prices or other competitive advantages over the Group’s current products.

·        The difficulties, uncertainties and the high level of investment inherent in new product development.  The outcome of the lengthy and complex process of new product development is inherently uncertain.  A candidate can fail at any stage of the process and one or more late stage product candidates could fail to receive regulatory approval.  New product candidates may appear promising in development but fail to reach the market because of efficacy or safety concerns, the inability to obtain necessary regulatory approvals, the difficulty of excessive cost to manufacture and/or the infringement of patents or intellectual property rights of others.  Furthermore, the sale of new products may prove to be disappointing and fail to reach anticipated levels.

·        Pricing pressures, both in the United States and other countries around the world, including rules and practices of government sponsored health systems, managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement and pricing in general.

·        Changes in government laws and regulations and the enforcement thereof affecting the Group’s pharmaceutical and vaccine businesses.

·        Efficacy or safety concerns with respect to marketed products, whether or not scientifically justified, leading to product recalls, withdrawals or declining sales.

·        Legal factors, including products liability claims, antitrust litigation, environmental concerns and patent disputes with competitors, any of which could preclude commercialization of products or negatively affect the profitability of existing products.

·        Lost market opportunities resulting from delays and uncertainties in the approval process of the U.S. Food and Drug Administration, European and other regulatory authorities.

·        Changes in tax laws related to the taxation of the Group’s earnings within and outside the United Kingdom, particularly with respect to jurisdictions in which the Group pays tax at rates lower than its overall effective rate.

·        Changes in applicable accounting standards that are adverse to the Group.

·        Economic factors over which the Group has no control, including changes in inflation, interest rates and foreign currency exchange rates and controls.

·        International operations could be affected by changes in intellectual property legal protections and remedies, trade regulations, and procedures and actions affecting approval, production, pricing, reimbursement and marketing of products, as well as unstable governments and legal systems, intergovernmental disputes and possible nationalization.

This list should not be considered an exhaustive statement of potential risks and uncertainties. 

SOURCE: GlaxoSmithKline plc

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