Sir Andrew Witty - Chief Executive Officer Simon Dingemans - Chief Financial Officer

Graham Parry - Bank of America Merrill Lynch James Gordon - JPMorgan Andrew Baum - Citi Kerry Holford - Exane BNP Paribas Jo Walton - Credit Suisse Tim Anderson - Bernstein Keyur Parekh - Goldman Sachs Steve Scala - Cowen Richard Parkes - Deutsche Bank Nicholas Guyon - Morgan Stanley Jeff Holford - Jefferies Seamus Fernandez - Leerink

Good day, ladies and gentlemen, and welcome to your GSK Analyst and Investor Call. My name Grunt and I’m your event manager. During today's presentation, your lines will remain on listen-only. [Investor Relations] I would like to advice all parties today's conference is being recorded. And now I'd like to hand the call over to Sir Andrew Witty, CEO.

Thank you very much. Good afternoon and welcome to the call. Q3 has been another strong quarter for GSK. We've continued sales growth, cost control and pipeline progression. Core EPS was £0.32, up 12% on CER basis and group sales grew 8% to £7.5 billion at constant exchange rate. Sales growth came from all three businesses across the group, but primarily from the moment of new pharmaceutical and vaccine products, which had sales of £1.2 billion, 79% on the same period last year. Pharmaceutical sales grew 6% to £4.1 billion. HIV sales were up 32% to £940 million with continuing very strong demand for Tivicay and Triumeq. In respiratory, sales grew 8% to £1.6 billion, including 14% growth in the U.S. At the start of the year, we said we'd be looking for return to growth of this business and year-to-date total respiratory sales are indeed up 2%. New respiratory products are driving this performance with third-quarter sales of £269 million pounds. These new products Breo, Anoro, Incruse, and Nucala positioned the group well to manage the impact of potential genericization to Seretide/Advair and to ensure GSK remains the world’s leading respiratory company. I’m also excited by the progress we’ve seen in our respiratory pipeline. In the near-term, we are on track to file our closed triple products COPD in Q4. In earlier stage development, our next-generation products include danirixin, our CXCR2 antagonist and our PI3K inhibitor, which I’m pleased to say, met its primary endpoint in the Phase II proof-of-concept study during the quarter. Vaccines also had a very strong quarter with sales up 20% to £1.6 billion. This is not a function of phasing, but much more related to an improved execution of commercial performance allowing for an earlier delivery of vaccines giving us high market share and higher prices and you see a significant growth over 2015 and previous year performance. In addition, demand for Bexsero our meningitis vaccine continues to be strong with sales more than doubling to £133 million in the quarter and we're investing to increase our manufacturing capacity in this vaccine. Prospects for our vaccine business remain very strong and we're pleased to announce on Monday that our latest innovation Shingrix, a candidate vaccine for shingles prevention has now been filed in the U.S. In consumer healthcare, sales were up £1.9 billion, up 5%, competitive performance relative to others in this space and ahead of our estimated market growth of around 3.5%. Power brands including Sensodyne and Voltaren are grew double-digits and 12% of Q3 sales with the result of new product introductions in consumer. Looking at pipeline innovation more broadly, our most recent review of capital allocation for research and development reinforced our confidence in both our near-term portfolio and potentially the assets we have in earlier stages of development. We expect visibility of our pipeline to increase substantially in the next two years with clinical data being generated on around 20 to 30 potential assets by the end of 2018 in core therapy areas such as oncology and immune-inflammation. Assets with data readouts will include our OX40, the ICOS1, and BET inhibitors for various cancers and our anti-GM-CSF for RA. The group's operating margin for the quarter was 30.7%, 2.7 percentage points higher than in Q3 2016 and 1.3 percentage points higher in CER terms. This improved operating leverage reflects sales growth and continued delivery of cost savings from restructuring and the integration following our three-part deal with Novartis. We’ve now delivered $2.5 billion of annual benefits faster than expected and on target to deliver our target of £3 billion. These improvements in operating profits together with benefits from currency lead to a significant improvement in our cash position with net cash inflow from operations of £1.8 billion this quarter compared to £1.5 billion in Q3 2015. At the earnings level, we're very pleased with the trends we are seeing in the business and very confident in achieving our 2016 earnings guidance with core EPS growth of 11% to 12%, which of course we’ve already upgraded earlier in the year from our original expectations. Total EPS was £0.166, down 1% CER primarily reflecting charges arising from increase in the valuation of the consumer healthcare and HIV businesses, which in part relate to put options held by our respective partners. Finally, the board has declared a dividend of £0.19 for the quarter and continues to expect to pay an £0.80 dividend for the full year. With that, I'll hand over to Simon to give you a little bit more detail on the quarter.

Thanks, Andrew. The results we’ve reported today mark another quarter of progress and deliver against both the strategy and the goals we set out in the financial architecture to drive growth and earnings per share ahead of sales by improving our operating leverage and being more financially efficient and convert more of those earnings to cash that we can return to shareholders or reinvest back into the business when and where we can see attractive returns. Sales growth is being driven by all three businesses in the quarter, but particularly via continued momentum from the new pharma products and a standout performance from our vaccines business that continue to build the new meningitis portfolio while also delivering very strong growth in flu vaccines especially in the U.S. We're generating greater operating leverage through continued execution of our integration and restructuring programs, which have not only delivered around £2.5 billion of annual cost saves since they started, but also creating significantly greater flexibility in our cost base allowing us to maintain tight control of our ongoing costs while also allowing us to relocate resources and targeted reinvestments, including supply chain improvements and new product support as well as advancing the R&D pipeline. Together with the continued efficiencies we’re delivering through our funding structure, this improved operating leverage allowed us to deliver earnings-per-share growth ahead of sales growth as well as a significant improvement in free cash flow more than double Q3 last year after adjusting for the restructuring and other transaction costs being funded from the balance sheet through divestment proceeds. As you'll recall, we’ve already adjusted our earnings guidance upwards a couple of times during the year and delivery this quarter leaves us with confidence in meeting the guidance we’ve set out for growth in core earnings per share for the full-year of 11% to 12% in constant currencies. We also said when we issued that guidance that we expected earnings growth for the two halves to be similar. This reflects the greater season weight of Q3 of the post-Novartis business as well as the need to continue to invest consistently around our new products and the R&D pipeline. The press release provides extensive detail about performance as usual and my comments from here will focus on the major points, expectations for the rest of the year, and any comparative points that might help you in your modeling. On currency, this is the first full quarter since the Brexit vote. The resulting sterling depreciation delivered a tailwind of 15% to sales and 27% to core EPS with a larger impact on EPSA due to a higher proportion of our costs being in sterling compared to revenues. The impact of a weaker sterling on the reported operating margin varies in the quarter by business with pharma positively affected given its relatively higher proportion of sterling costs while it's more of a drag for vaccines and consumer. Vaccines has a large manufacturing and R&D presence in euros, in Belgium and Italy in particular while consumer also has a relatively larger proportion its cost base in euros, but also Swiss francs. If exchange rates held at the September month end rates for the remainder of the year and we have the same level of exchange losses as last year, we’d expect a positive full year impact on turnover of about 10% and we estimate the positive benefit to core EPS will be approximately 21%. Total results for £0.166 with the difference from core results primarily relating to charges from adjustments to the estimated liabilities for contingent consideration in ViiV and consumer put options. In addition to £243 million for the normal unwinding of the discount on these future liabilities in line with the quarterly run rate we expect, the remaining adjustments were as a result of changes to the forecast for the relevant businesses for performance, but mainly currency, which increased their estimated sterling values and therefore the associated liabilities. To help you model the impact of future exchange rate movements on these estimated liabilities, we’ve added some extra detail into the press release on Page 50, including some sensitivity analysis and an explanation of what exchange rates we’ve used. Details of the payments to Shionogi to just settle the contingent consideration are also set out. These are included in the cash flow section of the press release each quarter. The payments, remember, are made directly by ViiV and in Q3 totaled $121 million pretax. The rest of my comments will be focused on CER growth and core results. In constant currency terms, as Andrew has highlighted, Group sales up 8%, core EPS up 12% reflecting the operating leverage we have already discussed. Pharma sales including HIV were up 6% more than double the growth rate from last quarter has increased sales from new products continue to more than offset the decline on Seretide/Advair. In respiratory, we continue to transition the portfolio from its previous reliance on Advair/Seretide to a much broader. Total respiratory sales were up 8% globally with double-digit growth in the U.S. and international, more than offsetting a 9% decline in Europe. This was primarily the result of growth in the Ellipta products and Nucala, up $179 million in sterling terms, which more than offset the 7% decline in Advair/Seretide, which slowed its rates of decline in the quarter. This primarily reflected a mix in the period of better RAR in the U.S. and improved performance in the emerging markets offset by continued competitive pressures in Europe. In the U.S., we are continuing to see greater volatility in our RAR rates quarter-to-quarter that might have been the case in the past and that trend seems likely to continue given the dynamic conditions in the respiratory market in the U.S. However looking through that volatility for Advair specifically, we are expecting an overall rate of decline in CER terms for the year as a whole towards the mid-teens more in line with what we saw in the first half. Moving on to HIV, our second-largest therapeutic area, sales are up 32% as Tivicay and Triumeq continue to generate substantial growth both are now amongst the largest individual products in the group and while we continue to see very strong momentum in the dolutegravir franchise, we’re starting to annualize the significant acceleration we saw for both products last year and in the quarter, we also started to see a more meaningful impact from generics for Epzicom and Kivexa and we expect the generic impact to accelerate in Q4 and into 2017. Elsewhere in pharma, established products had a stronger quarter and trend declining by just 3%, which reflects some better supply, but also some tender orders and other similar one offs. Looking forward, remember also that we announced a series of deals with Aspen in September that when completed will simplify our established products portfolio, but will also move around £100 million of revenues on a full-year basis. We expect those transactions to close around the end of the year. Moving on to vaccines, up 20%, stronger execution across the business. In flu, we shipped much higher volumes with earlier deliveries this year than in 2015 as well as an improved product mix driving sales growth of 55% in the quarter. Part of this success was delivering early in the season so we're not expecting as many deliveries in the fourth quarter compared to last year as our count in pain has been very deliberately more concentrated to deliver that progress. Vaccines also continue to build the meningitis franchise with particular success in growing share and the overall market for Bexsero. Supply remains tight although given that we’ve seen such a significant acceleration of demand for this product and we are continuing to invest in expanding capacity so this will be a multiyear project. Given the underlying trends we are seeing in the vaccines business, we now expect that this year as a whole we will see vaccines sales growth at the top end of the guidance range we previously given you for the business of mid to high single-digit rates of sales growth. Consumer healthcare remains on track, continuing to grow in line with our mid-single-digit expectations of 5% even though the business was lacking a strong comparative quarter last year. We delivered especially strong results from the power brands including Sensodyne and Volterra, which more than offset some tougher market dynamics for HOLEX in India. Flonase OTC also continue to grow in the U.S. with line extensions offsetting the increasing impact of private label competition. This quarter Veramyst OTC received FDA approval and we expect to launch in the first quarter of 2017. This will be the business’s second switch in three years. Worth noting also that that at the end of September we successfully divested the Nigerian drinks business, the last of our drinks businesses with annual sales of just over £50 million pounds as we continue to focus and invest behind the core and power brands. Turning to operating profit excluding currency, operating margin up 130 basis points. Our continued delivery of integration and restructuring benefits and the leverage provided by better sales growth have enabled us to deliver an improved margin while also absorbing pricing pressures and the declines of some of our older products and continuing to invest consistently behind our new products. This is alongside supply chain improvements and R&D pipeline investments. These investments and the recycling of a proportion of the restructuring benefits are key to sustaining the improved top line delivery and operating leverage where our now seen across the business. On restructuring specifically, we’ve delivered £2.5 billion accumulative annual savings compared to £1.6 billion at the end of 2015, so we are ahead of schedule. Although the incremental amounts each quarter are now coming up against tougher comparator, we remain confident in delivery of the targeted total savings of £3 billion. In the bottom half of the P&L, core financing costs were up £12 million to $160 million and I continue to expect interest costs to be slightly higher than the full year constant exchange rates. The core effective tax rate was 20.8% in the quarter versus 20% last year bringing our year to-date rate to 21%. As in previous quarters, this increase is due in part to higher levels of profits being made in the U.S. And for the full year, I continue to expect the tax rate of between 20% and 21% although the mix of trading and currency that we have seen this year is likely to land us at the upper end of that range. Our cash flow for the first nine months of the year excluding legal settlements of £166 million and adjusting for tax payments on the Novartis transaction, restructuring costs and the BMS acquisition, all of which we are funding from retaining disposable proceeds, the underlying free cash flow more than doubled to $2.6 billion. This reflects both the improvement in operating performance, but also the benefit of the move in sterling, which contributed about half of the overall increase as well as generating stronger free cash flow, we’ve also realized attractive values on the disposal of various non-core assets including our second milestone payment on ofatumumab of £150 million and almost £500 million from the sale of our residual Aspen stake. We will receive the proceeds for the Aspen disposal in early October so they are not yet reflected in the quarterly cash flows or net debt position. Net debt at the end of September was £14.7 billion, compared to $10.7 billion at the year end, but this includes a currency translation drag of £1.4 billion since December. Year-to-date in addition to using disposal proceeds to fund £800 million of restructuring and integration costs, purchasing the HIV assets from BMS and paying £1 billion special dividend, we’ve also returned £2.9 billion of ordinary dividends to our shareholders. I continue to expect this year to be a heavy investment year with net debt reflecting that but as we move towards the end of the integration and restructuring program next year, we should see the demands on the balance sheet reduced excluding the impact of currency net debt continues to be in line with expectations. In summary, another strong quarter execution across the business, reflected in delivery of sales growth, integration and restructuring benefits, improved cash flow, and earnings. And as a result, we are confident in delivering the full-year guidance. With that, I'll hand you back to Andrew.

Thanks very much, Simon. And let's open up the call for today. Operator perhaps you could take people through the protocol and we will start the Q&A.

Thank you. Ladies and gentlemen, your question-and-answer session will now begin. [Operator Instructions] Your first question comes from the line of Graham Parry from Bank of America Merrill Lynch. Please go ahead. You are now live on the call.

Great. Thanks for taking my questions. So I’ve got three. Firstly on Advair, can you quantify the rebate benefit that we saw in the quarter in the U.S. and how much of that is the historic adjustment versus the just the change in rebates? And any channel that mix of price came from? And I think you said that this is a trend you expected to continue, if you could just clarify that comments. Secondly, could you run through first the contracting position of Breo, Anoro, an increase to 2017, I seen you’ve pretty much done on those contracts now, just in terms of covered lives in tier 2 across Part D and commercial and any exclusives that you’ve got there and is there any risk that that positioning shift if generic contract is approved, so are there opt outs in those contracts? And thirdly on Bexsero, you’re annualizing over £1 billion in sales now and capacity constraint, so what is your ultimate capacity needed to meet what you perceive to be demand now and can you help us understand just how far penetrated you think into the ultimate potential of that vaccine? Thank you.

Thanks very much, Graham. So on the Advair piece, I think there are a couple of things, about $50 million in terms of the RAR adjustments. It's a historic, as you all know, we don’t know at the time that we ship the product, which channel product is going to be sold through and there is an estimate we then have to correct one way or the other. So this is a catch up or a correction on historic provisioning. It's really important for you all to understand, we also we did not call out in the press release by detail but we did make the general point. Actually at the respiratory level is a neutral impact because we had RAR provision changes going in the other direction for some of the products, notably Ventolin. So the net-net of all of this is irrelevant in terms of the overall group but product-by-product it has a slight impact which is why we called out for Advair because obviously I know a lot of you are tracking the Advair kind of decline curve. The underlying performance of Advair is basically pretty much on track with what we’ve seen historically but there is no big deal around this particular point within the respiratory business and that’s one of the group level because it essentially washes out between the various puts and takes. And in terms of contract and I think we're in the best position we’ve been for next year. So for Advair, we are running a very high favorable position in the commercial book of business as we are for all the new products, and the same in the Part D book. You never quite know what is going to happen if the generic comes, the key question really, Graham, obviously is if it comes, what is it? What is it look like, and when exactly does it come, all of that uncertainty. We’ve seen and you’ve probably seen from some other companies with increasing appetite for managed care clients to continue to think about how to keep the brand available even after a generic arrival. So I think going into next year for the new products, we feel really, really good. For Advair, we feel really good at this point. And we'll have to wait and see if and when a generic actually shows up and in what kind of shape it is by the time we get there. In the vast majority of cases, all of our products are preferred brands and obviously that is exactly where we want to be. As far as Bexsero is concerned, we are expanding capacity as we go. I’d remind you if we go back two or three years, I think Bexsero volume was something like 2.5 million doses. I think we were heading up towards 10 million doses this year, more or less maybe a little less than that, we’ll see. And certainly over the timeframe of the next three or four years, we can certainly see a pathway to take us up into various multiples of that 10 million type of level. We’ve been investing in various aspects of the supply chain for Bexsero since we acquired the product. We will continue to do that. While we don’t have unlimited capacity today, we’ve certainly got a growing capacity. So I wouldn’t conclude that we are not able to grow this product. We will but obviously the sooner we can bring on the new capacity the better. In terms of penetration I think we are in very, very early days of this marketplace. You are really in the kind of hazard to guest, but you're probably in the 10% territory, maybe not even that, of the overall opportunity of this particular vaccine. So there is an awful lot of opportunity to go on a global basis. We’ve seen very strong performances in the U.S. of course we’ve seen a very significant business in the UK, Spain has been important, Italy is important but it's still a relatively small number of countries against the overall potential opportunity. So big opportunity to go, expansion and manufacturing ongoing active. I’ve personally been to the facility we acquired I think now three times, even gone through that every time I go we are able to produce more doses. We’ve made progress. I think there is a really strong energy and commitment in the organization to do that and I think we are on the right track with that. And overall of course, as you rightly say, we're now running at something like 130 million pounds a quarter for Bexsero, very, very strong growth and we want to continue to see that delivery. Next question?

Thank you. Your next question comes from the line of James Gordon from JPMorgan, please go-ahead, you’re live on the call.

Hello, thanks for taking my questions. One was on the new respiratory launches, which is Relvar/Breo, Anoro, Incruse and Nucala. They are a little bit below where consensus expectation was. So let me just do a sum around this quarter or is this something that we miss, something like step up and rebating or something else? Any reason we need to be a bit more cautious in subsequent quarters for these products? The second question was just about where we are in terms of cost savings and looking forward year, so I think there's about 500 million pounds of further cost savings to come through. Can you just remind us where they might fall in terms of the cost lines or by division, and it is a chunk of that from vaccine. I know the target is to eventually get to 30% plus margin but it looks like you could almost get this year actually, could you actually get the next year? And then just a final question more generally with [indiscernible] coming from the consumer background, could be accelerating a move to lesser bit best pharma focus and more of a consumer focus, but is that a fair move and when you're looking at something like fixing assets, is consumer increase in a focus in less pharma?

So thanks very much James for the question. I'm going to ask Simon in a minute to comment on what kind of likely distribution of the next 500 million of cost savings are. I think on Breo and Anoro, it’s a round in aero in terms of the difference between the expectations and the delivery first off and I don’t know why that is there but within the schema things, I think it's a very close set of numbers. Actually if you look at the performance of the products, there continue to be extraordinary growth actually. So if you look at the U.S. for example, 100,000 patients a week and they have been prescribed ELLIPTA based inhaled products. July 01, ELLIPTA represented the equivalent of 36% of total Advair volumes by prescription. By September 30, it was up to 42%, a very rapid evolution there. If you look in the U.S. share position during the year, over 12 month period, Advair has lost seven share points, Breo has gained seven share points, Anoro and Incruse together in the market have acquired a brand-new 12.7% share. And in all cases, the NBRx, the leading indicator of new completely new to brand tracking significantly ahead of the actual delivery. So if you look at Breo currency RX share, and it’s in 11% of territory but NBRx is now up to 18.5%. That gives you a very strong impression of the where that product is going. And overall when you combine it with the HIV business, you can see that new products at 1.2 billion annualized and 4.8 growing at 79% year-over-year, a very, very strong new product portfolio. And to pull that into contest, for the pharmaceutical business, one in every 4 pounds we generate in sales comes from products lost in the last three or four years. They basically comes from the HIV products or respiratory products you've just been talking about. Nucala is tracking very well. We’ve got 5,600 patients on drug now in the U.S. We got 10% TRx share but interestingly enough we have 25% and the Rx share which shows you the ramp up that is coming in there. I think right now as of today, we’ve got something like 12,000 patients registered for interest to go on a drug. As you know, it takes a few weeks for patients to cycle through on to the product. So I think, as you think from a just a stand back, cold look at the performance of the new products, particularly in respiratory and also in HIV, very, very strong performance. Very sustained growing share, accelerating as we came through the summer. Very strong coverage for next year. I think it continues to be very substantial potential for us going forward. Simon, do you want to talk to where the next 500 million could potentially, where it would distribute in terms of where the cost savings are going to come from? And just before you do that, I know you asked a couple of questions, James, which kind of try to get us to redefine some of the target to the guidance we gave back at the May capital markets Day in terms of 2020 long-term gone, just what to reiterate our position on that as a general point which is not our intention to update each of those guidance points quarter-by-quarter or even year-by-year actually. We give you all of that as a long-term shape evolution of the company. It's very clear that we are on our head of the expectations that we set for ourselves and some of the key goals that for example new products. We’ve made clear that that those would come forward, 6 billion gold come forward to at least 2018, who knows when we actually hit that number maybe sooner than that. That is - we're not really going to get into a lot more precise adjustment of those numbers. When you take as a shape, I would encourage you to look at the delivery and then as and when obviously, if you want to adjust your expectations for the 2020, you’re obviously welcome to do that. Again, it's that general comments, maybe Simon you could talk about the savings and then I will come back and talk about the question you had with relevant to MS appointment.

Sure. And I think James, as we’ve said before, in terms of the sequence, we always expected the SG&A and R&D savings would come before the SG&A and cost of goods savings if you like. So those are sort of the general trends and that is true of the last 500 million that we probably expect to see a heavier weight within cost of goods than the other two lines. I think in terms of the business mix, probably consumer and Pharma where you would see the greatest contribution, some still to come in vaccines although as you pointed out we have been ahead of that in terms of delivery and the margin performance makes that pretty clear. So that’s kind of the overall shape but more cost of goods benefit than the other two.

And in terms of your question about MRIN [ph], clearly next year we’ll layout for you how she sees strategies to take forward the company and she is doing all the work now to really take the time to do deep dives on various aspects of the business and particularly the parts of the business. She hasn’t personally run up until this point. And so you're going to have to wait to see what hurt U.S. I just want to come by analogy, just maybe make a point around why you should not necessarily make any assumption until Emma actually stands up and tells you what she wants to do. The last project I did for the company before I was appointed CEO was to do an analysis of whether or not we should keep the consumer business and my in going prejudice if I could put it that way was – maybe we shouldn’t keep the consumer business. By the time I had finished that project, I convinced myself and the company that we ought to, and we massively kept it and invested into that business into a phenomenal organization for the company, 16% margin, sales up this quarter 5%. Very substantial, global scale and a terrific innovator when you look at the power brands like Sensodyne or the new switches like Flonase and obviously the approval we had this quarter for Veramyst, all great stories around momentum. So just by analogy, you might have looked at me six months before I took over as CEO and predicted one thing and I did completely the opposite. And you know I would simply use that as a reminder that when somebody is appointed to be the CEO, they have a chance to really think about what they do with that organization and the take in ownership for they have the chance to set their strategy. You shouldn’t necessarily expect that what people have done in the past will be a precursor of what they do in the future in any particular way. Next question?

Thank you. Your next question comes from the line of Andrew Baum from Citi, please go ahead, you’re now live on the call.

Thank you. Three questions please. First, could you just outline GSK's commitment to oncology? Given the history of the asset as well, given the share competitive intensity of the segment, should we believe the epigenetic's IO are here to stay for good inside GSK? Second, could you just give us some additional color, Simon, on the tendering components around vaccines and how you anticipate it to play out over the next couple of quarters? And then finally, for China, and are you confident that we are now tossed here on the new base in terms of underlying outlook?

Thanks, Andrew. So I think on China the answer to that is yes. We had a little bit of benefit in this quarter of a system’s cut over. But fundamentally, we are back into the growth. We are seeing improvements across the refocus business and importantly, with the launch here of new products in hepatitis B the launch but also critically the Cervarix approval in the quarter. We can see a significant opportunity to put more energy behind that business in the next year or two. So I think the answer to that question is yes. We are committed to oncology, Andrew, and what does that mean? It means that we are absolutely focused on bringing through breakthrough medicines as you’ve written several times whether it be an epigenetic store in IL, we have some significant opportunities for first in class Meds. It’s a little early to say exactly what these medicines could be or can’t be but in the next 12 to 18 months we are going to know, that date is going to come in thick and fast during 17 and through to the middle of 18. And at that point, MO will be in the position of making the choices about how we then go forward. You're quite right of course. This is a very competitive space. There's the potential for combination strategies. You know we are already partnered with Merck and one or two of the combination exploratory trials. With Keytruda, we are very pleased to be working with them to explore potential of our meds alongside or possible meds alongside of Keytruda. But exactly how we then go forward is really depend on what happens to which products over the next 18 months. The number one driver is going to be how we maximize shareholder return from those assets. We took a decision about how we can maximize shareholder return on the older generation of assets. That deal I think did maximize shareholder return very substantially. And that we’ll make, ML will be in a position to make choices going forward but I would say all options are on the table but the default option must be to develop this business ourselves. And if I went back to 2006, 2007, we had no oncology business. Within four or five years, we built a built-in time business launch 7 products which we then sold to Novartis, but the fact is we built that presence very practically and I think there is no reason why we couldn’t do that again if that were the right thing to do with the portfolio of medicines that come along. But we will know what that portfolio really is for probably another year or so. Simon, do you want to comment on the tendering question?

Yes, Andrew, as we talked about for tenders, to create a lumpy profile inside the vaccine business many affecting the international piece of it which is why I called it out. But it is not material to the overall position we reported for the whole vaccines business. There's probably a $30 million to $40 million within the international region which is why we market so it's on that scale.

I think just on the back of that because if you what you digging at, Andrew, how real is the Q3 vaccine number versus it being somehow phased in or tendering. I think the reality is it's a very real number. It doesn’t mean that we are going to see the same sales number in every quarter because there is some fundamental seasonality in the vaccine business whether that be around the flu business particularly in the United States. There are some vaccines which are associated with back-to-school period that sort of thing. So, there is definitely lumpiness from a seasonality point of view and there's definitely a tendering which can affect us, and there also things like CDC stockpiles which can be positive or negative. Actually in this quarter that was a negative. So actually the number would have been even higher if we hadn’t had that situation. So you’ve got a lot of - there are things which drive lumpiness of the quarter. Now in this particular year, in quarter three, the reason why we got such a strong performance is really twofold. Absolutely fantastic Bexsero meningitis sales in particular and absolute execution of the goal we had which was to ship more flu vaccine earlier so that we could a) get higher share and achieve that at a better average price point than you get when you come late in the market. So that is a very deliberate effort to shift the flu business into Q3 and obviously going forward the challenge will be to do that every Q3. But that's why we’ve generated that, it's not just that the sales have come into a different quarter compared to historic patterns. They’ve come in higher volume and they’ve come in at higher average prices and that is very substantially permanent if I can put it that way rather than simply a timing phenomenon. It’s quite important to understand I think. It doesn’t mean you won’t see lumpiness but it's not that, it's not really the feature of why you've seen this very strong vaccine performance in the quarter. Next question?

Thank you. Your next question comes from the line of Kerry Holford from Exane BNP Paribas, please go ahead, you’re live on the call.

Thank you. Kerry Holford from Exane. Just two questions please. Firstly on the pipeline, I noticed that you’ve terminated the maturation inhibitor from Bristol-Myers and there is a negative back up with the better profile. Can you just give us some more detail on this? What stage is that backup and can you provide us with more detail as to why 795 was terminated, and why you think the backup will be superior? Do you still think you can be first to market with an oral maturation inhibitor? And just a concern, does that backup also originate for Bristol-Myers? And then just going to from your comment, Andrew, on your color, you referenced the time taken to get basis onto drug following efficient writing a script. Have you seen a decrease now? Is that moving in the right direction? How long does it typically take to get patients onto drug now? And any comments you like to make about competitive production at pace currently and into next year? Thank you.

Thanks very much, Kerry. So as far as the maturation inhibitor, you're quite right. We terminated 795, it’s really a tolerability issue, we didn’t feel it was good enough from that point of view. In fact, we have at least two more backups and they come from both Bristol-Myers and GSK labs actually. And I don’t think we are going to lose a lot of time. We obviously lose a bit of time here but not a lot of time. So I think we feel like the overall program is really still very much substantive as a number of opportunities in it and even at the time where we did the transaction with Bristol-Myers, while we didn’t know the tolerability profile of this lead asset, we were particularly intrigued by a couple of the backups. So even at the time of the transaction, we’ve been increasing our focus on the backups. As it turns out the leader from BMS wasn’t what we hoped it would be but the reality is I think the program remains very much intact. I don’t think the time liability is going to be very material and the backups come from both BMS and GSK which is good because that gives you a bit of diversity of chemistry and it gives us a bigger solution set to be able to come up with the right kind of product. As far as new color is concerned, we are seeing that timeline shortened but the reality is for anybody who is on these kind of biologics, it’s the timing to get through the reimbursement cycle and authorizations are challenging, and much longer than you would want them to be and personally I think it’s one of the areas really deserving of a focus for all the stakeholders to work together to streamline in the U.S. But we continue to focus on how to take a day out here and there. We are doing that. We're seeing that cycle time come down. We are seeing fantastic feedback from physicians and patients who are on the drug. And as I said earlier, our NBRx share is now up to 25% against our TRx position of 10%, so that shows you the climbing curve that we are doing. You can see that in the marketplace certainly as far as the products which are on the market today, new color is really a story in town. Clearly there is potential competition coming in a year or 18 months time. We will have to wait and see. We haven’t seen anything published there which makes us feel particularly anxious in terms of the profile for Nucala. There is a few true reasons in this particular target set, the higher the year as soon as they come to baseline, the higher the proportional drop. So if you do your trials in patients with high EO counts, you are going to get typically higher percentage drops. What we have seen with Nucala is a very strong performance even as you go into lower [indiscernible] and as you know we’ve done trials at 150, others have done trials at 300. And what we've also seen with Nucala is great consistency of performance. We’ve been and we have seen some new interesting data published during the quarter and you will see more very interesting data on Nucala published in the not-too-distant future. So this product is very much in a very active launch phase, it's going extremely well in terms of share acquisition and tracking very much, a little bit ahead actually of our expectation and we feel good for going into 2017. Good coverage and focus point is to try and make the patient experience a bit smoother in terms of accessing the product. Next question?

Thank you. Your next question comes from the line of Jo Walton from Credit Suisse, please go ahead, you’re live on the call.

Thank you. Jo Walton from Credit Suisse. It is with trepidation if I ask this question, but it's about U.S. pricing going forward and specifically you made a comment that plans were looking to keep the brand as much as possible post generic. I'm not sure that those of that follow French companies are seeing that is a widespread factor. So we just wonder if you could tell us a little bit more about how you think that could play out in the respiratory market and just generally do you think investors are too worried about all the rhetoric that we are hearing on the U.S. political scene? Do you think that could turn into action and if so what would be your best bet as to what may happen on U.S. pricing next year?

Thanks very much Jo. I didn’t actually say the plans we’re trying to do is keep the brand as much as possible. I said plans were more open-minded to looking at strategies to keep the brand. We are seeing that. I think a lot of this depends on, it's no secret to anybody, certainly not you Jo or anybody else on this call. But the net average Advair prices dropped significantly in the last three years and essentially we’ve absorbed 50% of the economic effect of generalization already notwithstanding the reduction in any volume market share. Now what that means is that our net prices are in the range of being able to have a sensible conversation around potential generic entrance. Now obviously all depends on what kind of generic marketplace evolves and when it evolves and how substitutable or how big the supply is, all those good questions which have been the subject of my earnings calls for nearly 10 years. Those things still exist. And the reality is I think against that backdrop, there are some significant merits for customers to think about some certainty and there are some significant merits to think about the overall portfolio that GSK has to offer versus the single debate about Advair versus a generic. And to contrast that to some other companies who’ve been very challenged in this space, you got to step back and say okay we're doing just over 200,000 prescriptions a week in America of Advair. We are already doing 100,000 plus a week of ELLIPTA based products. The dynamic of that whole conversation has really moved on to how do we work together on the new products. That is why we're seeing such terrific access being established across the border of the respiratory portfolio. And remember the triple therapy file is going in before Christmas and you know given the, that may well have shorter review cycle than 12 months. It puts us in a very interested position to do something competitive dynamic in the U.S. So we will see. But I think it's all to play for Jo is the way I would characterize it for us. And I think the fact that we’ve absorbed so much pain on pricing over the last three years actually puts us in a more interesting zone going into the generic cycle. Of course it would have an impact on us. Of course generics would lead to a reduction in sales and profitability from Advair. The question really is to what degree and that is very much determined by just exactly when, what the profile of the generic entry is, and that is not within my control to predict, I am afraid. As far as your more general question is concerned, I think it is important to be conscious of the dynamics around U.S. pricing and it's not just political dynamics although of course that is what drives a lot of headlines. There are tremendous market forces at work in terms of the way in which the U.S. market is changing, who is making the decisions, who is controlling the lives, that has changed dramatically. We've been talking about this on these calls for many, many years and it's what has driven a lot of our strategic thinking at GSK in terms of making sure our innovation can be differentiated and then importantly priced at a sensible level to maximize returns and I think we are showing that in the new products. I don’t know how many other companies that you cover can say that 25% of their sales come from products which have been launched in the last three or four years. And I think that is proof point of the returns argument that you can launch a reasonable price vis-à-vis the products and generate significant economic return. So it has driven that agenda and it has of course given our agenda of looking for high returning growth opportunities beyond simply the traditional U.S. pharmaceutical high price marketplace if I can characterize it that way which is way we’ve invested where it makes sense in the consumer business, the vaccine business, and elsewhere in the organization. And when we look at the returns that those three businesses offer over a ten-year period, they basically deliver very similar return rates. And that has been the strategy of the company to make sure that yes, we will continue to drive forward Pharma innovation. We got 20 to 30 new drugs to readout in the next two years and we will look to sensibly price those markets into the U.S. to get a decent return but we will take some of the pressure off that dynamic in the expectation that it gets a tougher world not an easy world by investing sensibly for similar return in the consumer and vaccine business. In terms of what to anticipate next year, do not know. I nobody knows, nobody knows what’s going to happen next year, Jo. I think next year, you'll simply see a further ratchet up of the behavior of the marketplace through the commercial payers and negotiators. I think that the idea that certain therapeutic areas are immune will be dismissed over the next two or three years. And I think that the - any kind of governmental interventions are probably more like a 2018, 2019 scenario. And I think at the very least what we should anticipate is more Part B type demonstration projects. So I think the intervention to limit Part B reimbursement is very telling of a potential pathway for how the U.S. might evolve. The good news of that is that they tend to be more kind of sniper type shots at the marketplace rather than big title changes, but the bad news is that they happen reasonably quickly. And I would anticipate more of that type of thing. Might there be a much broader political agenda? Maybe but unless show of that frankly, Jo. And I think there are plenty of reasons why you might conclude that isn’t the most likely outcome. I certainly think commercial marketplace dynamics are now moving into her much more broad-based scale and I think the possibility of government, CMS, and others choosing to implement other demonstration type projects as a way to try and change the market must be rising and not falling. Next question.

Thank you. Your next question comes from the line of Tim Anderson from Bernstein, please go ahead, you’re live on the call.

Thank you. A couple of pipeline questions. Going back to respiratory and the closed triple just thinking about market access in the U.S. when you launch Breo, you felt you had more pricing power than you ended up having that obviously hurt the product launch and I’m wondering what lessons from that experience might port over to the closed triple specifically. Are there some similarities there or do you think this is a totally different product, different set of circumstances? I know it's always a way but just wondering if investors should be bracing for another slow launch kind of matter what you do. And then second question is on Shingrix. Great efficacy but on safety and tolerability, there is something that standout so in the New England Journal article for example about 10% of patients had a great reinjection side reactions which is pretty high and higher react to the city. So for preventive product were patients aren’t really coming to the office or for active symptomatic disease, I'm wondering if that creates a commercial impediment or if there could be compliance issues with the second dose.

Great. Thanks very much Tim. As far as the triple's concerned, I don’t think Breo is a good analogy. I would actually look at what we’ve done since Breo. So Breo was you have to remember, Breo and Advair was a simultaneous event and as a very unusual dynamic. If you then look at our ability to get Anoro, Incruse, Nucala, all of these products covered very, very quickly. And in fact our ability to reverse the setbacks we had an Advair and Breo, I think you can see a very different success rate in terms of our managed market position. And I am pretty confident that, I do not want to hand them a gift too much of this point but in terms of one of those gifts where you have to constantly explain it. My guess is that tripled ought to be reasonably straightforward provided we go in with a pragmatic price proposition and that is what we have been doing since Breo. And the consequence of that is we’ve seen excellent coverage, rapidly achieved and then very rapid market share acquisition. So I think it should be fine. But it all revolves around – I mean literally walking the talk. I just talked for five minutes about how I see U.S. pricing and we have to be consistent with that and have pragmatic pricing positions for new products like triple. But I think that will work. As far as Shingrix is concerned, fabulous of efficacy as you rightly say. The injection site in the trial remembers the placebo was literally placebo so you're comparing something which is not active against an active, so the comparison in the trial isn’t really relevant. If you look at other products like Pneumovax, you see very similar sort of injection great reaction. I mean the reality is almost certainly that is a function of the adjuvant and driving the immune response. I think honestly Tim, if you sat down and you sit with somebody and say there is a response, an immunogenic response as all the people know it's coming, there is an immunogenic response, that the benefit of that high immunogenic response to much higher, in fact a doubling of your protection level, it's a bit like when I go for my flu shot, they say it's going to hurt a little bit, I still have it and I have it because I have prepared to tolerate that for the benefit it gets me. What we need to be very good with is making sure physicians understand what the experience is going to be like. I think the overwhelming positive news about this drug, phenomenal efficacy, phenomenal impact from potential future cases of post automatic neuralgia and also comes the efficacy side, I think that the issue of injection site reaction is a bit, in the trial, looks more overstated in the city because it was a true placebo. But I think it's entirely explainable and not unprecedented in vaccinology. Next question?

Thank you. Your next question comes from the line of Keyur Parekh from Goldman Sachs, please go ahead, you’re live on the call.

Good afternoon. I’ve got three please. First one, Andrew, there has been recent press about some UK government reaction to a white paper that happened to Glaxo and AstraZeneca in the ABPI had worked on towards kind of Brexit. Would be great to hear your thoughts on how you think that plays out for the industry. Secondly, last quarter, there was some question around intellectual property around [indiscernible] and whether the Gilead compound could potentially infringe that. Would love to hear your updated thoughts on that if you have any? And lastly and I realize, we will have another quarter to do this but just what do you think your biggest legacy to Glaxo will be, how we think about your time at Glaxo in five years time? Thank you.

Thanks, Key. I think I’m going to short-circuit the three. Nothing to add on IP or potential competition issues there. Way too early to think about legacy, I'm still thinking about making sure we deliver a great year end for the company. And in terms of the UK government position, I think first of all there is a very good dialogue going on between the industry and government. Of course, the overall strategic framework of the UK's exit from Europe is not clear or defined, so inevitably there is an absence of black and white decisions and clarity if I can put it that way. But I would say that the number one most important thing that has definitively been confirmed since June 23 is life sciences is one of the top three industrial sectors that Britain wants to swing behind. That is incredibly important. It's definitely creating the backdrop for a constructive engagement between industry and government not just on the short run but on long-term competitiveness that’s clearly very important for GSK. We are very actively involved in those conversations. But I think it is also fair to say and also reasonable for us to kind of sit back and say this is a big complex, big story around Brexit and therefore inevitable that things necessarily get nailed sector by sector as quickly as a people might like. Nothing to worry about I think from my perspective. I think we are in an early stage of a complex process. We are in a good position because we have been called out priority industry. I think the benefits that could bring in terms of continued commitment in science in Britain, continuation of things like the patent box, ensuring that this is an agenda where the UK government looks for ways in which you can legitimately help encourage innovation to take place and these are all very positive. So it's early days but nothing to worry about and I certainly would not be concerned about any observations in the media on this sort of thing. Next question?

Thank you. Your next question comes from the line of Steve Scala from Cowen, please go ahead, you’re live on the call.

Thank you. I have several questions. Andrew, apologies for asking a question you said you wouldn’t answer but regarding the expectation that new pharmaceuticals and vaccines are expected to reach 6 billion pounds in 2018. GSK is on track to exceed that in 2017. So given the fact that it's nearly upon us, what are your reservations in revising that number now? The second question is on vaccine. Merck strategy is to vaccinate as many people as possible before Shingrix is approved. GSK has said that only 7% to 8% percent of patients have been penetrated but if Prevnar is a good parallel, only about one third of patients will seek vaccination. So if GSK's ongoing study of Shingrix in people already vaccinated with zoster vaccine of new patient pool is indeed fairly limited. And then lastly what impact on a new color would GSK expect if Astra [indiscernible] is approved on a QA basis. Thank you.

Thanks very much, Steve. So in terms of the new products, we're clearly tracking very well. In terms of the performance and if you can draw your own lines, you take the 79% growth rate over 4.8 billion basin then you figure out what the decay rate of that growth projectile is and you can come to your own conclusion. It's more a general point that we, right now, I do not think it's necessary for us to update for you. I think kind of what is in the 10 is more important, what is on the label of the tin and the situation is absolutely clear fantastic momentum here. I think it's also important that frankly as we look at forward facing statements in 2017, 2018, 2019, that is largely for Emma to be very much the owner of as she takes of the business going forward. And so I think that as we go through this transition, there will be some things which we may all agree on Steve, but it is) into the person to say yes, I am ready to make that commitment on behalf of the company going forward. No question, though, that I am super pleased with this performance and I am going to reiterate having a quarter of your pharma business coming from new products most of which have been flicked property running too late 2020, that feels pretty good. In terms of zoster, you are quite so, a couple things really. Remember that Merck are only in a handful of countries because they have a live virus manufacturing process that always been significantly constrained to manufacturing volume. They’ve clearly prioritized some of the biggest markets like the U.S. but they are only in a handful of countries. We see Shingrix as being a global launch. We see this as you obviously know it's not a live virus, we're not inhibited by the same manufacturing constraints that live wire or manufacturer creates for you. So first of fall, this is going to be global, that massively increases marketplace compared to the Merck position. Secondly, yes of course, we're looking to prove that we can we vaccinate someone who is already been vaccinated. We owe it to them because if that vaccine only works 50% of the time, they have one in two change of not being protected. And so that is something we need to really demonstrate and I think from a public health point of view, if we are successful in that trial, I think that will have very material impacts on what public health authorities potentially choose to do. And I think it will also signal that – I am now 52, if somebody said to me I can a vaccine or even had a vaccine which was 50-50, but now there is one which is approved for revaccination, if we got that stage than I do not think I have too many doubts about going back to get it. So we're looking at the whole marketplace frankly, Steve. We're looking at the geography opportunity, we're looking at the patients who have not come through the door yet, who would love to come through and be protected, and we are also exploring whether or not there is legitimate basis on which to develop – or to develop the claim for revaccination. I think this is going to be a very significant product. I know Emma is super excited about it. I know that this is an area where it's obvious that there is a real blend of the best of pharmaceuticals, vaccine, and actually consumer healthcare skills and I think it’s going to be a fantastic opportunity for GSK and for Emma as she takes over and drives it over the next few years. Next question?

Thank you. Your next question comes from the line of Richard Parkes from Deutsche Bank. Please go ahead. You are live on the call.

Yeah, thanks for taking my questions. I've just got three questions if that’s okay. Firstly, just a simple one, I wonder if you could quantify the impacts from the stocking in China and phasing of tenders in the established products line? And then secondly, given the beat to consensus for customers in the third quarter and the fact that you haven’t raised guidance, looking at R&D you’ve increased spend in the third quarter, it looks like from your comments that you are really taking the opportunity to reinvest some of that better underlying performance. I’m wondering, is that the right interpretation? Are you ahead of where you expect it to be and how should we think about R&D spend versus margin development longer-term? And then third question, we are seeing Sandoz recently file a petition on questioning use of the low dose of Advair in bioequivalent trials. I'm just wondering how likely you think those delay generics I think both the current filers have used the lower dose in their phase three trials? Thanks.

Yeah, thanks very much Richard. So the stocking in China was 20 million in fact. And Simon, the tenders?

It’s about 30 million or 40 million overall.

Yeah, so not – I mean immaterial at the scheme of things. And to be honest with you, as you know, in our quarters, you are just as likely to have a one or two more of those – you can get them in a quarter, you don’t get them in the quarter. But I would say those are small. We really only call that the China one in particular because – I mean that’s Andrew Baum's first question, very, very positive about the beginnings of recovery growth in China. But we did not want to necessarily give the impression it was going even more quickly than it is because of that distortion. I think frankly if it wasn’t for that, we wouldn’t call it out because it's such an immaterial number. In terms of the – so in terms of where we are, we are ahead of where we expected. That’s why we’ve risen guidance – lifted guidance a couple of times during the year. We continue to trade very well. We are very confident we can come in within the range that we set for the rest of the year. Let's see what Q4 brings us. There are always degrees of volatility in the quarter. I am feeling very, very confident about where we stand today. But it's also true that we are incorporating into our short run and medium run expectations a gradual beginnings of investment in the – rising investment in the R&D business driven by the opportunity of the R&D portfolio. And as we look going forward, we start to see some of the big inhaled respiratory programs, which have consumed a lot of resources, some of the big Tanzeum programs, which have consumed a lot of resources historical coming to an end. We start to see the gradual ramp up of new product investment coming forward. And we're investing in that and it's beginning – you can see in this quarter, the one part of the P&L where we weren’t delivering leverages was R&D, we delivered leverage COGS, we delivered in S&G, we delivered everywhere except for in R&D and that’s reflective of the fact that the savings we are taking through normal restructuring are being immediately redeployed plus a bit more. And you should continue to expect to see how we invest intelligently in R&D. Now it's not that we are going – there is no target number, there is no target percentage of sales, but I think very much driven by the opportunity the pipeline gives us and as we look over the next two years, we've got between 20 and 30 potential to get behind. One of the things the company will focus on and we do it all the time anyway, but it becomes even more intense in the next two years is exactly how much weight do we put behind each product as it surfaces if we get multiple opportunities surfacing. So you are right to reflect that. Obviously, we're going to continue to try and deliver the best number we can for the year without shortchanging the future in any way whatsoever. So the R&D investment is all about making sure we have long-term foundations for sustained growth and sales delivery. But we're going to continue to look for every opportunity we can between now and the end of the year to deliver the best number we can. As of today, we are very confident around the guidance we’ve given you. Let's see how the next 2.5 months plays out to where we actually land. I cannot really comment on the Sandoz citizen petition, obviously, there’s nothing to do with us in the sense of we didn’t originate it, we don't – I have no idea what if any dialogue has gone on between that company and the FDA already. I would remind you that GSK filed its own citizen petition several years ago, which is still a pending citizen petition, so I cannot predict to you how long – how this might affect approval times. But I would remind you this isn’t the only citizen petition that is now at the FDA. And I think it just – the only conclusion I take from it is something I’ve been saying to you for nine years, it's complex. And FDA will have to make a choice in a complex generic space. Something like only 11% of contemporary generic applications get approved on first cycle review in the U.S. That includes the simplest generics imaginable all the way through to things like Advair. Advair is a very complex generic. Let's wait and see whether or not people can thread the needle early in that process or not, but what’s clear from the Sandoz piece is that there are at least other generic companies out there who want the FDA to address some aspects of this complexity more than have already been done. Who knows what that means? I think it simply reiterates the point we said repeatedly. There’s lots of moving parts to this. Our focus at GSK is on the things we can control, which is all about the new products. So we are focused on driving that 4.8 billion annualized new products number up. We will live with whatever comes on a generic Advair whenever it comes. I think restate the point we’ve made many, many times before, we don’t know, nobody knows and we will deal with it when it comes along. Next question?

Thank you. Your next question comes from the line of Nicholas Guyon from Morgan Stanley. Please go ahead. You are live on the call.

All right. Thank you very much for taking my questions. I have two, actually. The first one is on 2017 margins. So this year currencies will have the lot combined with the integration and material synergies in OTC and vaccines. While I suspect it ViiV also plays a major role in pharma margin improvement. How shall we think about margins for next year so 2017 directionally with further FX and synergy tailwinds but potentially Advair generics in H1 and thus comps for vaccines? I mean is there a scenario where you can improve margins as anticipated by the consensus despite Advair being genericized? And second, respiratory question, what do you expect from the soon-to-be published head-to-head trials that Novartis is running with Ultibro versus Anoro? Do see any particular upside or downside there? Thank you.

Thanks very much. So, Nicholas, a super elegant question, but I am going to not give you guidance for 2017 while we are still in 2016. So the only thing I would say is if and when there is a generic to Advair, obviously, Advair is a very profitable product, we don’t have very much commercial resource attached to Advair, we're focused on the future not on Advair, so if and when there is a generic to Advair, then the loss of Advair volume will be -- it's a high profitably product, so you have to be aware for that. I think it terms of – the only other piece I would say and I think you alluded to this in your question, is important to remember that all else equal, it’s highly likely we will retain a significant currency tailwind into and through much of next year if everything stays as it is today. There was no guarantee of that of course but it's hard to remember almost that the pound is at 1.50 as recently as June 22. And so for the first of next year, you're likely to see a very significant currency tailwind. But beyond that I'm not going to make any comment on margin again. I think all of those kind of comments are very much appropriate in 2017, not in 2016. They are driven enormously by the timings. So if a generic came earlier, it's one thing. If it came late, it's another. If it came never at all, then it's another. And those are all things which Emma and Simon will be in no doubt chatting to you about at different times during next year. No particular comment on the Novartis trial. I think it's for us to talk about our trials particularly before they are published – sorry, talk about our trials when they are published, not other peoples when they haven’t been published. Let’s wait and see. The only good news I will share with you on that front which is fantastic news is that GSK is now number one in the [indiscernible] global marketplace and given that we started second and we are now number one, it feels like that race is playing out well and we are continuing to see some very good progress and I think we will see in some global guidelines some evolution over the next few months, which will also potentially open up opportunity for us. Next question?

Thank you. Your next question comes from the line of Jeff Holford from Jefferies. Please go ahead. You are live on the call.

Hi. Thanks very much for taking my questions. I kind of look at a bit differently on Advair for 2017, maybe for Simon, if you could give any general thoughts about when you're going to give guidance on 2017? Can we just assume that you will be ignoring the potential of Advair generics in 2017 and we will just see when we come, we will try and bake that somehow into guidance of 2017, just interested in general thoughts on how you're going to deal with that? Secondly, maybe just a bit more comment on generally the company's appetite for M&A right now and the focus and the size if there is any interest? And then just last, Andrew, I kind of thinking from some of the comments you’ve made today, you’re playing down the potential risk of things like changes to LIS and dual eligible patient rebating over the next year or two, I wonder just might tell me if I'm correct about that and why you have that view? Thank you very much.

Thanks very much, Jeff. I think on things like dual eligible, the degree – so the point I'm trying to get across is I think the chance of that in the next year or two are low, I think as you get into the end of 2018 and 2019 it raises. So I think there is a – there is a timing dynamic around that. I think there are some other things, which could happen more quickly. And so I don’t think it's a zero risk at all. Jeff, I don’t think it's a 2017 risk and it's more a case of the pace and speed at which some of these various things might evolve. As you know, GSK has a low fraction of its business exposed in the Medicaid Medicare space compared to many and what we do have there is dominated by Advair, so slightly ironically, if there were to be a generic Advair, our risk to dual eligibles drops dramatically and – which is a kind of interesting upside to something you didn't want necessarily to happen. In terms of guidance for next year, Emma and I, we will sit down over the next few weeks also to start to think about how we [indiscernible] this, but rest assured, between the three of us, between Emma, Simon, myself, we will do everything we can to make sure that we give you as much help as appropriate so that you can understand what the true underlying growth of the company is and what the potential impact of generics might be. So we will definitely be discussing that with you. But obviously it's supercritical that that is owned and something that Emma feels good about and therefore we're not going – one of the reasons we are not going to rush anything out, because it would only be sensible to have that conversation once Emma has had her chance to really get the grips with the process she is going through now in terms of familiarity with parts of the business that she hasn’t necessarily run directly. So you're just going to have to bear with us a bit. We wouldn’t normally give you guidance until we were into the year; I think that’s a very safe assumption in this situation. The three of us will work together on it and at the right time, we will be describing to you, I am sure, both what the effect would be if there were no generic, but also give you some indication of what the impact of the generic would be. Next question?

Thank you. Your next question comes from the line of Seamus Fernandez from Leerink. Please go ahead.

Great. Thanks for the question. Andrew, I guess, given your views on the industry and near-term prospects particularly on pricing and access, just kind of wondering also as we enter a more biosimilar heavy environment as that accelerates, what are your thoughts on the prospects for mega cap M&A as we saw heading into the big sort of 2007 to 2012 cliff that the industry had the way into? Obviously you took a very different strategy than mega cap M&A, but others may have a different view and I’m just wondering how you feel GSK ultimately is positioned in the context of that environment? And then a separate but similar question, just interest in further consolidating OTC consumer, and just maybe giving us a better understanding of Novartis' ability to block a deal that GSK may want to do that could be a little bit costly in the near-term but could be significantly value-added long-term. Obviously we're seeing some challenges at some of your partners in that regard. Thank you.

Yeah, thanks very much, Seamus. I think – so I think from the kind of mega cap M&A dimension, I think the possibility of – the economic rationale for that type of thing must be rising if you believe the environment becomes more pressurized from a price perspective. But we are now – certainly when I started in this industry, I think there was 65 companies global drug companies, we're down to a reasonably small number. These are very big companies typically, but they are complex and we’ve obviously seen a variety of potential or putative transactions launched and then canceled in the last two or three years always for slightly different reasons, but nonetheless they’ve been tricky to get done. And I think that is an issue. I think complexity of the transaction when these businesses are so big and they have lots of overlapping pieces potentially and then the issue of do you really want to run a drug company with 250,000 employees in it. I think it's really an interesting question actually. These companies are very, very big. There are relatively few companies in the world with 250,000 employees. That’s not a completely trivial challenge to think about if what you want to drive is top line growth. So where do I come out and obviously when Emma takes over, she will develop her own view of this. But my own personal view is that from a GSK perspective, I think we are set pretty well to deal with the challenges which are coming. We’ve really and you know over the years, we haven’t always been a flavor of the month for this, but I think we are set well to anticipate a challenging price environment. We’ve invested in businesses, which have differential risk exposures, consumer vaccines, pharma, we’ve invested in different geographies and we're delivering now £27 billion, £30 billion, this quarter growing 8% growing healthy at the top and driving leverage. It does not make me super hungry to go rushing around and put all of that at risk frankly from a personal point of view. I think we are well-positioned and I think we can navigate this well. If we get a decent yield from the next generation of R&D that’s coming and if we can take the current 4.8 billion of new products to where they could be in 2020 or 2022, that portfolio feels like a tremendous price. Remember, after Advair, there is almost no intellectual property risks to portfolio, we have no biosimilar risk to that dynamic, we have no high priced oncology risk baked into our current number. All of those risks sit somewhere else. 0.1% of our business is in Medicaid Part Bin the U.S., so we have no exposure to type of thing. And as I said, post Advair, our exposure to dual eligibles drops dramatically. So when I look at the risks that could be coming toward the industry, a lot of them we’ve either engineered out of the company or by chance by luck or our portfolio doesn’t expose ourselves to those areas. That gives us I think the basis to feel pretty confident and robust around the future, which is why we gave you the 2020 shape of the company, which in itself predicted significant growth in sales and earnings even absorbing a full generization of Advair. And as we have made clear, on a number of occasions, we are tracking very, very well against that set of expectation that we laid out. So where I come out is for us personally, but I certainly don’t want to Emma’s freedom to maneuver at all, but for me personally, that would be my analysis. As far as consumer is concerned, clearly there are opportunities to consolidate in this space. Clearly in the current JV structure, it would need to be something that the co-owners would have to agree. But the relationship with Novartis in that consumer JV is extremely positive, extremely constructive and I think that if there were value creating opportunities for both firms, I know that both organizations would be behave rationally to ensure that both companies achieved the value they wanted. So yes, we are thoughtful about those sorts things, Seamus, as we do see the opportunities there, but having just done the Novartis transaction, we’re just now at the point where we are delivering the value from it. That’s going to be for another day and it's going to be for Emma to really give her thought as she takes over.

Thanks, Seamus. With that, I’m going to bring the call to a closure. I appreciate all of your questions today. The IR team at GSK is obviously at your disposal if you have more follow-up questions. For those of you who are limited your questions to only three, you can always come in and ask the other five. I very much appreciate it and look forward to seeing you all at different times in the future. Thanks very much.