Blueprint
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For
period ending 12 March
2019
GlaxoSmithKline plc
(Name
of registrant)
980 Great West Road, Brentford, Middlesex, TW8 9GS
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or
will
file annual reports under cover Form 20-F or Form 40-F
Form
20-F x Form 40-F
--
Indicate
by check mark whether the registrant by furnishing the
information
contained in this Form is also thereby furnishing the
information
to the Commission pursuant to Rule 12g3-2(b) under the
Securities
Exchange Act of 1934.
Yes
No x
GlaxoSmithKline
plc
(the 'Company')
Publication of 2018 Annual Report
The Company will today publish on its website www.annualreport.gsk.com the
Annual Report for the year ended 31 December 2018 (the '2018 Annual
Report').
A hard copy version of the following documents will be sent to
those shareholders who have elected to receive paper communications
on or about 2 April 2019:
-
2018 Annual Report
-
2018 Annual Summary (the '2018 Summary')
-
2019 Notice of Annual General Meeting
Shareholders who have not elected to receive paper communications
will be sent the 2018 Summary notifying them of the availability of
these documents on the Company's website.
In compliance with Listing Rule 9.6.1R of the UK Financial
Conduct Authority ('FCA'), the aforementioned documents will be
submitted to the UK Listing Authority and will be available for
public inspection at the National Storage Mechanism
(NSM) www.morningstar.co.uk/uk/NSM.
The information included in the unaudited preliminary results
announcement released on 6 February 2019, together with the
information in the Appendices to this announcement which is
extracted from the 2018 Annual Report, constitute the materials
required by the FCA's Disclosure Guidance and Transparency Rule
6.3.5R. This announcement is not a substitute for reading the 2018
Annual Report in full. Page and note references in the Appendices
below refer to page and note references in the 2018 Annual
Report.
V A Whyte
Company Secretary
12 March 2019
Cautionary statement regarding forward-looking
statements
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. Such factors
include, but are not limited to, those set out in Appendix A of
this announcement.
Brand names
Brand names appearing in italics throughout this announcement are
trademarks either owned by and/or licensed to GlaxoSmithKline or
associated companies.
APPENDIX A
Principal risks and uncertainties
The principal risks discussed below are the risks and uncertainties
relevant to our business, financial condition and results of
operations that may affect our performance and ability to achieve
our objectives. The risks below are those that we believe could
cause our actual results to differ materially from expected and
historical results. During 2018 we have evolved the cycle of
management of these risks which helps us Identify, manage and
report on our most important risks in a proportionate and
consistent way.
We must adapt to and comply with a broad range of laws and
regulations which apply to research and development, manufacturing,
testing, approval, distribution, sales and marketing of
Pharmaceutical, Vaccine and Consumer Healthcare products. These
affect not only the cost of product development but also the time
required to reach the market and the likelihood of doing so
successfully on a continuous basis.
Also, during 2018 we have improved consistency of risk management
across the organisation through evolution of our enterprise risk
management and reporting cycle.
As rules and regulations change, and governmental interpretation
evolves, the nature of a particular risk may change. Changes to
certain regulatory regimes may be substantial. Any change in, and
any failure to comply with, applicable law and regulations could
materially and adversely affect our financial results.
Similarly, our global business exposes us to litigation and
government investigations, including but not limited to product
liability litigation, patent and antitrust litigation and sales and
marketing litigation. Litigation and government investigations,
including related provisions we may make for unfavourable outcomes
and increases in related costs such as insurance premiums, could
materially and adversely affect our financial results.
More detail on the status and various uncertainties involved in our
significant unresolved disputes and potential litigation is set out
in Note 45, 'Legal proceedings,' on pages 215 to 218.
UK regulations require a discussion of the mitigating activities a
company takes to address principal risks and uncertainties. A
summary of the activities that the Group takes to manage each of
our principal risks accompanies the description of each principal
risk below. The principal risks and uncertainties are not listed in
order of significance.
Patient safety
Risk definition
Failure to appropriately collect, review, follow up, or report
human safety information (HSI), including adverse events from all
potential sources, and to act on any relevant findings in a timely
manner.
Risk impact
The risk impact has the potential to compromise our ability to
conduct robust safety signal detection and interpretation and to
ensure that appropriate decisions are taken with respect to the
risk/ benefit profile of our products, including the completeness
and accuracy of product labels and the pursuit of additional
studies/ analyses, as appropriate. This could lead to potential
harm to patients, reputational damage, product liability claims or
other litigation, governmental investigation, regulatory action
such as fines, penalties or loss of product
authorisation.
Context
Pre-clinical and clinical trials are conducted during the
development of investigational Pharmaceutical, Vaccine and Consumer
Healthcare products to determine the safety and efficacy of the
products for use by humans. Notwithstanding the efforts we make to
determine the safety of our products through appropriate
pre-clinical and clinical trials, unanticipated side effects may
become evident only when products are widely introduced into the
marketplace. Questions about the safety of our products may be
raised not only by our ongoing safety surveillance and
post-marketing studies but also by governmental agencies and third
parties that may analyse publicly available clinical trial results.
Constant vigilance and flexibility is required in order to respond
to a varied regulatory environment which continues to evolve and
diverge globally.
The Group is currently a defendant in a number of product liability
lawsuits, including class actions, that involve significant claims
for damages related to our products. Litigation, particularly in
the US, is inherently unpredictable. Class actions that seek to
sweep together all persons who take our products increase the
potential liability. Claims for pain and suffering and punitive
damages are frequently asserted in product liability actions and,
if allowed, can represent potentially open-ended exposure and thus,
could materially and adversely affect the Group's financial
results.
Mitigating activities
The Chief Medical Officer (CMO), who is also the Medical Officer
for Pharmaceuticals, is responsible for
medical governance under a global policy. Under that policy,
safeguarding human subjects in our clinical
trials and patients who take our products is of paramount
importance, and the CMO has the authoritative
role for evaluating and addressing matters of human
safety.
Individual Medical Officers within the Pharmaceutical, Vaccines and
Consumer Healthcare businesses and
our substantial Safety and Pharmacovigilance organisation keep
track of any adverse issues reported
for our products during the course of clinical studies. Once a
Group product is approved for marketing,
we have an extensive post-marketing surveillance and signal
detection system. Information on
possible side effects of products is received from several sources
including unsolicited reports from healthcare
professionals (HCPs) and patients, regulatory authorities, medical
and scientific literature, traditional
media and social media. It is our policy that employees are
required to report immediately any
issues relating to the safety or quality of our products. Each of
our country managers is responsible for
monitoring, exception tracking and training that helps assure the
collection of safety information and reporting
the information to the relevant central safety department, in
accordance with policy and legal requirements.
Information that changes the risk/benefit profile of one of our
products will result in certain actions to characterise,
communicate and minimise the risk. Proposed actions are discussed
with regulatory authorities
and can include modifying the prescribing information,
communications to physicians and other
healthcare providers, restrictions on product
prescribing/availability to help assure safe use, and
sometimes carrying out further
clinical trials. In certain cases, it may be appropriate to stop
clinical trials or
to withdraw the medicine from the market.
Our Global Safety Board (GSB), comprising senior physicians and
representatives of supporting functions,
is an integral component of the system. The GSB (including
subsidiary boards dedicated to Consumer
Healthcare products and Vaccines) reviews the safety of
investigational and our marketed
products and has the authority to stop a clinical trial if
continued conduct of such trial is not ethically or
scientifically
justified in light of information that has emerged since the start
of the trial.
In addition to the medical governance framework as described above,
we use several mechanisms to foster
the early evaluation, mitigation and resolution of disputes as they
arise, and of potential claims even
before they occur. The goal of the programmes is to create a
culture of early identification and evaluation
of risks and claims (actual or potential) that remains strong
through organisational andregulatory change, in order to minimise
liability and litigation.
Product quality
Risk definition
Failure to comply with current Good Manufacturing Practices (cGMP)
or inadequate controls and governance
of quality in the supply chain covering supplier standards,
manufacturing and distribution of
products.
Risk impact
A failure to ensure product quality could have far reaching
implications in terms of patient and consumer safety
resulting in product launch delays, supply interruptions and
product recalls. This would have the potential
to do damage to our reputation, as well as result in other
regulatory, legal and financial consequences.
Context
Patients, consumers and HCPs trust the quality of our products.
Product quality may be influenced by many factors including product
and process understanding, consistency of manufacturing
components, compliance
with GMP, accuracy of labelling, reliability of the external supply
chain, and the embodiment of
an overarching quality culture. The internal and external
environment continues to evolve as new products
and new legislation are introduced. Critically, we are addressing
the impact of Brexit on our supply
chain management and quality oversight between the UK and the EU
and are developing and deploying
appropriate contingency plans to avoid interruption of supply to
patients.
Mitigating activities
An extensive global network of quality and compliance professionals
is aligned with each business unit to
provide oversight and assist with the delivery of quality
performance and operational compliance, from
site level to senior management level. Management oversight of
those activities is accomplished through
a hierarchy of Quality Councils and through an independent Chief
Product Quality Officer and Global Product Quality
Office.
We have developed and implemented a single Quality Management
System that defines the quality standards
and systems for our businesses associated with Pharmaceuticals,
Vaccines and Consumer Healthcare products and clinical
trial materials. This system has a broad scope and is
applicable throughout
the product lifecycle from R&D to mature commercial
supply.
There is no single external quality standard or system that governs
the detailed global regulatory expectations
for the quality of medicinal products. Requirements are often
complex and fragmented across
national and regional boundaries. We have therefore adopted the
internationally recognised principles from the 'ICH Q10:
Pharmaceutical Quality Systems' framework as the basis for the
GSK Quality
Management System.
This is an industry standard which incorporates quality concepts
throughout the product lifecycle. The GSK
Quality Management System is augmented by a consolidation of the
numerous regulatory requirements
defined by markets across the world, which assures that it meets
external expectations for
product quality in the markets supplied. The Quality Management
System is routinely updated to ensure
that it keeps pace with the evolving external regulatory
environment and with new scientific understanding of our products and
processes. As part of our drive to continually improve the
operational deployment
of our Quality Management System, we are making our policies and
procedures simpler to understand
and implement, as well as adopting innovative tools to give a more
user-friendly experience.
We provide the Corporate Executive Team & Risk Oversight and
Compliance Council with an integrated assessment
of Regulated Quality (GxP) performance. The defined key performance
indicators cover manufacturing
practice, clinical practice, pharmacovigilance practice, regulatory
practice, drug safety assessment,
and animal welfare.
We have implemented a risk-based approach to assessing and managing
third party suppliers that provide materials which are used
in finished products. Contract manufacturers making our products
are expected
to comply with GSK standards and are regularly audited to provide
assurance that standardsare met.
All staff members are regularly trained to ensure that cGMP
standards and behaviours based on our values
and expectations are followed. Additionally, advocacy and
communication programmes are routinely deployed to ensure
consistent messages are conveyed across the organisation, whether
they originate
from changes in regulation, learnings from inspections, or
regulatory submissions. There is a continued
emphasis on the value of quality performance metrics to facilitate
improvement and foster a culture
of 'right first time'.
Financial controls and reporting
Risk definition
Failure to comply with current tax laws or incurring significant
losses due to treasury activities; failure to report accurate
financial information in compliance with accounting standards and
applicable legislation.
Risk impact
Non-compliance with existing or new financial reporting and
disclosure requirements, or changes to the recognition of income
and expenses, could expose us to litigation and regulatory action
and could materially and adversely affect our financial results.
Changes in tax laws or in their application with respect to matters
such as transfer pricing, foreign dividends, controlled companies,
R&D tax credits, taxation of intellectual property or a
restriction in tax relief allowed on the interest on debt funding,
could impact our effective tax rate. Significant losses may arise
from inconsistent application of treasury policies, transactional
or settlement errors, or counterparty defaults.
Any changes in the substance or application of the governing tax
laws, failure to comply with such tax laws or significant losses
due to treasury activities could materially and adversely affect
our financial results.
Context
The Group is required by the laws of various jurisdictions to
disclose publicly its financial results and events
that could materially affect the financial results of the Group.
Regulators routinely review the financial
statements of listed companies for compliance with new, revised or
existing accounting and regulatory
requirements. The Group believes that it complies with the
appropriate regulatory requirements
concerning our financial statements and disclosure of material
information including any transactions
relating to business restructuring such as acquisitions and
divestitures. However, should we
be subject to an investigation into potential non-compliance with
accounting and disclosure requirements,
this may lead to restatements of previously reported results and
significant penalties.
Our Treasury group deals in high value transactions, mostly foreign
exchange and cash management transactions,
on a daily basis. These transactions involve market volatility and
counterparty risk.
The Group's effective tax rate reflects rates of tax in the
jurisdictions in which the Group operates that are
both higher and lower than the UK rate and takes into account
regimes that encourage innovation and
investment in science by providing tax incentives which, if
changed, could affect the Group's tax rate.
In addition, the worldwide nature of our operations means that our
intellectual property, R&D and manufacturing
operations are centered in a number of key locations. A consequence
of this is that our cross-border
supply routes, necessary to ensure supplies of medicines into
numerous end markets, can
be complex and result in conflicting claims from tax authorities as
to the profits to be taxed in
individual countries. Tax legislation itself is also complex and
differs across the countries in which we operate. As such, tax risk can
also arise due to differences in the interpretation of such
legislation. The tax
charge included in our financial statements is our best estimate of
tax liability pending audits by tax authorities.
We expect there to be continued focus on tax reform in 2019 and
future years driven by initiatives of the
Organisation for Economic Cooperation & Development to address
the taxation of the digital economy
and European Commission initiatives including the use of fiscal
state aid investigations. Together
with domestic initiatives around the world, these may result in
significant changes to established
tax principles and an increase in tax authority disputes. These,
regardless of their merit or outcomes, can be costly, divert
management attention and may adversely impact our reputation
and relationship
with key stakeholders.
Mitigating activities
Financial results are reviewed and approved by regional management
and then reviewed with the Financial Controller and the
Chief Financial Officer (CFO). This allows our Financial Controller
and our CFO
to assess the evolution of the business over time, and to evaluate
performance to plan. Significant judgments
are reviewed and confirmed by senior management. Business
re-organisations and newly acquired
activities are integrated into risk assessments and appropriate
controls and reviews are applied.
Counterparty exposure is subject to defined limits approved by the
Board for both credit rating and individual counterparties.
Oversight of Treasury's role in managing counterparty risk in line
with agreed policy
is performed by a Corporate Compliance Officer, who operates
independently of Treasury. Further
details on mitigation of Treasury risks can be found on pages 198
to 200, Note 42, 'Financial instruments
and related disclosures'.
We maintain a control environment designed to identify material
errors in financial reporting and disclosure.
The design and operating effectiveness of key financial reporting
controls are regularly tested by management and via
Independent Business Monitoring. This provides us with the
assurance that
controls over key financial reporting and disclosure processes have
operated effectively. A minimum
standard control set has been implemented, whereby all Finance
activities, are required to apply
and ensure they are monitored. Our Global Finance Risk Management
and Controls Centre of Excellence
provides extra support to large Group organisations undergoing
transformation such as system
deployment or significant business and finance transformations. We
have also added operational resources to ensure
processes and controls are maintained during business
transformation, the upgrade of our financial systems and processes.
Additional risk mitigation has been introduced
by amending
the programme timelines of system upgrades to optimise
delivery.
The Disclosure Committee reporting to the Board, reviews the
Group's quarterly results and Annual Report
and determines throughout the year, in consultation with its legal
advisors, whether it is necessary
to disclose publicly information about the Group through Stock
Exchange announcements. The
Treasury Management Group meets on a regular basis to seek to
ensure that liquidity, interest rate,
counterparty, foreign currency transaction and foreign currency
translation risks are all managed in
line with the conservative approach as detailed in the associated
risk strategies and policies which have
been adopted by the Board.
Tax risk is managed through robust internal policies, processes,
training and compliance programmes to
ensure we have alignment across our business and meet our tax
obligations. We seek to maintain open,
positive relationships with governments and tax authorities
worldwide and we welcome
constructive debate on taxation policy. We monitor government
debate on tax policy in our key jurisdictions
to deal proactively with any potential future changes in tax law.
We engage advisors and legal counsel to confirm the
implications for our business of tax legislation such as the
recently enacted US
Tax Cuts and Jobs Act. Where appropriate, we are active in
providing relevant business input to tax policy
makers. Significant decisions are submitted for consideration to
the Tax Governance Board which meets
quarterly and comprises senior personnel from across GSK's Finance
division.
Our tax affairs are managed on a global basis through a
co-ordinated team of tax professionals led by the Global Head of Tax who works
closely with the business. Our tax professionals are suitably
qualified for
the roles they perform, and we support their training needs in
order that they continue to be able to provide
up to date technical advice. We submit tax returns according to
statutory time limits and engage with
tax authorities to seek to ensure our tax affairs are current,
entering arrangements such as Continuous
Audit Programmes and Advance Pricing Agreements where appropriate.
These agreements provide long-term
certainty for both tax authorities and for us over the tax
treatment of our business.
In exceptional cases where matters cannot be settled by agreement
with tax authorities, we may
have to resolve disputes through formal appeals or other
proceedings.
We keep up-to-date with the latest developments in financial
reporting requirements by working with our
external auditors and legal advisors.
Anti-bribery and corruption (ABAC)
Risk definition
Failure of GSK employees, consultants and third parties to comply
with our Anti-bribery & corruption (ABAC)
principles and standards, as well as with all applicable
legislation.
Risk impact
Failure to mitigate this risk could expose the Group and associated
persons to governmental investigation, regulatory action, and civil
and criminal liability and may compromise the Group's ability to
supply its products under certain government contracts. In addition
to legal and financial penalties, a failure to prevent bribery
through complying with ABAC legislation and regulations could have
substantial implications for the reputation of the company, the
credibility of senior leaders, and an erosion of investor
confidence in our governance and risk management.
Context
We are exposed to bribery and corruption risk through our global
business operations. In some markets, the
government structure and the rule of law are less developed, and
this has a bearing on our bribery and
corruption risk exposure. In addition to the global nature of our
business, the healthcare sector by its
very nature maintains relationships with government bodies, is
highly competitive and subject to regulation.
This increases the instances where we are exposed to bribery and
corruption risk.
The Group has been subject to a number of ABAC inquiries. We
reached a resolution with the US authorities
in 2016 regarding their ABAC inquiry, following which we were
subject to a self-monitoring arrangement. The self-monitorship
concluded in September 2018. Government investigations
regarding our
China and other business operations are ongoing. These
investigations are discussed further in Note
45, 'Legal proceedings'.
Mitigating activities
Programme governance is provided through Enterprise Risk Management
overseen by the ABAC Governance Board which includes
representation from key functional areas and the business. We
have a
dedicated ABAC team responsible for the implementation and
evolution of the programme in response to
developments in the internal and external environment. This is
complemented with independent oversight
and assurance undertaken by the Audit & Assurance and
Independent Business Monitoring teams.
We have an enterprise-wide ABAC programme designed to ensure
compliance with our ABAC policies and
mitigate the risk of bribery and corruption. It builds on our
business standards, values and expectations
to form a comprehensive and practical approach to compliance and is
flexible to the evolving
nature of our business.
Our Code of Conduct, values and expectations, and commitment to
zero tolerance are integral to how we mitigate this risk. In light
of the complexity and geographic breadth of this risk, we
constantly evolve our
oversight of activities and data, reinforce to our workforce clear
expectations regarding acceptable behaviours,
and maintain regular communications between the centre and local
markets.
Our ABAC programme is built on best in class principles and is
subject to ongoing review and development.
It provides us with the basis from which we seek to manage the risk
from top down and bottom
up. For example, the programme comprises top-level commitment from
the Board of Directors and
leadership, a global risk assessment and key risk indicators to
enable targeted intervention and risk
management activities. The programme is underpinned by a global
ABAC policy and written standards
that address commercial and other practices that give rise to ABAC
risk and ongoing communications.
We provide mandatory periodic ABAC training to our staff and
relevant third parties
in accordance with their roles, responsibilities and the risks they
face. In addition, the programme mandates
enhanced controls over interactions with government officials and
during business development
transactions.
We continually benchmark our ABAC programme against other large
multinational companies and use external
expertise and internal insights to drive improvements in the
programme.
Commercial practices
Risk definition
Failure to engage in commercial activities that are consistent with
the letter and spirit of the law, industry,or the Group's
requirements relating to marketing and communications about our
medicines and associated
therapeutic areas; appropriate interactions with healthcare
professionals (HCPs) and patients;
and legitimate and transparent transfer of value.
Risk impact
Failure to manage risks related to commercial practices could
materially and adversely affect our ability to
grow a diversified global business and deliver more products of
value for patients and consumers.Failure to comply with applicable
laws, rules and regulations may result in governmental
investigation,regulatory action and legal proceedings brought
against the Group by governmental and private plaintiffs
which could result in government sanctions, and criminal and/or
financial penalties. Failure to provide
accurate and complete information related to our products may
result in incomplete awareness of
the risk/benefit profile of our products and possibly suboptimal
treatment of patients and consumers.
Any practices that are found to be misaligned with our values could
also result in reputational harm and dilute
trust established with external stakeholders.
Context
We operate on a global basis in an industry that is both highly
competitive and highly regulated. Our competitors
may make significant product innovations and technical advances and
may intensify price competition. In light of this
competitive environment, continued development of commercially
viable new products and the development of additional uses for
existing products that reflect insights which
help ensure
those products address the needs of patients/consumers, HCPs, and
payers are critical to achieve
our strategic objectives.
As other pharmaceutical, vaccine and consumer companies, we face
downward price pressure in major markets,
declining emerging market growth, and negative foreign exchange
impact.
Developing new Pharmaceutical, Vaccine and Consumer Healthcare
products is a costly, lengthy and an
uncertain process. A product candidate may fail at any stage,
including after significant economic and human resources have been
invested. Our competitors' products or pricing strategies, or any
failure on
our part to develop commercially successful products, or to develop
additional uses for existing products,
could materially and adversely affect our ability to achieve our
strategic objectives.
We are committed to the ethical and responsible commercialisation
of our products to support our mission to improve the quality of
human life by enabling people to do more, feel better, and live
longer.To accomplish this mission, we engage the healthcare
community in various ways to provide important information
about our medicines. Promotion of approved products seeks to ensure
that HCPs globally have
access to information they need, that patients and consumers have
access to the information and products
they need and that products are prescribed, recommended or used in
a manner that provides the
maximum healthcare benefit to patients and consumers. We are
committed to communicating information
related to our approved products in a responsible, legal and
ethical manner.
Mitigating activities
Our strategic objectives are designed to ensure we achieve our
mission of helping people do more, feel better
and live longer. We continue to strive for new product launches
that are competitive and resourced effectively. We also
strive to have a healthy proportion of the Group's sales ratio
attributable to
new product or innovation sales.
This innovation helps us defray the effect, for example, of
downward price pressure in major markets, declining
emerging market growth and negative foreign exchange impact.
Establishing new products that
are priced to balance expectations of patients and consumers, HCPs,
payers, shareholders, and the
community enables us to maintain a strong global business and
remain relevant to the needs of patients
and consumers. Our values and behaviours provide a guide for how we
lead and make decisions.
We constantly strive to do the right thing and deliver quality
products and ensure supply is sustained to meet customer needs
and demand requirements, seeking to ensure our actions reflect
our values,
behaviours and the mission of our company.
We have taken action to enhance and improve standards and
procedures for customer and consumer engagement utilising the
application of data analytics and e-commerce channels. We have
policies and standards
governing commercial activities undertaken by us or on our behalf.
Training has been implemented
to support the evolution of our activities to all relevant
employees. All of these activities we
conduct worldwide must conform to high ethical, regulatory, and
industry standards. Where local standards
differ from global standards, the more stringent of the two
applies. We have harmonised policies
and procedures to guide above-country commercial practice processes
as well as clarified applicable
standards for operations in the various markets in which we
operate. Each business has adopted
the Internal Control Framework to support the assessment and
management of its risks. Commercial
practices activities have appropriate monitoring programmes and
oversight from both business
unit Risk Management and Compliance Boards and Country Executive
Boards that manage risks across in-country business
activities. Where in the past we have fallen below our own or any
other regulatory
or industry standards, we have sought to improve both the framework
and culture for our compliance processes.
All promotional materials and activities must be reviewed and
approved according to our policies and standards,
and conducted in accordance with local laws and regulations, to
seek to ensure that these materials and activities fairly
represent the products or services of the Group. When necessary,
we have
disciplined (up to and including termination) employees who have
engaged in misconduct and have broadened our ability to
claw back remuneration from senior management in the event
of misconduct.
We have eliminated rewards based on individual sales or market
share of prescription products for sales
professionals and their managers who interact with HCPs in favour
of rewards based on the quality
of the individuals' interactions with HCPs.
In October 2018, we announced changes that allow fair market value
payments to be made by GSK to expert
practitioners to speak about our innovative medicines and vaccines
in a limited number of countries
during a restricted time period in a product's lifecycle. New
controls and training have been implemented to support these
changes while ensuring appropriate oversight and assurance across
the markets.
Under the new policy, we will expand our reporting of payments to
individual HCPs as part of our
commitment to transparency and responsible
disclosure.
Privacy
Risk definition
The failure to collect, secure, use and destroy personal
information (PI) in accordance with applicable data
privacy laws.
Risk impact
Non-compliance can lead to harm to individuals (e.g. financial
loss, distress, prejudice) and GSK (e.g. fines, management time,
operational inefficiency, out of pocket costs, and reputational
damage). It can also
damage trust between GSK and individuals, communities, business
partners and government authorities.
The General Data Protection Regulation (GDPR) increased the
enforcement powers of EU supervisory authorities,
including by allowing them to impose fines of up to 4% of global
revenue, and to require the suspension
of processing PI in certain circumstances. GDPR also gives
individuals the right to bring collective
legal actions against GSK for failure to comply with data privacy
laws.
Context
Data Privacy laws are diverse, with limited harmonisation, despite
Europe's adoption of GDPR. In many countries
in which GSK operates, local data privacy laws govern how GSK can
collect and use PI. It is challenging
for multi-nationals to standardise their approach to compliance
with data privacy laws due to
the high-level of local variation. Governments are enforcing
compliance with data privacy laws more rigorously.
There is an increasing focus on the ethical use of PI, over and
above compliance with data privacy
laws, and individuals are increasingly aware of their rights under
data privacy laws.
Mitigating activities
The Chief Compliance Officer is also the chairperson of the Privacy
Governance Board (PGB), which oversees
GSK's overall data privacy programme. Each business and function
has appointed a Risk Owner
who is accountable for the oversight of privacy risks associated
with that business or functional area.
They are supported by Privacy Leaders within their business or
function. Additionally, in some countries data privacy laws
require a Data Protection Officer (DPO) to be appointed. GSK has
appointed a
single DPO for the European Union, who is represented and supported
in specific countries by Country
Privacy Advisors. The Chief Compliance Officer is the Enterprise
Risk Owner (ERO). The ERO has
appointed a delegate risk owner, the Global Privacy Officer (GPO)
who has accountability on a day-to-day
basis for designing and implementing the control framework. The GPO
co-leads the cross functional
Privacy Centre of Excellence (CoE), together with the Global
Privacy Counsel. They are supported
by Privacy Officers and Privacy Counsel for each Region and
multiple Country Privacy Advisors
(who are familiar with local privacy
regulations).
GSK has emphasised the importance of data privacy from an internal
risk management perspective by separating
Privacy as a new, standalone Enterprise Risk from the Information
Security Enterprise Risk.It has created a Privacy Centre of
Excellence in Global Ethics and Compliance, which has overseen:
(i) the
implementation of a control framework; (ii)remediation of certain
existing business activities to ensure
compliance with GDPR (including adopting privacy controls e.g.
privacy contract terms, written records
of processing activities, data protection impact assessments) and
(iii) a comprehensive training programme
to drive greater awareness and accountability for managing PI
across the entire organisation. Key roles of the privacy network at
GSK will be certified with an accredited
international privacy
association.
Through monitoring, we continuously improve our processes, such as
issue identification, reporting and handling
capabilities. We are developing a process to detect and assess new
privacy regulations to proactively
prepare and mitigate regulatory risk to GSK.
Research practices
Risk definition
Failure to adequately conduct ethical and sound preclinical and
clinical research. In addition, failure to engage
in scientific activities that are consistent with the letter and
spirit of the law, industry, or the Group's
requirements, and failure to secure adequate patent protection for
GSK's products.
Risk impact
The impacts of the risk include harm to human subjects,
reputational damage, failure to obtain the necessary regulatory approvals
for our products, governmental investigation, legal proceedings
brought against
the Group by governmental and private plaintiffs (product liability
suits and claims for damages),loss of revenue due to inadequate
patent protection or inability to supply GSK products, and
regulatory action
such as fines, penalties, or loss of product authorisation. Any of
these consequences could materially
and adversely affect our financial results and cause loss of trust
from our customers and patients.
Context
Research relating to animals can raise ethical concerns. While we
attempt to address this proactively,
animal studies remain a vital part of our research. In many cases,
they are the only method that can be used
to investigate the effects of a potential new medicine in a living
body before it is studied in humans. Animal research can provide
critical information about the causes of diseases and how they
develop. Nonetheless, we are continually seeking ways in which we
can minimise our use of animals in research, whilst complying with
regulatory requirements.
Clinical trials in healthy volunteers and patients are used to
assess and demonstrate an investigational product's
efficacy and safety or further evaluate the product once it has
been approved for marketing. We also work with human biological
samples. These samples are fundamental to the discovery,
development and safety monitoring of our
products.
The integrity of our data is essential to success in all stages of
the research data lifecycle: design, generation, recording and
management, analysis, reporting, storage and retrieval. Our
research data is governed
by legislation and regulatory requirements. Research data and
supporting documents are core
components at various stages of pipeline progression
decision-making and form the content of regulatory
submissions, publications and patent filings. Poor data integrity
can compromise our research
efforts and negatively impact company reputation.
There are innate complexities and interdependencies required for
regulatory filings, particularly given our
global research and development footprint. Continually changing and
increasingly stringent submission
requirements continue to increase the complexity of worldwide
product registration.
Scientific engagement (SE), defined as the interaction and exchange
of information between GSK and external
communities to advance scientific and medical understanding,
including the appropriate development and use of our
products, is an essential part of scientific discourse. Such
non-promotional engagement
with external stakeholder groups is vital to GSK's mission and
necessary for scientific and medical
advance. SE activities are essential but present legal, regulatory,
and reputational risk if the sharing
of data, invited media coverage or payments to HCPs have, or are
perceived to have, promotional intent.
A wide variety of biological materials are used by GSK in
discovery, research and development phases. Through the Convention
on Biological Diversity (CBD) and the Nagoya Protocol, the
international community has established a global framework
regulating access to, and use of, genetic resources
of non-human
origin in Research and Development (R&D). We support the
principles of access and benefit
sharing to genetic resources as outlined in the CBD and the Nagoya
Protocol, recognising the importance
of appropriate, effective and proportionate implementation measures
at national and regional
levels.
Patent rights play an important role in providing GSK with a
competitive advantage in the market. Any loss of patent protection in a
market for GSK's products developed through our R&D, including
reducing the
availability or scope of patent rights, could materially and
adversely affect our financial results in that
market. Absence of adequate patent or data exclusivity protection,
which could lead to, for example, competition from manufacturers of
generic pharmaceutical products, could limit the opportunity to
rely on
such markets for future sales growth for our products, which could
also materially and adversely impact
our financial results. Following expiration of certain intellectual
property rights, a generic manufacturer
may lawfully produce a generic version of a product. Introduction
of generic products typically
leads to a rapid and dramatic loss of sales and reduces our
revenues and margins for our proprietary
products.
Mitigating activities
We have an established Office of Animal Welfare, Ethics and
Strategy (OAWES), led by the Chief of Animal
Welfare, Ethics and Strategy, that ensures the humane and
responsible care of animals and the
knowledge and application of non-animal alternatives. The OAWES
provides a framework of
animal welfare governance, promotesapplication of 3Rs (replacement,
refinement and reduction of animals
in research), conducts quality assessments and develops and deploys
strategies on animal model
reproducibility and translatability.
The Chief Medical Officer oversees the following enterprise Medical
Governance Boards:
-
The Human Subject
Research Board is in place to provide oversight for the human
subject research sponsored and supported by us to ensure it
conforms to ethical, medical and scientific standards
-
The Data Disclosure
Board provides oversight for disclosure of our sponsored and
supported human subject research. We make information available on
our clinical studies, including summaries of the results - whether
positive or negative. We were the first company to publish clinical
study reports that form the basis of submissions to regulatory
agencies and we have publicly posted more than 2,400 clinical study
reports in addition to more than 6,400 study result
summaries
-
Specific accountability
and authorisation for SE is overseen by the Scientific Engagement
and Promotional Practices Board. This Board is responsible for
oversight of applicable policies and seeking to ensure the highest
level of integrity and continuous development of SE
We have a Global Human Biological Samples Management (HBSM)
governance framework in place to oversee
the ethical and lawful acquisition and management of human
biological samples. Our HBSM Enterprise
Risk Management Team champions HBSM activities and provides an
experienced group to support
internal sample custodians regarding best
practice.
It remains an important priority to enhance our data integrity
controls. Data Integrity Committees are in place
to provide oversight and Data Integrity Quality Assurance teams
conduct assessments to provide independent
business monitoring of our internal controls for R&D
activities.
The Regulatory Governance Board serves as the global regulatory
risk management and compliance board,
promoting compliance with regulatory requirements and procedures,
and oversees Group-wide written
standards for cross business regulatory processes.
We established an Access and Benefit Sharing Centre of Excellence
to oversee applicable requirements and enforcement
measures for the acquisition and use of genetic material of
non-human origin
in scope of the Nagoya Protocol.
R&D maintains and controls pre-publication procedures to guard
against public disclosure in advance of filing patent applications. In
addition, because loss of patent protection can occur due to lack
of data integrity
in preparing patent application data and information, legal experts
collaborate with R&D to support
the review process for new patent applications.
The Research Practices risk is overseen by an Enterprise framework
that seeks to ensure strengthened governance
across the R&D businesses in Pharmaceuticals, Vaccines and
Consumer Healthcare. Under the leadership of the Research Practices
Enterprise Risk Owner, management of the risk
takes a
pragmatic approach to information sharing, streamlining risk
identification and escalation, while ensuring
ownership stays with the business.
Third party oversight (TPO)
Risk definition
Failure to maintain adequate governance and oversight over third
party relationships and failure of third parties to meet their
contractual, regulatory, confidentiality or other
obligations.
Risk impact
Failure to adequately manage third party relationships could result
in business disruption and exposure to
risks ranging from sub-optimal contractual terms and conditions, to
severe business and legal sanctions
and/or significant reputational damage. Any of these consequences
could materially and adversely
affect our business operations and financial
results.
Context
Third parties are critical to our business delivery and are an
integral part of the solution to meeting our business
objectives. We rely on third parties, including suppliers,
advisors, distributors, individual contractors,
licensees, and other pharmaceutical and biotechnology collaboration
partners for discovery,
manufacture, and marketing of our products and for supporting other
important business processes.
These business relationships present a material risk. For example,
we share critical and sensitive information
such as marketing plans, clinical data, and employee data with
specific third parties who are
conducting the relevant outsourced business activities. Inadequate
protection or misuse of this information
by third parties could have significant business impact. Similarly,
we use distributors and agents
in a range of activities such as promotion and tendering which have
inherent risks such as inappropriate
promotion or corruption. Insufficient internal compliance and
controls by the distributors could
affect our reputation. These risks are further increased by the
complexities of working with large
numbers of third parties across a diverse geographical
spread.
Mitigating activities
To guide and enforce our global principles for interactions with
third parties we have a global policy framework applicable to buying
goods and services, managing our external spend, paying and
working with
our third parties. This policy framework applies to all employees
and complementary workers worldwide.
The enterprise-wide TPO programme takes an enterprise-wide view of
third party related risks
to ensure compliance with our ABAC policies and additional risks
such as Labour Rights, Health and
Safety and Human Safety Information. It forms a comprehensive and
practical approach to third party
oversight that is flexible to the evolving nature of our business
and the type of engagement being managed.
The programme is managed through the Global Ethics and Compliance
organisation and has
been globally deployed. It has strengthened risk assessment,
contractual terms and due diligence efforts
on third parties and improved the overall management of our third
party risks through the lifecycle of
the third party engagement.
Programme governance is provided through Enterprise Risk Management
overseen by the TPO Governance Board which includes
representation from key functional areas and the business. We
have a
dedicated TPO team responsible for the implementation and evolution
of the programme in response to
developments in the internal and external
environment.
Each business leadership team retains ultimate accountability for
managing third party interactions and risks.
When working with third parties, our employees are expected to
manage external interactions and
commitments responsibly. This expectation is embedded in our values
and Code of Conduct. It is our
responsibility that all activities carried out on our behalf are
performed safely and in compliance with applicable
laws and our values, expectations, standards and Code of Conduct
(See ABAC report above).
Our programme is complemented with independent oversight and
assurance undertaken by the Audit &
Assurance and Independent Business Monitoring teams. We review the
TPO programme against
other large multinational companies and use external expertise and
internal insights to drive improvements
in the programme.
Environment, health & safety and sustainability
(EHS&S)
Risk definition
Failure to manage environment, health & safety and
sustainability (EHS&S) risks in line with our
objectives
and policies and with relevant laws and regulations.
Risk impact
Failure to manage EHS&S risks could lead to significant harm to
people, the environment and communities
in which we operate, fines, failure to meet stakeholder
expectations and regulatory requirements,
litigation or regulatory action, and damage to the Group's
reputation, which could materially
and adversely affect our financial results.
Context
We are subject to health, safety and environmental laws of various
jurisdictions. These laws impose duties to protect people, the
environment, and the communities in which we operate, as well as
potential obligations
to remediate contaminated sites. We have also been identified as a
potentially responsible party
under the US Comprehensive Environmental Response Compensation and
Liability Act at a number
of sites for remediation costs relating to our use or ownership of
such sites in the US. Failure to
manage these environmental risks properly could result in
litigation, regulatory action and additional remedial
costs that may materially and adversely affect our financial
results. See Note 45 to the financial statements,
'Legal proceedings', for a discussion of the environmental related
proceedings in which we are
involved. We routinely accrue amounts related to our liabilities
for such matters.
Mitigating activities
The Corporate Executive Team (CET) is responsible for EHS&S
governance under a global policy. Under
that policy, the CET seeks to ensure there is a control framework
in place to manage the risks, impacts
and legal compliance issues that relate to EHS&S and for
assigning responsibility to senior managers
for providing and maintaining those controls. Individual managers
seek to ensure that the EHS&S
control framework is effective and well implemented in their
respective business area and that it
is fully compliant with all applicable laws and regulations,
adequately resourced, maintained, communicated, and monitored.
Additionally, each employee is personally responsible for ensuring
that all
applicable local standard operating procedures are followed by them
and expected to take responsibility
for EHS&S matters.
Our risk-based, proactive approach is articulated in our Global
EHS&S standard which supports our EHS&S policy and our
objective to discover, develop, manufacture, supply and sell our
products without harming
people or the environment. In addition to the design and provision
of safe facilities, plant and equipment,
we operate rigorous procedures that help us eliminate hazards where
practicable and protect
employees' health and well-being.
Through our continuing efforts to improve environmental
sustainability we have reduced our value chain carbon
intensity per pack, water consumption and waste generation. We
actively manage our environmental
remediation obligations and seek to ensure practices are
environmentally sustainable and
compliant.
Information security
Risk definition
The risk to GSK business activities if information becomes
disclosed to those not authorised to see it, or
if information or systems fail to be available or are corrupted,
typically because of cybersecurity threats,
although accident or malicious insider-action may be contributory
causes.
Risk impact
Failure to adequately protect critical and sensitive systems and
information may result in loss of commercial
or strategic advantage and could materially affect our ongoing
business operations, such as
scientific research, clinical trials and manufacturing and supply
chain activities.
Context
We rely on critical and sensitive systems and data, such as
corporate strategic plans, intellectual property,
manufacturing systems and trade secrets. There is the potential
that our computer systems or
information may be exposed to misuse or unauthorised
disclosure.
We believe that the cyber security incidents that we have
experienced to date have not resulted in significant
disruptions to our operations and have not had a significant
adverse effect on our results of operations,
or on third parties. However, as the threats evolve we cannot
provide assurance that our significant efforts in protecting
and monitoring our systems and information will always be
successful in preventing
compromise or disruption in future. They increasingly involve
highly-resourced threat actors such
as nation-states and organised criminals. Combined with the size
and complexity of our IT systems and
those of our supply chain partners (including outsourced
operations), this means that our systems and
information have been, and are expected to continue to be, the
subject of cyber-attacks of various types.
Mitigating activities
We have a global information protection policy and accompanying
information technology standards and processes that are supported
through a dedicated team and programme of activity. Our
Information Protection
function provides strategy, direction, and oversight, including
active monitoring of cyber security,
while enhancing our global information security capabilities,
through an ongoing programme of
investment that is in its sixth year.
We assess changes in our information protection risk environment
through briefings by government agencies,
subscription to commercial threat intelligence services and
knowledge sharing with other pharmaceutical
businesses and cross-industry bodies. Such changes are regularly
reviewed by our Executive
team and our Board and suitable adjustments agreed.
We aim to apply industry best practices as part of our information
security policies, processes and technologies
and invest in strategies that are commensurate with the changing
nature of the security threat
landscape. This will include suitable levels of cyber-risk
insurance cover in future.
Supply continuity
Risk definition
Failure to deliver a continuous supply of compliant finished
product; inability to respond effectively to a crisis
incident in a timely manner to recover and sustain critical
operations, including key supply chains.
Risk impact
We recognise that failure to supply our products can adversely
impact consumers and patients who rely on
them. A material interruption of supply or exclusion from
healthcare programmes could expose us to
litigation or regulatory action and financial penalties that could
adversely affect the Group's financial results.
The Group's international operations, and those of its partners,
expose our workforce, facilities, operations and information
technology to potential disruption from natural events (e.g. storm,
earthquake), man-made events (e.g. civil unrest, terrorism), and
global emergencies (e.g. Ebola outbreak,
flu pandemic). It is important that we have robust crisis
management and recovery plans in place
to manage such events.
Context
Our supply chain operations are subject to review and approval by
various regulatory agencies that effectively
provide our license to operate. Failure by our manufacturing and
distribution facilities or by suppliers
of key services and materials could lead to litigation or
regulatory action such as product recalls
and seizures, interruption of supply, delays in the approval of new
products, and suspension of manufacturing
operations pending resolution of manufacturing or logistics
issues.
We rely on materials and services provided by third party suppliers
to make our products, including active pharmaceutical ingredients
(API), antigens, intermediates, commodities, and components for
the manufacture
and packaging of Pharmaceutical, Vaccine and Consumer Healthcare
products. Some of the
third party services procured, such as services provided by
contract manufacturing and clinical research
organisations to support development of key products, are important
to ensure continuous operation
of our business.
Although we undertake risk mitigation we recognise that certain
events could nevertheless still result in delays
or service interruptions. We use effective crisis management and
business continuity planning to
provide for the health and safety of our people and to minimise
impact to us, by maintaining functional operations
following a natural or man-made disaster, or a public health
emergency.
Mitigating activities
Our supply chain model is designed to ensure the supply, quality
and security of our products globally, as
far as possible. Through the Supply Chain Governance Committees we
closely monitor the inventory status
and delivery of our products, with the aim of ensuring that
customers have the Pharmaceutical, Vaccines and Consumer Healthcare
products they need. Improved links between
commercial forecasting
and manufacturing made possible by our core commercial cycle
should, over time, reduce the
risk associated with demand fluctuations and any impact on our
ability to supply or the cost of write offs
where products exceed their expiry date. Each node of the supply
chain is periodically reviewed to ensure
adequate safety stock, while balancing working capital in our
end-to-end supply chain. Particular attention
is placed on mitigating supply risks associated with medically
critical and high-revenue products.
We routinely monitor the compliance of manufacturing external
suppliers to identify and manage risks in
our supply base. Where practical, we minimise our dependence on
single sources of supply for critical items. Where alternative
sourcing arrangements are not possible, our inventory strategy aims
to protect the supply chain from unanticipated
disruption.
We continue to implement anti-counterfeit systems such as product
serialisation in accordance with emerging
supply chain requirements such as the EU Falsified Medicines
Regulation around the world.
A corporate policy requires each business and functional area head
to ensure effective crisis management and business
continuity plans are in place that include authorised response and
recovery strategies, key areas of responsibility and clear
communication routes, before any business
disruption occurs.
Corporate Security supports the business by: coordinating crisis
management and business continuity
training; facilitating simulation exercises; assessing our
preparedness and recovery capability;and providing assurance
oversight of our central repository of plans supporting our
critical business processes.
Each business performs risk oversight to assure adequate risk
mitigation including identifying new and emerging
threats. We have a coordinated approach to evaluate and manage the
implications for our business
arising from Brexit. Our approach to Brexit is set out on page
36.
These activities help ensure an appropriate level of readiness and
response capability is maintained. We
also develop and maintain partnerships with external bodies like
the Business Continuity Institute and
the UN International Strategy for Disaster Risk Reduction, which
helps improve our business continuity
initiatives in disaster-prone areas and supports the development of
community resilience to disasters.
APPENDIX B
Directors' responsibility statement
Each of the current Directors, whose names and functions are listed
below in the Corporate Governance section of the Annual Report 2018
confirms that, to the best of his or her knowledge:
- the
Group financial statements, which have been prepared in accordance
with IFRS as adopted by the EU and IFRS as issued by the IASB, give
a true and fair view of the assets, liabilities, financial position
and profit of the Group; and
- the
Strategic report and risk sections of the Annual Report, which
represent the management report, include a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that it faces.
|
Name
|
Function
|
|
Sir
Philip Hampton
|
Independent
Non-Executive Chairman
|
|
Emma
Walmsley
|
Chief
Executive Officer
|
|
Dr Hal
Barron
|
Chief
Scientific Officer and President, R&D
|
|
Simon
Dingemans
Iain
Mackay
|
Chief
Financial Officer
Chief
Financial Officer Designate
|
|
Manvinder
Singh (Vindi) Banga
|
Senior
Independent Non-Executive Director
|
|
Dr
Vivienne Cox
|
Independent
Non-Executive Director and Workforce Engagement
Director
|
|
Lynn
Elsenhans
|
Independent
Non-Executive Director
|
|
Dr
Laurie Glimcher
|
Independent
Non-Executive Director and Scientific & Medical
Expert
|
|
Dr
Jesse Goodman
|
Independent
Non-Executive Director and Scientific & Medical
Expert
|
|
Judy
Lewent
|
Independent
Non-Executive Director
|
|
Urs
Rohner
|
Independent
Non-Executive Director
|
|
|
|
APPENDIX C
Related party transactions
At 31 December 2018, GSK owned 32 million shares or 31.7% of
Innoviva Inc. which is a biopharmaceutical company listed on
NASDAQ. GSK began recognising Innoviva as an associate on 1
September 2015. The royalties due from GSK to Innoviva in the year
were £209 million (2017 - £173 million). At 31 December
2018, the balance payable by GSK to Innoviva was £64 million
(2017 - £53 million).
At 31 December 2018, GSK held a 50% interest in Japan Vaccine Co.
Ltd (JVC) through its subsidiary GlaxoSmithKline K.K. This joint
venture with Daiichi Sankyo Co., Ltd is primarily responsible for
the development and marketing of certain prophylactic vaccines in
Japan. During 2018, GSK sold £43 million (2017 - £41
million) of its vaccine products into the joint venture. At 31
December 2018, the trading balance due to GSK from JVC was £15
million (2017 - £11 million) and the balance payable by GSK to
JVC was £nil (2017 - £nil).
Loans of £5 million to Medicxi Ventures I LP and £6
million to Index Ventures Life VI (Jersey) LP remained due to GSK
at 31 December 2018. In 2018, GSK increased the equity investment
in Kurma Biofund II, FCPR by £3 million, Apollo Therapeutics
LLP by £2 million and Longwood Founders Fund LP by £0.2
million, and reduced a liability with Qura Therapeutics LLC by
£3 million. As at 31 December 2018, the outstanding liability
to Qura was £4 million.
The aggregate compensation of the Directors and CET is given in
Note 9, 'Employee costs'.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorised.
|
|
GlaxoSmithKline plc
|
|
|
(Registrant)
|
|
|
|
|
Date: March
12, 2019
|
|
|
|
|
|
|
By: VICTORIA
WHYTE
--------------------------
|
|
|
|
|
|
Victoria Whyte
|
|
|
Authorised
Signatory for and on
|
|
|
behalf
of GlaxoSmithKline plc
|