GlaxoSmithKline plc (GSK) Q4 2021 Earnings Call Transcript

GlaxoSmithKline plc (NYSE: GSK) Q4 2021 earnings call dated Feb. 09, 2022

Corporate Participants:

Nick Stone — Head of Global Investor Relations

Dame Emma Walmsley — Chief Executive Officer

Luke Miels — Chief Commercial Officer

Deborah Waterhouse — Chief Executive Officer of ViiV Healthcare

Brian McNamara — Chief Executive Officer, GSK Consumer Healthcare

Iain Mackay — Chief Financial Officer

Hal Barron — Chief Scientific Officer and President, R&D

Roger Connor — President, Vaccines & Global Health

Analysts:

James Gordon — JP Morgan — Analyst

Keyur Parekh — Goldman Sachs — Analyst

Graham Parry — Bank of America Merrill Lynch — Analyst

Simon Baker — Redburn — Analyst

Tim Anderson — Wolfe Research — Analyst

Emmanuel Papadakis — Deutsche Bank — Analyst

Jo Walton — Credit Suisse — Analyst

Steve Scala — Cowen — Analyst

Andrew Simon Baum — Citigroup Inc. — Analyst

Laura Sutcliffe — UBS Investment Bank — Analyst

Seamus Fernandez — Guggenheim Partners — Analyst

Kerry Holford — Berenberg Bank — Analyst

Mark Purcell — Morgan Stanley — Analyst

Peter Welford — Jefferies LLC. — Analyst

Presentation:

Operator

Good day and welcome, everyone. Ladies and gentlemen, welcome to the Analyst Call for GSK’s Fourth Quarter 2021 Results.

I will now hand you over to Nick Stone, Head of Global Investor Relations, who will introduce today’s session. Please proceed.

Nick Stone — Head of Global Investor Relations

Thank you, Operator. Hello, everyone. This is Nick, obviously, the operator has just mentioned. Welcome to our full-year and Q4 2021 conference call and webcast for investors and analysts. The presentation was posted to gsk.com and it was also sent out by email to our distribution list earlier today.

Please turn to Slide two. This is the usual safe harbor statements and will be making comments [Technical Issues] constant exchange rate or CR, unless otherwise stared.

Please turn to Slide three. This is today’s schedule, we’ll plan to cover all aspects of our full-year results. The presentation will last around 35 minutes to maximize the opportunity for questions. For those on the phone please join the queue by pressing star one and we request in the first instance, if you could ask one question, so that everyone has the chance to participate in today’s call.

Today, our speakers are Emma Walmsley, Luke Miels, Deborah Waterhouse, Brian McNamara, Iain Mackay and Hal Barron. The Q&A portion of the call will be joined by Roger Connor and David Redfern.

And with that I will now hand the call over Emma. Please turn to Slide four.

Dame Emma Walmsley — Chief Executive Officer

Thanks, Nick, and a very warm welcome to everyone. I am delighted to announce our 2021 full-year results. They demonstrate strong financial performance and continued progress against our strategic priorities. For the full-year, sales increased 5% and adjusted EPS increased 9%, excluding the contribution from COVID solutions we exceeded our raised guidance with adjusted EPS stable for the full-year.

Sales growth was driven by first class commercial execution and strong uptake of new products. Pharma delivered 10% growth, new and specialty medicines growing 26%, double-digit sales in Immuno-inflammation, Respiratory and oncology together with sales from Xevudy for COVID-19 all drove this performance. Vaccine sales increased 3% and consumer healthcare finished the year with 4% growth overall, notably accelerating again in the fourth quarter with sales, up 11%.

Alongside this we increased investment for key R&D pipeline programs, expanded support for new and ongoing launches and maintained a strong focus on cost optimization. This is also reflected in adjusted operating profit growth, which increased 9% for the full-year. We see these results is very encouraging and a demonstration of the accelerating momentum we now have a GSK.

As we said 2022 marks the step change in growth for the company and is underscored by the guidance for new GSK, the biopharma business we are giving today of 5% to 7% sales growth and 12% to 14% adjusted operating profit growth to CER. This includes the anticipated benefit of Biktarvy related royalties, but excludes any contribution from pandemic solutions and Iain will provide more detail on this and our overall financial performance in his section.

Turning to Slide six. 2021 was the year of excellent progress across all three of our long-term strategic priorities. In innovation, we delivered three major product approvals Jemperli for endometrial cancer, Xevudy for COVID-19 and Apretude our new long-acting medicine for HIV prevention. We also presented positive Phase III data for daprodustat, a potential best-in-class medicine for treating anemia of chronic kidney disease and we expect to file this new and exciting medicine with regulators in the first half of 2022. These new medicines are at the forefront of an exciting high value pipeline, we continue to build across prevention and treatment of disease through organic and inorganic delivery.

We now have a pipeline of 21 vaccines and 43 medicines, 22 of which are in pivotal studies. And this year we anticipate data readout from up to seven of the 11 new vaccines and medicines we’ve identified as key future growth drivers. This includes our RSV vaccine for older adults in the first half of 2022 and several new potential specialty treatments, including those for rheumatoid arthritis, cancer and hepatitis B.

In performance, our decision to prioritize investments in commercial execution to specialty medicines and vaccines is evident in our improving sales growth. Shingrix sales clearly reflected the adverse impact of COVID-19 last year, particularly in the US, but we exceeded our expectations highlighted at Q3 to deliver sales of GBP1.7 billion. And this year, we do expect to see strong recovery growth [Technical Issues] in a moment.

And lastly on Trust, we continue to maintain sector leadership in ESG with our number one ranking in the Dow Jones Sustainability Index and our longstanding leadership in the Access to Medicines index. Looking ahead, we also aim to deliver ambitious environmental commitments with targets of net zero on carbon and net positive on nature by 2030, and we’re also making good progress on diversity and inclusion. ESG will continue to be an integral part of new GSK strategy and investment case.

And turning to Slide seven. 2022 sees the biggest change in GSKs recent corporate history with the creation of a new unique world leader dedicated to consumer [Technical Issues] in the middle of this year. This will be the culmination of a series of progressive strategic moves successfully executed over the last few years to build significant value and the new Consumer Healthcare Company. We are now in full countdown mode to demerger and by doing so, our aim is to unlock the potential of both GSK and Consumer Health, the strength in GSKs balance sheet and to maximize value for all our shareholders.

As a new standalone company, the Consumer Healthcare business is a compelling prospect. It has an outstanding brand portfolio and will be a world leader in Consumer Health. For prospective invested it will offer a highly attractive financial profile above category sales growth, sustainable margin expansion and high stable cash generation. It will have a fantastic leadership team led by CEO, David and Brian McNamara and the Board with best-in-class international consumer sector experience as is already evident with the recent appointment of Sir Dave Lewis, as Chairman Designate. We’ll then provide a lot more detail on this business at our Capital Markets event later this month, and Brian will give you more on this shortly.

For new GSK, as we previously shared, we’ve set a new purpose and new ambitions for growth. Our purpose is to unite science, talent and technology to get ahead of disease together; to deliver scale with human health impact, improved returns to shareholders and to be a company where outstanding people thrive. This is reflected in the growth commitments and ambition we set out in our Investor update in June last year. These represent a significant step change in delivery for GSK, and as I said earlier start now and are reflected in the guidance we’re giving today and the exciting R&D catalysts ahead.

Before closing, I would like to say a very big thank you to the more than 94,000 GSK people who help them to deliver our 2021 performance and the momentum they have built as we head into this landmark year.

So let me now hand over to this team, who will take you through more of the details. Luke, first of all, over to you.

Luke Miels — Chief Commercial Officer

Thanks, Emma. Please turn to Slide nine. Let me start with new and specialty where we made remarkable progress, driven by excellent commercial execution. Excluding, Xevudy we delivered 14% sales growth for the year and 10% in Q4, maintaining a double-digit track record. I am incredibly proud to report that two of our assets exceeded GBP1 billion or so for the first time Trelegy and Nucala.

And as you’ve seen, we were able to respond quickly to the strong demand for Xevudy delivering close to 1 billion in sales of iits crucial COVID treatment. Trelegy had a fantastic year despite growing competition and our unique dual indication in COPD and asthma continues to drive high demand in the US and Japan. We’ve also seen very positive trends for our launch in China with a single inhaler therapy classes growing rapidly and we are winning share in Tier 1 and Tier 2 city.

For Nucala sales were, up 22% and it remains the leading IL5 eosinophil-driven diseases [Technical Issues] key markets. We’re pleased to see that our robust approach the lifecycle innovation is driving incremental growth opportunities with the launch of three new indications: EGPA, HES and nasal polyps in Europe.

Benlysta also developed benefit from label expansion with sales, up 29% as we reached more new patients with lupus nephritis. And against the backdrop of COVID, we continue to see the importance of having a subcut formulation available for at-home use. And as expected with competitors entering the market, we’ve seen an overall increase in biologic, benefiting Benlysta as the leader.

In oncology, we continue to make steady progress. Blenrep remains the only off the shelf anti-BCMA therapy and we’ve expanded our presence for 13 markets. In the US, we’re driving [Technical Issues] community setting, where most multi-myeloma patients are treated, and we’re working to reach new physicians is prescribing experience, improved perceptions of corneal adverse event management.

Closing with Zejula, COVID continues to impact the ovarian cancer market with diagnosis into bulking surgery is still below pre-pandemic level. Despite, the constrained markets Zejula [Technical Issues] strongest quarter of sales today and we continue to perform exceptionally well in market share terms with one and two new patients receiving a pop being prescribed Zejula. So, a very strong year for new and specialty and we expect to grow specialty itself by around 10% in 2022 even with Trelegy moving into the new general medicines area. And this is before we include the expected contribution from Xevudy.

Please turn to Slide 10. Moving to vaccines, full-year sales increased by 2%, decreased by 5% excluding pandemic sales. The overall performance demonstrated the impact on several of our vaccines of COVID. Most impacted Shingrix, were sales were down 9% of the year, which was slightly better than the outlook we indicated at the nine month stage.

Based on the encouraging early momentum we’re seeing, we continue to anticipate a strong sales recovery for 2022. Since Q2 2021 Shingrix has delivered strong sequential growth reflecting improvement in trends US, including solid demand in the non-retail channel, as well as contributions from new European launches and recovery of demand in Germany. We expect this momentum to continue in 2022, despite Omicron short-term impact, we continue to launch in new markets, supported by our unconstrained supply position and we believe there is a significant pent-up demand in the US.

Consequently, we continue to expect Shingrix to deliver strong double-digit sales growth in 2022 with record annual sales. This will be a crucial driver of the expected low teens. Sales growth in vaccines here including pandemic solutions. Looking further ahead by 2024, we expect Shingrix to be available in 35 markets, representing nearly 90% of the global vaccines market, underscoring our ambition to double Shingrix revenues by 2026.

Let me now hand over to Deborah on Slide 11.

Deborah Waterhouse — Chief Executive Officer of ViiV Healthcare

Thank you, Luke. Our goal is to remain innovation leaders in HIV, achieve a mid single-digit sales target to 2026 and digest the loss of exclusivity of Dolutegravir at the end of the decade. Through the changing mix of our portfolio and the success of our pipeline.

Our Q4 and full-year results demonstrate positive momentum towards delivering on these objectives. Sales grew 3% both for Q4 and for the year. Within this, we achieved a noticable acceleration in our innovation sales, which now stand at 34% of our portfolio, and all regions reported growth. This acceleration in growth results from strong commercial execution behind our two-drug regimens and Dovato in particular.

Sales of Dovato more than doubled to GBP787 million and are fast approaching 20% of the total HIV sales. Dolutegravir based regimens now hold the number one position in the share of the switch market across the US and Europe. Based on the strong momentum we believe Dovato is on track to deliver GBP1 billion of sales in 2022, we drove a significant growth potential beyond.

Please turn to Slide 12. Turning to our injectable portfolio. Cabenuva is our first-in-class long-acting regimen for the treatment of HIV, for which we received FDA approval last week for every two months dosing. As with any new class of medicines sales of Cabenuva will take time to build and the COVID environment is constraining switch activity, particularly where a patient needs to visit a physician’s office. Nevertheless, over 4,500 people living with HIV are already taking Cabenuva/Vocabria, Rekambys, and the outlook for this important new medicine [Technical Issues] strong brand recognition and market access exceeding 80%.

Moving on to prevention, we ended 2021 on a high with the FDA approval of Apretude, the world’s first long-acting injectable for the prevention of HIV dosed every two months. HIV prevention is a huge unmet need as current medical options are associated with stigma and adherence issues. Apretude not only addresses these concerns, but it is demonstrated superior efficacy over daily oral tablets. As a new paradigm, we need to educate physicians, patients and payers. So this year, our focus is on building awareness and access for Apretude. The early signs are encouraging with positive feedback from patients and prescribers and with political will supportive [Technical Issues] of HIV prevention.

Consequently, we remain confident that Apretude will deliver significant benefit to patients in the years ahead, as well as significant commercial value beginning in 2023.

And with that I will hand over to Brian, and we will move on to Slide 13.

Brian McNamara — Chief Executive Officer, GSK Consumer Healthcare

Thanks, Deborah. Now turning to Consumer Healthcare. Sales for the full-year, excluding brands divested under review, increased by 4% at constant exchange rate, despite a negative 1% impact of COVID on cold and flu sales. Building on the 4% growth we delivered in 2020.

International grew 9% with emerging markets performing particularly well. Including [Technical Issues] East Africa growing double-digits. US sales increased 2% and Europe was broadly stable with both regions building momentum through the year. Q4, our growth was strong, up 11% at constant exchange rates, albeit, against a weaker comparator of 1% growth in 2020 with all categories performing well. Cold and flu sales rebounded in Q4 with European sales above 2019 and US sales only slightly below.

From a category perspective for the full-year. Oral health sales increased 5% with broad-based growth in key markets, reflecting brand strength, strong execution and successful innovation. Pain relief grew high single-digits, this was primarily driven by Panadol, which benefited from seasonal demand in the second half of the year. Voltaren delivered mid single-digit growth, despite the expected introduction of US private label earlier in the year.

Vitamins, minerals and supplements grew 4%, continuing the momentum on a very strong year-over-year comparator. Centrum growth in the second half was particularly strong to increase capacity and retailer stocking. Respiratory declined 1% with strong growth in allergy offset by a mid single-digit decline of our cold and flu products.

Q4 rebounded delivering 40% growth, due to return of a more typical cold and flu demand although it felt just short of offsetting the unprecedented market declines in Q1. Digestive health and other sales were up mid single-digits, with broad based growth across skin, digestive health and smokers health.

On e-commerce year-to-date sales grew in the high-20% range and is now 8% of sales. With good growth in key regions such as China. Our ongoing investment in digital capabilities continue to position us well for growth in this vital channel. We’ve also delivered strong margin progression for the year of 200 basis points at constant exchange rates, while at the same time increasing investment in our brands. Operational efficiencies on top of synergies along with pricing has more than offset the impact of divestments and inflation in the year.

Overall, looking at sales growth over the last two years. We’ve delivered a CAGAR well lower 4%, despite net COVID headwinds. We’re able to successfully capitalize on tailwinds created by increased vitamins, mineral and supplement demand. However, these were more than offset by the decline in respiratory. As a result of the historically low cold and flu season. This clearly demonstrates the strength and breadth of our portfolio and the capabilities we’ve built through the most — two most significant transactions in the industry, coupled with extensive portfolio rationalization. This positions us to deliver sustained market outperformance with the 4% to 6% medium term annual sales outlook.

Please turn to Slide 14. With regards to the upcoming separation, I’m delighted that Dave Lewis was recently appointed as Chaired Designate and my executive leadership team is now been announced. I hope you will join us at our Capital Markets Day, which will take place virtually on February 28th. We will lay out our strategic priorities, key growth drivers, and detailed financial information. The team and I will share both the global and regional overview, including our innovation, digital and operational capabilities, as well as our capital allocation priorities as a newly-listed company.

Most importantly, we will set out how we will deliver the growth, category outperformance and attractive sustainable returns that we are confident this business can achieve in the medium-term.

With that, I’ll hand it over to Iain. Please turn to Page — Slide 15.

Iain Mackay — Chief Financial Officer

Thanks, Brian. As I cover the financials, references to growth at constant exchange rates [Technical Issues]. On Slide 16, is the summary of the Group’s results for the full-year 2021. And I’ll focus my comments on the full-year performance. Turnover was GBP34.1 billion, up 5% and adjusted operating profit was GBP8.8 million, up 9%.

Total earnings per share were 87.6 pence, down 13%, while adjusted earnings per share was 113.2 pence, up 9%. Pandemic solutions contributed approximately 9 points of growth and adjusted earnings per share. On currency, there was a headwind of 5% in sales and 11% in adjusted earnings per share. In particular, due to the strengthening of Sterling against the US dollar relative to 2020.

Turning to next Slide. This slide summarizes the reconciliation of our total to adjusted results. The main adjusting items of note for the year were in disposals and other, which primarily reflected profits across several divestments, including the gain on disposal of rights, the royalty stream for cabozantinib. In Q1, the gain on disposal of the cephalosporin business in Q4 and a significant positive revaluation of deferred tax assets in the UK, resulting from the Q2 enactment of the 2021 UK finance bill. And finally in transaction related, the main factor was the movement on the ViiV CCL, which includes the impact of the settlement with Gilead.

My comments from here onwards from adjusted results unless stated otherwise. Turning to Slide 18. Key drivers of revenues and profits for the Group in 2021, compared to 2020 are set out here. Revenues grew 5% overall, revenues from our COVID solutions contributed around 4 percentage points of that growth. Post of operating leverage from higher sales in the year was supported by continued focus on cost control and the benefits and synergies resulting from restructuring across the Group with SG&A down 1%. This included favorable legal settlements, compared to increased legal costs in 2020, which primarily impacted Q1 and one-off benefits and pensions and insurance in Q4.

Alongside these benefits, we continue to prioritize investing in our pipeline and R&D expenditures increased by 8%. This resulted in an adjusted operating profit increase of 9% with pandemic solution contributing 7 percentage points of that growth. The full-year margin was 25.8% and 90 basis points higher than 2020 at constant exchange rates.

Turning to Slide 19. Moving to bottom half of the P&L and the highlight that the effective tax rate of 17.5% was aligned with expectations and net interest expense of GBP753 million was slightly lower than expected, primarily due to favorable foreign exchange.

Next, I’ll briefly cover free cash flow for the year before going into more detail on the financials of each business. On Slide 20, in 2021, we generated GBP4.4 billion of free cash flow. This was a step down versus 2020 and consistent with our outlook given in February last year. The positive factors of increased adjusted operating profit at CER and lower dividends to non-controlling interests were more than offset by increased purchase of intangible assets, including our collaborations with Alector and iTeos from Q3, reduced proceeds following completion of the Consumer Brands disposal program, adverse timing of returns and rebates, compared to 2020 and adverse exchange impacts.

Net cash generated from operations for the Group was GBP8 billion. And we expect to share comparator for new GSK cash flow later in the first half. In 2022, we expect cash generated from operations for new GSK on a like-for-like basis to be higher than 2021, as a result of the Gilead settlement and increased adjusted operating profit. This will be partly offset by lower cash generated from lower margin COVID solutions and RAR headwinds relates to the phasing of payments in 2021 and continued generics impact on US respiratory portfolio.

Turning to performance of the Pharma business in Slide 21. Overall, pharmaceutical revenues grew 10%, driven by strong growth in new and specialty medicines, favorable US return and rebate adjustments and sales of Xevudy, which contributed 6 percentage points of growth. Within this 10% growth the established pharma sales decreased 6% in 2021, which was slightly better-than-expected. The pharma operating margin was 26.4% for 2021. The increase in profit and margin primarily reflected the positive operating leverage from the increased sales, including favorable pricing in RAR, continued tight cost control and restructuring benefits. This was partly offset by continued investment in R&D and HIV product launches.

Turning to Slide 22. Overall, vaccine sales grew [Technical Issues] excluding pandemic adjuvant revenue sales decreased 5%, primarily driven by Shingrix dynamics, which Luke has described. We continue to be very confident in the demand for our vaccines. Notably during 2022, we expect Shingrix to deliver record sales with strong double-digit growth.

The operating margin was 33.3%, the decrease in operating profit and margin, primarily reflected higher supply chain costs resulting from lower demand. That this was accompanied by an increased R&D investment of 34%, as we progressed our RSV and meningitis development programs and invested in our mRNA platform. Higher royalty income and beneficial mix from pandemic adjuvant sales, partly offset these factors. Q4 sales were, down 7%, reflecting the tough comparison in [Technical Issues] Shingrix sales.

Turning to Slide 23, revenues in consumer healthcare increased 4%, excluding brands either divested or under review, including those brands turnover was flat. Brian outlined the main drivers earlier. The operating margin was 23.3%, up 200 basis points at CER versus last year, due to sales growth, including favorable pricing and mix and strong synergy delivery. This was partially offset by 120 basis point impact from divested brands. In addition to commodity and freight cost pressure. The strong 11% sales growth, excluding brands divested or under review in Q4 is encouraging sign of momentum as the business moves into 2022.

Turning to Slide 24. I’ll close with our guidance for new GSK in 2022 all of which excludes the commercial impact of our COVID solutions. Our guidance is predicated on the consumer healthcare business being demerged in mid-2022. We expect the formal criteria for treating consumer healthcare as a discontinued operation to be satisfied in Q2. GSK will continue to consolidate the business for reporting purposes until the time demerger.

As Brian mentioned earlier the Consumer Healthcare Capital Markets Day will set out the strategic priorities, key growth drivers, and detailed financial information that underpin our confidence and compelling medium-term outlooks for that company. For new GSK 2022, we’ll see a step change in growth. We expect new GSK sales growth to be between 5% and 7% in 2022. Investments in the business for growth will continue and are focused on controlled fashion, and so we expect SG&A and R&D to increase the rate similar to sales. Whilst we expect cost of goods sold to increase at slower rate than sales.

As a result, our guidance for adjusted operating profit is for between 12% and 14% growth. This includes the anticipated benefits [Technical Issues] related royalties contributing around 2 percentage points of adjusted operating profit growth. On outlook for COVID solutions and 2022 based on known binding agreements with governments. We expect the COVID solutions will contribute a similar sales level to 2021, but a substantially reduced profit contribution, due to the increased proportion of lower margin inXevudy sales. We expect this to reduce new GSK adjusted operating profit growth, including COVID solutions in both years, between 5% to [Technical Issues]. We’ll provide quarterly updates with future contracting and binding agreements progresses.

With regards to dividend policy in 2022, the total expected cash distribution and the respective dividend payout ratios for each company are unchanged from what we communicated at our Investor Update last June. GSK expects to pay 49 pence per share, comprising 44 pence per share for new GSK and 5 pence per share, representing consumer health care cost still part of the Group. Consumer healthcare’s dividend in the second half of 2022 subject to review and approval by the consumer healthcare board. This is expected to be around 3 pence per share and there has been adjusted to reflect the total number of consumer shares that were expected to be issued upon the merger. In more detail [Technical Issues] provide in the appendix.

Given the complexities associated with demerging a significant operating segment of the Company, we’ll provide adjusted earnings per share guidance at our Q2 results, following the demerger. To help with modeling new GSK a reconciliation of the 2021 results reflect new reporting format is expected to become available later in the first half. As a reminder, we’ll be presenting a single new GSK operating margin in the future.

In summary, we believe the business momentum built from the excellent work for our teams in 2021 sets us up for a step change in growth for New GSK in 2022.

And with that I’ll hand over to Hal.

Hal Barron — Chief Scientific Officer and President, R&D

Thank, Iain. I’ll provide a short update on our progress in R&D over the past year and highlight some of the key upcoming pipeline milestones.

Please turn to Slide 26. As we set out last June the transformation of our R&D [Technical Issues] has resulted in a significantly stronger pipeline and improved productivity across multiple metrics. And in 2021, we continue to build on this momentum. In terms of late-stage pipeline achievements — advancements, we achieved the first regulatory approval for three new medicines in 2021, Apretude, Xevudy and Jemperli, as well as seven regulatory submissions.

And as Luke mentioned earlier, our approach to lifecycle innovation is also delivering with five additional approvals in 2021 for Nucala and Benlysta. We also reported positive pivotal data on three assets, including daprodustat, which I’ll cover in more detail in a moment and started eight new Phase III trials. In total, we have delivered 13 major regulatory [Technical Issues] 2017, which is top quartile performance for the industry. And four of these efforts have already achieved so called blockbuster status.

As a reminder, we expect the medicines and vaccines approved between 2017 and 2021 to contribute around 60% of new GSK’s ’21 to ’26 sales growth, with the anticipated pipeline approvals contributing another 40%. We’re also bringing forward the next generation of innovative assets into our pipeline, driven by our focus on the science of the immune system, human genetics and advanced technologies.

In 2021, we moved 19 assets in the Phase I or Phase II trials, which are the direct result of our focus on human genetics and functional genomics with our overarching vision to use the human as the model organ. An excellent example of this is our anti-IL18 neutralizing antibody, so called GSK 806, which is being developed to treat patients with atopic dermatitis, where there is strong genetic rationale for this target.

The second example of GSK 130, our monoclonal antibody just entered Phase I and targets IL-7, which is genetically associated with developing multiple sclerosis. In oncology, our internal work on functional genomics has identified more than 10 target candidates and research for evaluation in the field of synthetic lethality. Our collaboration with IDEYA has three synthetic lethal targets, the most advanced is our Mat2A inhibitor, which is in Phase I for patients with tumor. where MTAP [Phonetic] is deleted, which is common in solid tumors. So overall, I’m very excited about the potential of this next wave of medicines and vaccines in our pipeline.

Please turn to Slide 27. This slide highlights two major pipeline achievements delivered towards the end of 2021. I’ve previously spoken before about Daprodustat, our hyp prolyl hydroxylase inhibitor. The target we chose to pursue, because again genetic strongly suggested a role in stimulating erythropoiesis. The ASCEND Phase III program recruited over 8,000 patients and well-designed studies using active controls and delivered very consistent efficacy and safety results in both dialysis and non-dialysis patients. The results uniquely demonstrated that Daprodustat met the primary endpoint of non-inferiority to an erythropoietin-stimulating agent in terms of cardiovascular safety and were shown to be as effective standard-of-care in treating to a target hemoglobin range. We believe these data position Daprodustat as a best-in-class oral agent for treating patients with anemia of chronic kidney disease and are on track to submit these data in the first half of this year.

The second key pipeline achievement was the approval of Apretude for the prevention of HIV-based on extremely impressive efficacy results. This exciting milestone as well covered by Deborah earlier, so let’s turn to Slide 28.

Looking to the year ahead, this slide focuses on the important pipeline milestones we anticipate in the first half of 2022. RSV disease represents a significant unmet medical need with RSV infections accounting for around 180,000 hospitalizations each year and about 14,000 deaths in the over 65 populations in the United States alone. The unique design of our antigens adjuvant combination induces a strong neutralizing antibody titers and T-cell responses against both RSV A and B in the Phase II trials, which is critical to protect an older adult population for an increased risk for RSV disease.

From the literature and our trial data, we know that older adults typically have a lower T-cell response, when compared to younger populations and our RSV older adult vaccine utilizes our AS01 adjuvant to overcome this deficiency. Our RSV older adult trials expected to read out ahead of our original timelines with headline data expected during the first half of 2022 and filing is anticipated before year end, potentially putting us on a path for inclusion in the June 2023 meeting.

Please turn to Slide 29. The next two years we’ll see R&D continue to deliver important news flow on several potential new medicines and vaccines within our late-stage pipeline. In 2022, we anticipate late-stage milestones from up to seven of the 11 [Indecipherable] and medicines we’ve highlighted at the Investor Update in June last year, including those I’ve already mentioned.

I think two minutes to highlight some of the other rehabs that I’m most excited about. I’ll start with otilimab, we have three Phase III trials reading out in 2022 contRAst 1, 2 and 3. These data will define the efficacy and safety of our anti GM-CSF antibody, which has the potential to deliver an entirely new mechanism of action for patients with rheumatoid arthritis. Data from the Phase IIb trial suggested a unique reduction in pain, which we believe could be driven by CCL17 the most over-express protein by monocytes been stimulated by GM-CSF.

Based on this finding we move GSK 279, CCL17 monoclonal antibody into development to treat patients with osteoarthritic pain and we expect initial data to be available [Technical Issues]. In addition, we expected on Blenrep, a pivotal DREAMM-3 trial readout in patients with third-line multiple myeloma. This is an important study that will give us the first progression-free survival and overall survival data on Blenrep in a randomized setting. We also anticipate presenting data around the middle of this year on Blenrep in combination with a gamma secretase inhibitor. These data will also help inform our strategy for patients — for treating patients in the frontline setting.

I also want to briefly mention bepirovirsen, our HBV ASO, which we plan to present data on in the middle of the year from our Phase IIb trial investigating the treatment of patients with chronic FD. There is a significant unmet medical need for these patients with over around 300 million patients living with happy and the diseases responsible for over 900,000 deaths each year. In addition to these late-stage date readouts we plan at least three major regulatory submissions in ’22, including Daprodustat, RSV for older adults and Blenrep in the third-line setting.

Lastly, we have recently announced several impressive leadership appointments including, Phil Dormitzer, as Head of Vaccines R&D, who joined us from Pfizer and Hesham Abdullah, who was promoted to the Head of Clinical Oncology. In January, we also note — announced that Tony Wood would be our new Chief Scientific Officer from August 1st and I’m delighted about his appointment. Tony is a person and scientist of the highest quality. He was integral to building our new approach to R&D and his appointment and expertise deepen our commitment to the strategy and I’m positive that Tony will be an outstanding leader for GSK R&D. I’m also pleased to remain part of GSK beyond August, as I transition to a Non-Executive Board member and support Tony and the team to deliver on the promise of our exciting pipeline.

So in summary, 2022 will be an exciting year for our high-quality pipeline and I remain very confident that we’ll continue to advance the standard-of-care for patients and deliver value to shareholders.

With that, I’ll hand it back to Emma [Technical Issues] of the call.

Dame Emma Walmsley — Chief Executive Officer

Thank you. So let’s move to Q&A, please. Operator?

Questions and Answers:

Operator

Thank you. The first question is coming from the line of James Gordon from JPM. Please go ahead.

James Gordon — JP Morgan — Analyst

Hello, James Gordon, JP Morgan. Thanks for taking the questions. But I just have one question I’ll ask. A question on the specialty pharma, so specialty pharma sales were a little bit light versus consensus expectations today. And I mean growth is going to be approximately 10% in ’22, which sounds a little bit more cautious in the double-digit medium term outlook that you issued in June last year. So how things, I mean, talk about these assets. Is it going to be a bit of a back-end weighted, kind of, the specialty pharma? And what could drive an inflection particularly in oncology? Do we need more data? Or is it really about just COVID diagnoses or COVID going — getting better and then more diagnosis of these conditions?

And if I could got another question, just a clarification, if I look at the guidance the 5% to 7% core EBIT headwind from COVID 19 product contribution. It looks like it’s effectively assuming that you sell the 1 million doses for Xevudy that you’ve really got an order for, but there is no more sales for a tool for the rest of the year. So just a clarification, is that, right? The assumption is that beyond the orders you’ve already got, you weren’t sell anymore more to Xevudy this year?

Dame Emma Walmsley — Chief Executive Officer

Well, I’m going to ask Iain — thanks James for that one question and then clarification, and I’ll ask Iain to pickup exactly first on the forecast forward for COVID solutions, just remembering it’s not in any of our guidance, either for this year or for the year ahead. And obviously, there is still some uncertainty about how that markets will play out, we’ll come to Iain first.

And then just more broadly on the total outlook, obviously we’ve guided more than 5 top line on the five-year outlook. And as you said double-digit for specialty and high single-digit for vaccines. We are very clear that, that isn’t at an overall level is something that we’re expecting anyone to wait for, which is why we’re starting strong and starting now in ’22 with 5% to 7%. But clearly the mix of that is dependent on some of the pipeline, both coming [Technical Issues] and recent launches maturing into more scale contributions in specialty. But I’m going to ask Luke to comment a bit more on some of the shape of that and then perhaps how we can come back to you to talk about some of the pipeline catalyst further out in specialty medicines more broadly. But first of all, Iain on…

Iain Mackay — Chief Financial Officer

Easy answer, James, pretty much exactly what we wrote in our earnings release, which we expect pandemic sales were around GBP1.4 billion from Xevudy, that reflects binding agreement that we have in place at this point in time. And to the extent there are any further binding agreements that would inform any updates will provide those in a quarterly basis, okay.

Dame Emma Walmsley — Chief Executive Officer

So Luke in terms of momentum and outlook on specialty?

Luke Miels — Chief Commercial Officer

Yes, thanks, James. Look, I think the momentum, for example oncology is very strong. We’re getting five scripts for everyone that registry gets. Benlysta is very healthy. I think the primary challenges and we’ve placed this in the backup in the appendix, is just the continued slow recovery of ovarian cancer diagnosis which is still down by 22% and debulking surgeries are down by 17%. So that’s taking longer to resolve than we were expected, which is obviously very sad. And we expect when — we’re going to present the disease is going to be more advanced. And so that is having an impact. There was also some pricing pressure emerging in the IL-5 class in Q4.

Dame Emma Walmsley — Chief Executive Officer

And perhaps, Deborah, but before we go to Hal, obviously one of the areas is going to continue to build in contribution of the innovation in HIV, so Deborah to you first.

Deborah Waterhouse — Chief Executive Officer of ViiV Healthcare

Yes, so I think at the business investor update at the end of November, we committed to mid single-digit CAGAR between now and 2026 and that’s an acceleration of growth where we’ve been over the last few years, where if you remember we had — and about the last 3%, 1% and then obviously in 2021, we were at 3%, so you can see that progressive growth acceleration and we feel very positive about our ability to deliver that mid single-digit CAGAR on the back of the tremendous progress that we’ve made with Dovato but also the fact that you get more material contribution from Cabenuva, certainly 2022 and beyond and Apretude 2023 and beyond. So I’m feeling really excited and confident about the future in the HIV parts of specialty.

Dame Emma Walmsley — Chief Executive Officer

Thank you, Hal anything to add on catalyst to follow?

Hal Barron — Chief Scientific Officer and President, R&D

Yes, there has been a lot of catalyst in the last 12 months as I pointed out with the three regulatory approvals and the seven major filings, three pivotal data readouts in the Phase III start. I think it’s also important now that we have 64 medicines and vaccines in the pipeline, 22 of which are in late-stage pivotal studies. So we’re going to be seeing a lot of readouts. Most importantly in 2022, we’ve talked about the 11 key assets and in 2022, we’re hoping that up to seven of those will actually have readouts, including RSV-A in the first half, otilimab as I mentioned in the second half, Blenrep DREAMM-3 in the second half, RSV maternal which we should get data on the second half, the mening pentavalent ABCWY in the second half.

Jemperli we’ll have a readout both in the conversion of the GARNET study, as well as data and RUBY and as I mentioned earlier — a little earlier Phase IIb bepirovirsen for the BE-CLEAR study in HBV. And then of course complements the wonderful data that we received earlier with Apretude in the recent approval. So, really a lot — quite a lot of catalyst.

Dame Emma Walmsley — Chief Executive Officer

And I think fundamentally, James, it’s just worth reminding ourselves instead in new and specialty, our growth last year was 26% and even excluding the contribution from Xevudy, it’s 14%. So there’s a lot of reason for confidence in strong executional performance of growth and then of course all the pipeline to add to that.

Next question please?

Operator

The next question is coming from the line of Keyur Parekh from Goldman Sachs. Please go ahead.

Keyur Parekh — Goldman Sachs — Analyst

Hi, thank you. Hopefully you can hear me okay.

Dame Emma Walmsley — Chief Executive Officer

Yes.

Keyur Parekh — Goldman Sachs — Analyst

Two questions please, the first one for Deborah, just following up on your comments about the HIV, and I see that you’re guiding to about 2 billion Sterling and kind of revenue contribution from the long-acting regimens by 2026? But what I would be interested in Deborah is your perspectives on how do you see that long acting market developing beyond 2026 into the kind of 2030s given the news flow we’ve had from islatravir and kind of just the early feedback you’ve had on the PrEP launch? So just kind of, how are you framing that longer-term outlook for that business?

And then secondly, Hal many congratulations on all your successes and kind of, best of luck in your new role. But as you sit here today and look at the progress, kind of, Glaxo have made from an R&D perspective over the last few years. How much of what you set out to do at the start, have you achieved so far how much more, kind of, you think, you — kind of black sore the company needs to achieve? And what role do you think you might be playing in that from an non-executive perspective? Thank you.

Dame Emma Walmsley — Chief Executive Officer

Thanks very much, Keyur. Well, through it to Deborah and then Hal, please.

Deborah Waterhouse — Chief Executive Officer of ViiV Healthcare

Yes, so thanks for the question. So I mean we see the long-acting market from a treatment perspective to be about GBP4 million to GBP5 million in value by the end of the 2030 and actually by the end of the trends, but the end of the 2020s, we see at GBP4 billion to GBP5 billion in value for the PrEP market, but both the same cut of value from a long-acting [Technical Issues] 2020 decade.

I think despite the fact that we’ve seen islatravir have some challenges. We’ve seen that Gilead are also extremely committed to long-acting themselves with lenacapavir, and they outlined in their results obviously all the partners that they are looking at for lenacapavir. So I think what you’re hearing from both of the big players in the market is that there is a big opportunity to serve the needs of patients by delivering innovative new medicines, into both the prevention and the treatment parts of the market.

The other thing that I find encouraging, so obviously Merck will continue to look or fluctuate, but the piece that I think is really encouraging is the real energy around the evolution of the PrEP market in the United States. So if you remember, ending the epidemic is the commitment that there will be significantly less new infections as the decade progresses to the point at which there is a 90% reduction by 2030 and the government in the US is extremely energized at the moment around how they’re going to deliver against that target.

There’s a lot of dialog occurring and there’s a lot of encouraging sounds about how we could see that PrEP market evolve, given the only 23% of those that could benefit from PrEP are actually getting medicine today. So I think are the numbers that we talked about at the BIU in June. And again in November, I’ll still what we were expecting in terms of long-acting treatment market, long-acting PrEP market both each being around GBP4 billion to GBP5 billion by the end of the 2020.

Dame Emma Walmsley — Chief Executive Officer

The other thing is, I mean and maybe worth mentioning is the very exciting next-gen pipeline that’s coming through in longer-acting that even Ken covered off in November, when we get into a longer acting and beyond the near-term.

Deborah Waterhouse — Chief Executive Officer of ViiV Healthcare

Yes, we’re really excited about that. So we have, if you remember at three areas where we’re really focusing and at-home treatment and also long-acting treatment, which will be clinic delivered and then obviously, we’re focusing on cure. And so where we are today with Apretude and Cabenuva, we’re absolutely not stopping there, that’s why we say confident about our ability to move past the dolutegravir of exclusivity and still, you know, replace a lot of that revenue that is lost, and have a very vibrant HIV business at the end of the decade and beyond.

So obviously we’ve got integrated at the core, both these cabotegravir and then the next generation that we’ve agreed to in-license from Shionogi. And then we’ve got the partner options that we’re looking at and we should be able to pick a partner for cabotegravir for at-home and long-acting in 2024, as data readouts and inform [Technical Issues] really excited about the pathway, which is very clear before us and the choice points and win data will be available. I will say, very clear and we’ll keep you all updated.

Dame Emma Walmsley — Chief Executive Officer

Thank you, Hal.

Hal Barron — Chief Scientific Officer and President, R&D

Thanks for the comment and question Keyur. Firstly, I’m actually very proud of what we’ve — that in the R&D organization have accomplished over the past four years. There is so many different metrics one can use to highlight that today the pipeline has 64 medicines and vaccines, 22 of which are in pivotal studies. We have 13 novel assets in Phase III as Emma mentioned earlier, we’ve doubled the number of Phase III assets over the last couple of years, probably the most important metric that I look at is how much of the R&D success and the pipeline are driving the categories that we are proposing, which our top quartile relative to our peers.

And when you look back, there has been 13 new medicines and vaccines approved over the last 4.25 years or so and that’s driving about 60% of really terrific performance that we’ve committed to. And importantly on a risk adjusted basis, the late-stage pipeline and this again excludes all the Phase I and Phase II is expected on an adjusted basis to drive another 40% of that growth. So I think those are really important metrics, there’s quite of other metrics. But I think we’ve made it quite a bit of progress.

You asked, what’s not finished? Well, I think if you think about being the head of R&D at any pharma company or biotech company, you know, you never leave the job finish — the job, there is always more assets you can progress, there’s more programs, there’s more lifecycle innovation as long as the success rate is where it is. There’s still an enormous opportunity to transform how targets are discovered. And I’m very excited about how much progress we’ve made on using the human as the model organism, using human genetics functional genomics and machine learning to evolve our strategy. In fact, if you think about what’s coming, we have around 40 collaboration projects with 23 [Technical Issues] genetically validated target. We have 10 synthetic lethal programs that were internally developed, we have three with IDEYA, we have programs with the Broad, we have programs with [Indecipherable], a number of collaboration programs, the anti-sortilin program.

So a number of genetically validated target that over the next five to 10 years are going to evolve. I’m looking forward to my transition from being the CFO to the Board Member, the help Tony Wood, who is an outstanding leader and outstanding scientist and outstanding person. And I’m hoping that I can play some role and helping him evolve our strategy to be able to accomplish all these things that we’re hoping to do.

Dame Emma Walmsley — Chief Executive Officer

And I would just reiterate that what matters most in these transitions is extremely well planned and strategic and thoughtful succession. We are all very confident we’re going to accelerate the momentum of the execution of this strategy objectively and comfortably can really be seem to be bearing results already. And we’re absolutely thrilled that how is still going to be part of that is venture as a Board member as a science committee member and with some additional commitments. I know he is more than happily made to support the R&D organization, it’s advisory boards, some connectivity in his part of the world. And we are obviously very proud of him for his next steps to, and he is slightly for the path ahead.

Next question please? Hello?

Operator

And the next question is coming from the line of Graham Parry from Bank of America. Please go ahead.

Graham Parry — Bank of America Merrill Lynch — Analyst

Great, thanks for taking my question. So firstly, on the RSV vaccine looks like Pfizer’s on track to publish RCLs [Phonetic] for adults vaccine beta Q1 or Q2 possibly ahead of GSK? Are you seeing that the hurdle rates for both our vaccine and yours is the same level of protection, you saw J&J Cyprus Phase II trial? And how confident are you, you’ve actually can match those levels? And do you see that by not waiting for full RC season that Pfizer can gain any sort of time advantage to the market to you? Or is it just a seasonal issue?

And then secondly on COGS and that was negatively impacted by both Xevudy and write-downs in the quarter. I just wonder if you could quantify how much for each in basis points, then just the right sort of longer term COGS ratio ex-pandemic, we should be thinking about?

Dame Emma Walmsley — Chief Executive Officer

So briefly, Iain could you comment on COGS and then Hal on our RSV?

Iain Mackay — Chief Financial Officer

Graham, again, we provide a little bit of a steer in terms of the impact of Xevudy in terms of operating margin. We participate in about 27.3% of the economics from sales in Xevudy, so when you sort of translate that through to the overall profitability, we provide a little — some steer in our earnings release in terms of what that means. And there is within the team, a very strong focus on continuing to drive productivity and efficiency across the supply chain through COGS, and as we talked about in the investor update in June that focus remains consistent and is part of what informs our progress and operating profit growth in 2022 and beyond.

Dame Emma Walmsley — Chief Executive Officer

Hal?

Hal Barron — Chief Scientific Officer and President, R&D

Yes, thanks, Graham. Our RSV program is actually ahead of schedule that I mentioned, the enrollment is completed and we expect the data for the trial to readout, this half H1’22. In terms of — it’s important to keep in mind that we have a pretty unique vaccine, because we, as you know, have the protein with the ASO1 adjuvant. And we think this is very important component, because as I mentioned earlier, the elderly, who are obviously at risk for the complications of this infection. Over time lose their both adaptive and sense of being able to combat this infection and particularly you see a abnormality in their T-cell response. So we’re optimistic that the combination of the right protein [Technical Issues] which neutralizes both the RSV-A and B that forms of the virus, as well as having the T-cell modulatory component with the adjuvant will give us the highest chance of success in this — for this vaccine.

Dame Emma Walmsley — Chief Executive Officer

Thanks. Next question please?

Operator

Next question is coming from the line of Simon Baker, Redburn. Please go ahead.

Simon Baker — Redburn — Analyst

Thank you for taking my question. And just going back to Graham’s question on COGS, Iain you pointed out, the impact of Xevudy, but also in the press release you discussed other headwinds on the gross margin in 2021, presumably in light of the comments you made in R&D, SG&A and the guidance for operating profit, they will fall away in their entirety in 2022. But I just wonder if you could give us any other norms of Xevudy tailwinds and headwinds we should be thinking about for COGS in ’22? Thanks so much.

Iain Mackay — Chief Financial Officer

What I was referring to in ’21 was specifically some higher inventory cost within COGS and lower demand particularly within the vaccines business, that was one key driver. Another factor which was possibly more noticable within our consumer business, but as well as it was manage there — equally managed within the biopharma business was around input costs so freight as an example, where I think the team was incredibly successful in driving productivity to offset some of that inflationary pressures that focus and we believe capability continues through 2022. So there are a couple of factors that were unique to ’21 that I’ve mentioned that we do not see at this point in time recurring in 2022.

And then just that overall focus and driving efficiency productivity through the commercial cycle across our businesses in managing cost of goods sold overall or it feels a good track record over the course of next — over the last couple of years, we expect to be able to sustain over the coming years. So just — it’s good old fashion productivity through the supply chain. The procurement channels, good linkage with commercial cycle in terms of understanding demand in market and managing inventory accordingly.

Dame Emma Walmsley — Chief Executive Officer

Thank you. Next question please?

Operator

[Operator Instructions] And the next one is coming from Tim Anderson, Wolfe Research.

Tim Anderson — Wolfe Research — Analyst

Well, thank you. I have a question, just a pipeline question otilimab you call out the Phase III readout RA in the second half as an important 2022 catalyst. To me that Phase II data always look a little questionable. And I know Glaxo is only company chasing this mechanism sometimes that’s a red flag, because most of the time other companies crowd into new and exciting areas. So my question is your confidence in that readout and in this being a commercially meaningful asset? I’m trying to figure out how much this sort of thing is in your kind of longer term forecast? And how much risk adjusting you do on this particular asset? Thank you.

Dame Emma Walmsley — Chief Executive Officer

Hal?

Hal Barron — Chief Scientific Officer and President, R&D

Yes, you know, Tim thanks for the question. Otilimab is a pretty interesting pathway, it’s very novel. So typically when you have such a novel pathway, you don’t see the so-called crowding until, of course, the data readout positively, which then results in crowding. I’m pretty optimistic this trial will have to be honest, you have to remember that there is a design where it’s against placebo for the first 12-weeks and then active comparator against IL-6 and 1 one study and the JAK class in the other. We — the signal for efficacy, I think was pretty clear, but your point is well taken that not every endpoint in the Phase IIb was positive, but quite a few work.

I think the area that is little more speculative, but again, I’m cautiously optimistic is where we saw signals to a more significant reduction in the clinical pain scores then one would expect for the reduction and things like daprodustat and TRP levels that are biochemistry measures of the disease severity. [Technical Issues] that data carefully and overlaid it with the preclinical data where we had now stated with the CCL17 knock out, which as I mentioned earlier, the most over-expressed protein, when GMP SF has applied the mono site and in that CCL17 knock out mouse study in an osteoarthritic neuropathic pain model. There was a dramatic reduction in pain with the knock out and so they gave us more credibility that signal if you will, in Phase IIb might be real.

And again we’re going to have readout from the CCL17 MAB data this actually probably in Q2 maybe Q3. And I think that will give us further confidence in the program. But again just to highlight I’m reasonably optimistic that this will actually benefit patients it will be a novel class and hopefully we’ll see some important reductions in pain. Maybe I can just turn it over to Luke to comment on his interest in the commercial component and how we see that fitting in the landscape of RA patients.

Luke Miels — Chief Commercial Officer

Sure. Thanks, Hal. I mean, thanks, Jim for the question. I mean, the numbers of patients here enormous right? I mean, there is about 1 million in the US on biologic subject, many of them are cycling, as we know. What’s interesting, if you look at new data with JAKs we have market research that indicates about 65% of doctors want to reduce the usage of JAKs, and that they could be an opportunity for alternative non-JAK, non-TNF mechanisms for about 40%. So there is clearly a demand for patients. I think the genericization in biosimilars or it’s going to move patients to — on to targeted therapies earlier and therefore we’ll cycle earlier. I think for the other programs there’s been TMC assessed in the past and a number of them have had some issues in pre-clinical non-human primate models, etc.

So again, hopefully we can thread the needle here as Hal said contract 3, I think is really interesting against the IL-6, which is naturally a primary competitor. And then of course we’ve got contracts 1 and 2 against [Indecipherable] and methotrexate by itself. So I think an interesting program.

Dame Emma Walmsley — Chief Executive Officer

Thanks. Next question, please?

Operator

Next question is coming from the line of Emmanuel Papadakis from DB. Please go ahead.

Emmanuel Papadakis — Deutsche Bank — Analyst

Thank you for taking the question. Maybe a question vaccines these flu market outlook has been pretty topical of late, we’ve heard market leader’s talked length about reasons to believe in Brazilian outlook for [Indecipherable] quadrivalent vaccine. In fact, I would love your perspective on the room for mRNA based vaccines to improve upon both the production aspects and risk benefit current like based vaccines over coming years, given you have some involvement in both sides of that equation? And perhaps you could also take the opportunity to give us a quick update in queue of that partnership on both the second-gen COVID and lead programs. Thank you.

Dame Emma Walmsley — Chief Executive Officer

Sure. Why don’t we hear from Roger. Just on the more strategic outlook for flu, I know, — we also cover that at the Capital Markets Update briefly and then Hal come back to you in terms of the mRNA approach.

Roger Connor — President, Vaccines & Global Health

Emmanuel, thanks very much for the question. I think as we covered last year that the update we see flu is a real opportunity area to be honest, that the significant disease burden as you well know, but also when you look at flat or vaccine efficacy, it’s the one area that stands out is crying over for innovation to move and on average efficacy level of 50% some way higher. I think mRNA is a very exciting technology, it’s one that we are investing in significantly. It’s one that we think could potentially differentiate as well. I think the opportunity is that differentiation and our cure of that partnership with Hal, which I will go into. We’re looking at both flu and also looking at Universal flu option, as well.

I wouldn’t forget Ag is something that’s going to be ruling of the technology for a number of years and we will continue to maximize that, but we are allocating significant capital into the mRNA play to ensure that we look to differentiate. Obviously, the challenge with mRNA and a multivalent vaccine which flu is trying to solve this reactogenicity ceiling, actually that you can help with mRNA and I think it’s going to take a little bit of time to optimize and the mRNA platform to be able to deliver that as well. But our strategy is clear continue to maximize flu in the ag business to develop our peers in mRNA platform that can get us a flu solution to deliver a higher performing flu efficacy.

Hal Barron — Chief Scientific Officer and President, R&D

Yes. Thanks, Roger. Thanks Emmanuel for the question. I think it’s pretty clear the world now that mRNA is a disruptive technology that’s really going to transform to some extent how we think about vaccines, both because of its advantage in terms of speed from sequence of a virus or the knowledge of what virus is going to be endemic at that phase like in flu with a lot, you have to figure that out, the more likely you are to get [Technical Issues] variance in your vaccine. And so that’ll be a unique opportunity.

And as alluded to by Roger, the other thing is that if you can have a poly bandwidth vaccine, the efficacy is likely to go up relative to a monovalent vaccine. So mRNA is — has a significant potential in flu and we should be in the clinic with the multivalent mRNA vaccine in 2022 [Technical Issues] with CureVac. I think the key thing with multivalent vaccines in mRNA is of course the more transcript you put into a patient the risk is higher reactogenicity some of that somewhat solved by modifying the basis. But even with that as we saw from some of that in their data, we’re going to have to continue to work on that.

And one of the strategies that we’re pursuing that we’re excited about is whether we can lower the dose of the transcript by optimizing its stability and how effectively it’s translated [Technical Issues] more protein for a given amount of mRNA. And we think that the proprietary technology developed by CureVac with this optimization of the flanking the transcript the five prime and three prime regions that were done through some pretty sophisticated machine learning. We think this will allow us to lower the dose or if you could think of it is keeping the same dose. But with a larger number of valence and have a both immunogenic and well tolerated limited reactogenicity to be able to develop a best-in-class flu vaccine.

Iain Mackay — Chief Financial Officer

I should also mention just a — complete this we’ll have two other mRNA vaccines in the clinic this year as well for COVID, so at least three mRNA vaccines in 2022.

Dame Emma Walmsley — Chief Executive Officer

And Greg and the new vaccines leadership.

Hal Barron — Chief Scientific Officer and President, R&D

Yes, yes.

Dame Emma Walmsley — Chief Executive Officer

Thank you. Next question please?

Operator

Next one is is coming from Jo Walton from Credit Suisse. Please go ahead.

Jo Walton — Credit Suisse — Analyst

Thank you. I’m afraid, I’m going to go back to the margin question. On Page 24 you tell us, you’re going to have 5% to 7% top line growth; 12% to 14% adjusted gross all excluding COVID and we know that includes 2 points from Gilead. On Page 36, you tell us that SG&A and R&D are going to go up in line with sales and it’s the COGS, that’s going to go out less than sales? So there is a very big COGS improvement that we should expect in 2022. So my question is, if we were and we obviously don’t have this data to look at just the COGS of new GSK. How far a drift of your peer group do you think you are? So that we can get some guide as to whether the majority of the margin gains that we’re expecting, not just in 2022, but in ’23, ’24 etc, are going to come from COGS? And how much are going to be able to come from a winding down of SG&A, I’m assuming R&D will continue to grow strongly? Thank you.

Iain Mackay — Chief Financial Officer

Yes. So we’ll say and we say again, Jo, is that we would expect to grow SG&A, and this is very much customer facing SG&A, so it’s focused on supporting top line growth and engagement with patients and customers. So the — if you like the component that is oriented around functional support still as a trajectory that is flat to down. SG&A would expect to see similar levels, but slightly below revenue growth and the same is true from an R&D perspective, so it will continue to grow. It’s going to be similar to, but possibly slightly below revenue growth.

In terms of productivity coming through cost of goods sold and part of this is driven by top line. So we are seeing a change in mix in the portfolio over the period 2022 to ’26 moving to about 75% of the revenues coming from specialty and vaccines, moving to 25% coming from the General Medicines portfolio. And that mix change is an important part of the change overall. Now, when you talk about geographic mix, we remain broadly stable to where we are. So we’ve got about 40% for revenues in the US now, by ’26 we’d expect about 40% of our revenues to be US, as well from biopharma perspective. But that change in mix of new — of specialty medicines and vaccines to 75% versus 25% is an important component of the overall gross margin story. Notwithstanding the continued delivery of productivity and synergies coming through the supply chain. So those are key dynamics that are coming through there.

Dame Emma Walmsley — Chief Executive Officer

We are also having a bit of a one-year recovery of COVID D&A and I don’t know, we’re keeping cost very much under control on that, but we are expecting [Technical Issues].

Iain Mackay — Chief Financial Officer

Hey absolutely, but very much within the guidance that we provided today, Emma, yes.

Dame Emma Walmsley — Chief Executive Officer

Okay, next question please?

Operator

The next one is coming from the line of Steve Scala from Cowen. Please go ahead.

Steve Scala — Cowen — Analyst

Thank you very much. It looks as though the contrast 1, 2 and 3 trials about otilimab are well past their primary completions. They have conventional endpoints, so there is no events to wait for? So is the data in-house and how — I have to say you do sound more confident today than you’ve been in the past? Or is there a delay? And why want to filing be earlier than 2023? Thank you.

Iain Mackay — Chief Financial Officer

Thanks, Steve. No, I have not seen the data, about to see the data, but I have not. And the reason is and you’re absolutely right that it’s a 12-week end point, it’s not event driven, so that shouldn’t be the problem. The issue is the data remains blinded with all these studies to for the 52 week follow-up, because of the interest in secondary endpoints of being — having the active recruiter phase of the program. So in order to maintain the integrity of the trial blend for a longer period of time.

Dame Emma Walmsley — Chief Executive Officer

Next question please?

Operator

Next question is coming from the line of Andrew Simon Baum from Citi. Please go ahead.

Iain Mackay — Chief Financial Officer

Andrew?

Andrew Simon Baum — Citigroup Inc. — Analyst

Thank you. Question on BCMA, two parts. Firstly, [Technical Issues]. Yes could you hear me?

Dame Emma Walmsley — Chief Executive Officer

Yes, we can hear you. Yes, I am.

Andrew Simon Baum — Citigroup Inc. — Analyst

Hello?

Dame Emma Walmsley — Chief Executive Officer

Andrew, we can hear you. Yes.

Andrew Simon Baum — Citigroup Inc. — Analyst

Hello?

Dame Emma Walmsley — Chief Executive Officer

Right.Yes, perfect. So…

Andrew Simon Baum — Citigroup Inc. — Analyst

Yes, perfect. So…

Dame Emma Walmsley — Chief Executive Officer

Go on.

Andrew Simon Baum — Citigroup Inc. — Analyst

I can hear you too so here we go. The question is on BCMA and DREAMM-5 with the gamma secretase and you recently expanded that cohort. It’s an open-label trial. GSK has of late talked more about scheduling dose fractionation and less focus on the benefits of GSI. Given that is open label, given you’ve expanded the cohort, perhaps you could share what you’re seeing. And then secondly also on BCMA, there’s been some recent data published with the CAR-T suggesting that BCMA CAR-Ts were associated with Parkinson’s type syndrome, BCMA expression of substantia nigra. So, the question is do you have any evidence that belantamab crosses the blood-brain barrier? I’ll stop there. Thank you.

Dame Emma Walmsley — Chief Executive Officer

Thanks, Andrew. Hal?

Hal Barron — Chief Scientific Officer and President, R&D

Well, thank you. Andrew. Let me try to address that. It’s a really interesting question about the Parkinson’s. We have no evidence to suggest, and I’m reasonably confident that it doesn’t, the antibody crosses the blood-brain barrier so to the extent that it is an on-target effect. We’re not observing that clinically and I wouldn’t expect us to. I can look into little bit more detail about that later, but I’m pretty confident it’s not crossing the blood-brain barrier. But it’s an interesting point you make about the CARs. As you know, the rationale for the combination of the GSI with Blenrep was that it should be able to increase the density of BCMA on the plasma cells or maybe any cell, but the plasma cells of interest and therefore be able to obtain responses at lower doses and we hope that at lower doses, there would be less ocular toxicity. It’s one of the four levers that we’re using to try to improve the benefit risk ratio and I’ll go into the three in a second.

We have seen some open label data and, as we said, it is encouraging. It’s small numbers and I think we’ve all seen examples where small numbers of encouraging data doesn’t always translate. But the data was definitely encouraging enough that we moved into a randomized setting so using the DREAMM-5 platform to begin a more robust program where we both have larger number of patients, but also a control arm to make sure that it’s not confounded by baseline covariance that can occasionally happen. But I can say that our optimism was based on seeing data and we — as you know, we’re using doses at the 0.92 milligrams per kilogram level, which at least in the DREAMM-1 and 2 studies was inactive. So, we think that that’s a reasonable way of assessing our level of optimism. But mid-year this year we should have much more robust data set, hopefully with some control patients and be able to be clear with the value that this could provide to move into frontline.

As you know, the other three levers that we’re looking at to optimize this program are to see if the combination of Blenrep with standard of care, whether it’d be with Pomalidomide or Darzalex or Velcade or various other standard of care reagents, would allow us to be able to reduce the dose to further maximize its benefit risk. We’re also looking at something relatively simple, which is in the phased pivotal DREAMM-2 study, the protocol had dose holding when Grade 3 ocular tox was identified, probability to reduce Grade 3 and above ocular toxicity is limited if that’s when you hold the dose. Given the profound efficacy that we’re observing in multiple different trials now, we’ve decided to hold the dose when we see Grade 2 ocular tox, which in theory and actually observed data from ASH suggest that the ocular tox is going down further. And maybe even the most important of all these, who knows, is going to be that we’re altering and exploring different schedules.

So as you know in DREAMM-2 in the approved dose of [indecipherable] later lines using 2.5 mix per Q3 weeks. We’re looking at Q4, Q6, and even Q8 dosing at doses of 2.5, 1.9, and even lower and seeing if Cmax versus trough is going to have an impact on both efficacy and hopefully reduce ocular tox. So those four levers, if you will, all being studied independently and the ability to use them as modules and combine them turns them into third, second which we’re reasonably confident in and maybe even frontline. We’ll have data mid-year to help you understand that.

Dame Emma Walmsley — Chief Executive Officer

Thanks, Hal. Next question, please.

Operator

Next one is coming from Laura Sutcliffe from UBS. Please go ahead.

Laura Sutcliffe — UBS Investment Bank — Analyst

Hello. Thank you. Could we hear about the HIV, please? There’s been some commentary in recent days and Gilead talking about a tougher first quarter 2022 than 2021 based on co-pay scheme in the US and other gross to net dynamics. Is there anything we should be thinking about along those lines for your portfolio in terms of it being more aggressive this year than it was last year? And then just related given the wider importance of the access to medicines piece at Group level, is there anything you see changing on your ESG profile or external rankings, whichever one do you consider to be most meaningful, when Consumer leaves the Group later this year? Thanks.

Dame Emma Walmsley — Chief Executive Officer

So on the broader ESG and then we’ll come to [Technical Issues] see us continuing to seek to make leadership in ESG a priority for GSK and we will be updating our reporting on that, frankly, to make it at a simpler, more transparent, and easier for us to be held to account across the six key areas we’ve identified as priority for ESG; whether that be in access, in governance, in diversity and inclusion. And so, we’re really looking forward to discussing that with you. You will also be familiar with the fact that it is at a I would say focused level that’s included in the accountability from an incentive point of view as well. It really is something that has long been at the core of who we are as a company, it never replaces GSO. But I’m hoping that we are able to continue to get the recognition for the very much leading rankings we have, but also transparency and simplicity of reporting in a way that is of course validated by third parties as opposed to us just marking our own homework. But maybe I come back to Deborah please, the HIV question.

Deborah Waterhouse — Chief Executive Officer of ViiV Healthcare

Thanks, Laura. So if I think about the PrEP market and treatment, two separate markets. So in the treatment market, it continues to be guideline driven choice and access so absolutely crucial and we see that market as continuing to be relatively stable. Obviously the Build Back Better bill will affect the whole industry so let’s see how that plays out. But in terms of if you assume that’s taken to one side, the treatment market looks fairly stable and continues to be guideline driven, but choice and access is at the core. In the PrEP market, it’s a little bit different to that. So obviously we’ve got a generic of Truvada in the market. Gilead have moved quite a lot of the market away from Truvada into Descovy, but I think that’s taken obviously some negotiation with payers to make that happen. And we are in dialog with payers at the moment over ensuring that we can get broad access to APRA achieved at a price that rewards our innovation. So, I think you should look at treatment and PrEP as a little bit separate. But in the main, the treatment market is five times bigger than the PrEP market so the core of where our revenue and our profit comes from remains stable.

Dame Emma Walmsley — Chief Executive Officer

And the other core is having truly differentiated medicines and medicines to get approved and stocked in the trials for being so significantly better than existing standard of care, deliver a value that is worth paying for. Next question, please.

Operator

Next one is coming from the line of Seamus Fernandez from Guggenheim. Please go ahead.

Seamus Fernandez — Guggenheim Partners — Analyst

Thanks very much. So, my question is actually on HBV. Just wondered, Hal, if you could give us your thoughts on the HBV ASO versus antibody-based approaches as well as just your general thoughts on how we’re likely to ultimately see a real break in HBV cures. Is that going to require a combination of a treatment-based approach followed by a vaccine in your view or when we see these data later this year, do you think that either in ASO or perhaps RNAi based approach will really be viewed as the preferred way to then pursue cures? Thanks.

Hal Barron — Chief Scientific Officer and President, R&D

Thanks for the question. It’s a really good question. It’s really hard to predict the future on this, but it is likely that what we’ll see with the ASOs is a couple of things. First, I think it’s pretty clear that not all ASOs are behaving the same way. So I think over the next 6 to 12 months, we’ll get more clarity on the value of the various approaches of ASOs, GalNAc or unmodified. I think we’ll get a good sense and I’m optimistic from our IIa data that the ASO approach will deliver efficacy as it relates to lowering the surface antigen. One of the hypotheses is that this virus makes a massive amount of surface antigen and one compelling hypothesis that’s pretty well supported from pre-clinical data is that that overwhelms the T-cells and it results in T-cell exhaustion and that by lowering the HBV surface antigen levels, the immune system may be able to kick in.

My guess is that that will work in some people, but probably a very small minority and what’s going to be needed is combinations, whether that’s a combination with a NUC interferon or possibly even something like a checkpoint blockade like PD-1 or maybe even a STING agonist, things that are going to increase the interferon production from the Cooper cells and other cells responsible for the unit. I do think though that in the end after we figure all this out and hopefully we’ll have some compelling data mid-year with the CLEAR study that we’ll be able to embark on these combination studies in a thoughtful manner and ultimately reduce the really enormous burden, the 250 million people living with chronic hep B infection and thousand of people dying from it annually. If we can make a dent in the functional cure rate, which is a very high bar, that will be one of the more significant advances in medicine.

Dame Emma Walmsley — Chief Executive Officer

Thanks. Next question, please.

Operator

Next one is coming from the line of Kerry Holford from Berenberg. Please go ahead.

Kerry Holford — Berenberg Bank — Analyst

Thank you. Just a follow-up on RSV of older adults, please. Hal, you mentioned targeting the Zejula so I guess you’re working on the assumption of a launch next year. And I would just like to understand what gives you the confidence that the regulators accept a data package from one RSV only given your and competitor studies will continue further? Is there a risk that the regulators want to see more data across more seasons before moving to approve a vaccine here and do you think that decision will ultimately be influenced by the clinical efficacy you and your peers deliver? Thank you.

Hal Barron — Chief Scientific Officer and President, R&D

Thanks, Kerry. I think we’re pretty confident in our strategy, but of course any approval and any recommendation for use is going to depend on the risk benefit. We’re expecting a reasonably high success rate and effectiveness rate for this vaccine and being able to show it works well in the very subgroups of interest as well as determining whether this is going to be effective in an equally significant way across the season. In other words, how effective the duration of efficacy relates. So when we have all that data, I think we’ll be able to have a better sense. But we’re pretty confident in our strategy of the trial design, the sample size, the effect rate, and the risk benefit that would endure. I should also mention that of course that the ASO is something that we have enormous amount of experience within a very, very large safety database. So, it’s really going to be driven by the efficacy and probably viewed by ASP in aggregate all the data as well as how the regulators will reach an individual company.

Dame Emma Walmsley — Chief Executive Officer

Thanks. Next question, please.

Operator

Next question is coming from the line of Mark Purcell from Morgan Stanley. Please go ahead.

Mark Purcell — Morgan Stanley — Analyst

Yes. Thank you for taking my questions. Just again on RSV older adults and getting a bit more perspective, I wonder if you could sort of help us understand how we can assess whether the ASO1 adjuvant will provide a potential durability advantage from the initial data set, your own data sets, Renwa and Evergreen. What should we be looking out for which suggests you might have a full T-cell restoration benefit? And then just a related question., Are there any IP considerations around the pre-fusion subunit target? Clear you were first mover when it came to HPV and you secured a royalty stream. Is there something such that we should think that that situation could occur with RSV?

Hal Barron — Chief Scientific Officer and President, R&D

Thanks, Mark. Why don’t I tackle the first part and I don’t think there’s any IP issues that we’re unaware of, but I’ll let Roger jump in if he knows something I don’t. I think it’s going to be challenging to figure out the impact of the adjuvant on duration as it relates to multi-year because of course it will have multi-year. And in fact when you look at Shingrix, it obviously took eight years to figure out that it worked so well for eight years. I do think there is going to be hints potentially one could look forward to be under powered for these, but I think they might be directionally useful. First of all is the point estimate of benefit greater than other trials. I think that’s one thing to look for that would suggest that the adjuvant is doing something unique. It could also be that in subgroups, particularly the older 75 and particularly immune to [Technical Issues], one might see a signal that looks more prominent than non-adjuvant and that might give you a signal.

And as I said few minutes ago, there is a way of looking at the duration of efficacy as in of the season. So if the efficacy with a non-adjuvanted vaccine for instance is pretty significant in the beginning of the season, but wanes during the end of the season and for instance ours would have a treatment effect that’s impressive and constant over that period of time, one might be more confident that there could be a duration effect when one looks longer. But at the end of the day, we’re going to have to look for longer-term follow-up and we have studies already underway, but I’ll explore that, Roger, did you want to add anything?

Roger Connor — President, Vaccines & Global Health

Yes. Just on the IP. There’s no IP restrictions on the pre-F nor is there any IP direct ownership from our perspective that would generate income. So, that’s not something that we should be thinking or worrying about.

Dame Emma Walmsley — Chief Executive Officer

Okay. Think we got time for just one more question and we have one more question. I’m sure it maybe Brian.

Operator

Yes, we do. Our last question for today’s call comes from Peter Welford from Jefferies. Please proceed.

Peter Welford — Jefferies LLC. — Analyst

Hi. Thanks for squeezing me in. Just a question just on RSV vaccine again in the older adults. Can I just ask when we think about the COVID data, with hospitalization and decreases that we saw that of 90% plus in some cases. And perhaps could you give us some sort of idea of what we should be thinking about for the RSV Phase III with regards to what is a reasonable reduction in hospitalization? It’s in the study map, 80% or so reduction a sensible sort of ballpark that we should be guided clinically meaningful. And perhaps just a comment. I think you probably should have been [Technical Issues] sort of the massive understatement from my calculation, it seems as though you had strong double-digit growth is probably over 40% in Shingrix. Can you just remind us if the 2.5 billion, that’s roughly what I get to from your guidance, is entirely can be met with existing manufacturing and it should be then considered future growth from that. Again are you confident that you can sustain that level of growth and that level of demand with your existing capacity that you have without the need to service? Thank you.

Dame Emma Walmsley — Chief Executive Officer

So let me be extremely utterly unequivocal, we are not supply constrained and we’re very confident on doubling our Shingrix sales from 2020 levels in terms of the outlook that we gave in the update last year. We feel very good about getting a bounce back. Obviously there’s been a bit of COVID disruption, but as Luke outlined, the momentum is very good. I don’t know, Hal, if there’s anything further we want to add..

Hal Barron — Chief Scientific Officer and President, R&D

I’ll just say that of course it’s very hard to predict the efficacy. But as we look at our own immunogenic and the aggregate packages that have been presented, I think we’ve — and in discussions with clinicians, we’re pretty confident that any effect of more than 50% is clinically meaningful, an effect greater than 70% is a very good response and it will be a very successful vaccine, and should we get efficacy above 80% that’s outstanding.

Dame Emma Walmsley — Chief Executive Officer

Great. With that, thank you very much everybody. We shall look forward to gathering with some of you over the next few days. We’re really looking forward to an extremely exciting year ahead for GSK. Whether that’s doing everything that we said we were going to do, the delivery of the step change in growth, reading out of these very exciting pipeline milestones, continuing to accelerate the execution of all that we already have in hand, and plans of very competitive execution of what’s to come, and of course the tremendous unlock of value that’s going to come with the creation of a completely unique FTSE leading world leader dedicated to consumer healthcare. And I know Brian is enormously looking forward to the long Q&A session on that at the end of this month. Thanks, everybody. Catch up soon.