‘How well do GSK balance demands for shareholder value with the need for corporate social responsibility?’

Europe United Kingdom Pharmaceuticals Pharmaceuticals

24 July 2008

GlaxoSmithKline Reuters: GSK.L Bloomberg: GSK LN Exchange: LSE Ticker: GSK

Strategy seems sensible but delivery will take time Brian Bourdot Research Analyst (+44) 20 754-75875 [email protected]

Michael Leuchten Research Analyst (+44) 207 545-0470 [email protected]

You can't turn a supertanker on a dime -- HOLD Q2 numbers indicated underlying business performance in-line with expectations. New CEO's strategic vision aimed at increasing efficiency and exploiting a broader range of opportunities seems sensible, but investors are paying for big pharma revenue growth and any impact on this will take years to realise. Stock trading at fair value. HOLD.

Forecasts and ratios

Year End Dec 31 2007A 2008E 2009E 2010E

Revenue (GBPm) 22,716 23,433 23,273 23,842

DB EBITDA (GBPm) 8,942 8,519 9,175 9,630

DB EPS (GBP) 96.55 101.81 102.53 108.71

OLD DB EPS (GBP) 96.55 101.39 103.50 110.24

% Change 0.0% 0.4% -0.9% -1.4%

DB EPS growth (%) 3.4 5.4 0.7 6.0

P/E (DB EPS) (x) 13.8 12.0 11.9 11.2

EV/EBITDA (x) 8.9 8.5 7.6 7.0

DPS (GBP) 53.00 56.00 59.00 62.00

Yield (%) 4.0 4.6 4.8 5.1 Source: Deutsche Bank estimates, company data

Deutsche Bank AG/London

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access IR at http://gm.db.com or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.

Results Review

Hold Price at 23 Jul 2008 (GBP) 1,222.00 Price Target (GBP) 1,275.00 52-week range (GBP) 1,386.00 - 1,001.00

Price/price relative

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FTSE 100 INDEX (Rebased)

Performance (%) 1m 3m 12m Absolute 8.8 9.0 -4.0 FTSE 100 INDEX -5.3 -11.8 -19.0

Stock & option liquidity data

Market cap (GBP)(m) 63,634.9 Shares outstanding (m) 5,246 Free float (%) – Option volume (und. shrs., 1M avg.) 56,054,545

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Q2 results broadly in-line; new strategic vision outlined GSK’s Q2 EPS of 27.2p beat DBe 25.0p and consensus 25.0p although in our view the underlying business is on track to deliver management’s unchanged guidance. The buyback will be moderated although that has no meaningful impact on our valuation. New CEO Andrew Witty outlined his strategic vision, which is aimed at maximizing GSK’s growth opportunities in an efficient manner. Tangible growth impact of strategy may take time to be realised While sensible, we feel that GSK’s ability to continue to grow Pharma revenues longer term will drive the stock price, and this still relies to a great extent on launching new blockbusters in the US. Greater R&D productivity from a more entrepreneurial, efficient approach will likely take years to have a measurable impact on revenues. Efficient allocation of capital could, however, have a nearer- term impact on earnings. Valuation and risks We make no change to our 1,275p DCF-derived 12-month target, with a WACC of 8.5%, an asset beta of 0.9 (prospective but based on historical observation), a risk- free rate of 4.7% (30-year bond rate), a 4.5% equity risk premium, a terminal growth rate of 5% (nominal GDP), and terminal multiple of 11.8x (the EU large-cap pharma sector multiple). Upside could come from the impact of new strategy on costs or growth opportunities and GSK retains significant cost flexibility. Downside risks include development setbacks such as a negative FDA decision for Promacta in short-term ITP; and increased competition to Advair in asthma and COPD.

24 July 2008 Pharmaceuticals GlaxoSmithKline

Page 2 Deutsche Bank AG/London

Fiscal year end 31-Dec 2005 2006 2007 2008E 2009E 2010E

Financial Summary DB EPS (GBP) 81.98 93.40 96.55 101.81 102.53 108.71 Reported EPS (GBP) 81.98 94.54 93.66 90.10 98.65 107.26 DPS (GBP) 44.00 48.00 53.00 56.00 59.00 62.00 BVPS (GBP) 129.3 167.1 178.7 145.0 156.4 173.7

Weighted average shares (m) 5,674 5,643 5,524 5,207 5,008 4,857 Average market cap (GBPm) 76,110 82,425 73,809 63,635 61,198 59,352 Enterprise value (GBPm) 77,330 84,842 79,826 72,116 69,647 67,477

Valuation Metrics P/E (DB) (x) 16.4 15.6 13.8 12.0 11.9 11.2 P/E (Reported) (x) 16.4 15.4 14.3 13.6 12.4 11.4 P/BV (x) 11.36 8.04 7.16 8.43 7.81 7.04

FCF Yield (%) 6.6 3.6 5.5 7.4 8.6 9.4 Dividend Yield (%) 3.3 3.3 4.0 4.6 4.8 5.1

EV/Sales (x) 3.6 3.7 3.5 3.1 3.0 2.8 EV/EBITDA (x) 10.2 9.5 8.9 8.5 7.6 7.0 EV/EBIT (x) 11.2 10.9 10.5 10.0 9.2 8.4

Income Statement (GBPm) Sales revenue 21,660 23,225 22,716 23,433 23,273 23,842 Gross profit 17,618 19,346 18,748 18,667 18,898 19,355 EBITDA 7,596 8,939 8,942 8,519 9,175 9,630 Depreciation 722 1,131 1,349 1,329 1,568 1,620 Amortisation 0 0 0 0 0 0 EBIT 6,874 7,808 7,593 7,190 7,607 8,011 Net interest income(expense) -194 -65 -191 -449 -496 -492 Associates/affiliates 52 56 50 46 33 16 Exceptionals/extraordinaries 0 0 0 0 0 0 Other pre-tax income/(expense) 0 0 0 0 0 0 Profit before tax 6,732 7,799 7,452 6,787 7,144 7,535 Income tax expense 1,916 2,301 2,142 1,957 2,057 2,170 Minorities 127 109 96 104 109 114 Other post-tax income/(expense) 0 0 0 0 0 0 Net profit 4,689 5,389 5,214 4,726 4,978 5,250

DB adjustments (including dilution) 0 -65 161 614 196 71 DB Net profit 4,689 5,324 5,375 5,341 5,173 5,321

Cash Flow (GBPm) Cash flow from operations 5,958 4,357 6,161 6,319 7,190 7,629 Net Capex -906 -1,372 -2,099 -1,636 -1,918 -2,034 Free cash flow 5,052 2,985 4,062 4,683 5,271 5,594 Equity raised/(bought back) -679 -881 -3,244 -3,176 -1,736 -1,725 Dividends paid -2,390 -2,594 -2,793 -2,925 -2,899 -2,937 Net inc/(dec) in borrowings 0 0 0 0 0 0 Other investing/financing cash flows -1,077 -888 -1,396 -723 -574 -575 Net cash flow 906 -1,378 -3,371 -2,140 62 357 Change in working capital -323 -471 -538 70 -8 -9

Balance Sheet (GBPm) Cash and other liquid assets 4,209 2,005 3,379 4,988 4,988 4,988 Tangible fixed assets 6,652 6,930 7,820 8,397 9,171 9,767 Goodwill/intangible assets 4,079 4,051 5,826 6,103 5,894 5,712 Associates/investments 1,301 1,330 1,482 739 739 739 Other assets 10,957 11,237 12,496 12,426 12,600 12,779 Total assets 27,198 25,553 31,003 32,653 33,391 33,986 Interest bearing debt 6,471 5,490 10,571 13,891 13,830 13,473 Other liabilities 13,157 10,415 10,522 11,071 11,285 11,616 Total liabilities 19,628 15,905 21,093 24,962 25,114 25,089 Shareholders' equity 7,311 9,386 9,603 7,374 7,716 8,304 Minorities 259 262 307 317 347 379 Total shareholders' equity 7,570 9,648 9,910 7,690 8,063 8,682 Net debt 2,262 3,485 7,192 8,903 8,842 8,485

Key Company Metrics Sales growth (%) 8.4 7.2 -2.2 3.2 -0.7 2.4 DB EPS growth (%) 23.9 13.9 3.4 5.4 0.7 6.0 EBITDA Margin (%) 35.1 38.5 39.4 36.4 39.4 40.4 EBIT Margin (%) 31.7 33.6 33.4 30.7 32.7 33.6 Payout ratio (%) 53.2 50.3 56.2 61.7 59.4 57.4 ROE (%) 71.1 64.6 54.9 55.7 66.0 65.5 Capex/sales (%) 5.5 6.8 9.4 7.0 8.2 8.5 Capex/depreciation (x) 1.6 1.4 1.6 1.2 1.2 1.3 Net debt/equity (%) 29.9 36.1 72.6 115.8 109.7 97.7 Net interest cover (x) 35.4 120.1 39.8 16.0 15.4 16.3

Source: Company data, Deutsche Bank estimates

Model updated:10 July 2008

Running the numbers Europe United Kingdom Pharmaceuticals

GlaxoSmithKline Reuters: GSK.L Bloomberg: GSK LN

Hold Price (23 Jul 08) GBP 1,222.00

Target price GBP 1,275.00

52-week Range GBP 1,001.00 - 1,386.00 Market Cap (m) GBPm 63,635 USDm 127,053

Company Profile GlaxoSmithKline is a research-based pharmaceutical group that develops, manufactures and markets vaccines, prescription and over-the-counter medicines, as well as health-related consumer products. GSK has leadership in four major therapeutic areas anti-infectives, central nervous system, respiratory and gastro-intestinal/metabolic and also has a growing portfolio of oncology products. GSK was formed in 2000 through the merger of Glaxo Wellcome and SmithKline Beecham and currently ranks second in market capitalisation within the global pharmaceutical industry.

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Brian Bourdot +44 20 754-75875 [email protected]

24 July 2008 Pharmaceuticals GlaxoSmithKline

Deutsche Bank AG/London Page 3

Strategy sounds sensible; delivery will take time More reliable, lower risk growth sought – can GSK have it all?

Given GSK’s Q2 results were not especially remarkable (testament to the quality of guidance provided as well as GSK’s good fortune at avoiding traffic accidents this year), our main focus was on the strategy update provided by new CEO Mr Andrew Witty at his first official investor outing.

Mr Witty outlined a vision that had three key elements:

Growing a diversified, global business. GSK will rely less on developing blockbuster pharmaceuticals “on-tap”; rather it will seek to optimize all areas of its business, through better positioning in natural growth areas like emerging markets; exploiting opportunities in Japan and doing more with Consumer Health.

Delivering more products of value. R&D will become more entrepreneurial and contestable, with smaller project teams having to pitch for multi-year funding under a “Dragons’ Den” type scheme whereby teams will need to convince a panel of the scientific and commercial merit of their ideas. Waste will be reduced by cutting unnecessary clinical trials and tackling late-stage attrition rates (which will be a real skill, in our view). Payor input at an earlier stage will be aimed at better identifying the value proposition earlier in the process. External deals will be important, such as that announced with Aspen which will leverage GSK’s global sales force with additional product (without buying generics companies – medtech companies also do not appear to be on any shopping list).

Simplify GSK’s operating model. GSK will streamline operations to reduce complexity improve efficiency and reduce costs.

In general, these sound to us like sensible moves, aimed at making the most of GSK’s resources. The benefits of this strategy are, however, unclear both in magnitude and timing. Cost reductions may show some immediate benefits, although we suspect they may be peripheral rather than core to GSK’s earnings performance – we continue to believe that GSK can’t shrink its way to greatness and that revenue growth will drive the company’s destiny. In our view, GSK largely can’t escape the fact that the bulk of its earnings still come from selling big pharmaceutical products in the US and, given the stock is trading at 12x 2009E EPS, investors are plainly hoping that GSK will continue to do that into the future. “More reliable growth with lower risk” is definitely a good thing to have, but not if it comes at the expense of “more growth”. GSK might be able to have both, but changes to the way pharma R&D is done will take years to have a tangible revenue impact.

We have revised our EPS estimates slightly; nudging our 2008 estimate up to account for the Q2 result, but lowering estimates in future years to account for a lower share buyback. However our DCF valuation is little changed and we retain our 12-month share price target of 1,275p. With the stock trading at our assessed value, we reiterate our HOLD rating.

24 July 2008 Pharmaceuticals GlaxoSmithKline

Page 4 Deutsche Bank AG/London

Q2 results show business continues on track to deliver guidance

GSK’s Q2 financial results contained no real issues and were broadly in-line with our expectations. EPS of 27.2 was ahead of DBe 25.7p and consensus 25.0p, but the company maintained its EPS guidance for this year (a mid-single-digit decline in non-GAAP EPS in local currencies). Key reason for higher than expected net income was sales growth of 4% vs DBe 2% and consensus 1%; the currency impact on sales was a bit higher than we expected and most of the difference was attributable to Vaccines, which benefited from shipments of prepandemic vaccine and some shipment timing variances. Otherwise, sales of most key products were in-line with our expectations. Gross margins were as we had forecast and expense lines were broadly as expected.

Management announced the share buyback would be moderated. GSK is in the middle of a two-year £12bn buyback programme, with around half done. We had viewed this rate as unsustainable over the long run and designed mainly to increase gearing and return more cash to shareholders, with no little significant impact to valuation (increasing EPS but also increasing financial risk). Now, only £1bn will be returned over the next five months and we assume a run-rate of more like £3bn per year going forward rather than £6bn. This is the chief reason for our lower EPS forecasts but it does not affect our discounted cash flow valuation, which takes into account only cash generated rather than how cash is distributed. Management says it remains committed to a progressive dividend policy, hence we have maintained our dividend forecasts.

24 July 2008 Pharmaceuticals GlaxoSmithKline

Deutsche Bank AG/London Page 5

Figure 1: GlaxoSmithKline – Expected news flow Date Event Stock impact Comment

23-Jul-08 PDUFA for Amgen's Nplate Med Competitor to Promacta - decision delayed

30-Jul-08 Ex-dividend date Low 13p

3-8 Aug ACTH study of Ziagen vs Viread at AIDS 2008 Low Likely to be negative for HIV franchise

early Aug HuMax CD-20: Phase II / III data in refractory CLL Med Relatively limited indication

3Q08 XP13512: filing in RLS, US Low

19-Sep-08 Promacta: FDA approval decision in short-term ITP High ODAC voted 16-0 in favour of approval

Sep-08 GLP-1 analogue: Phase II data at EASD? Low Will need to be special else 4th to market

Sep-08 SGLT2 inhibitor: Phase II data at EASD? Low Bristol drug showed urinary tract infection signal

22-Oct-08 Q3/9M'08 results Med

31-Oct-08 Ex-dividend date Low

2H08 Lunivia: CHMP decision in insomnia Low From Sepracor; filed July 2007; EU mkt only $500m

2H08 Tykerb: Japan approval decision Low

2H08 Beyond Advair: Phase IIb asthma data for '444 + '698 High Study started Dec

2H08 darapladib Phase II imaging data publication Low Possibly large drug; but outcomes studies needed

2H08 Tykerb: Phase III data w/ Femara, 1st-line Med HER-2 non-selected pts; could expand use if compelling

10-Nov-08 Generic filing against Lovaza becomes possible Low Pronova lost patent case in Germany

4Q08 Imitrex: Dr Reddy's generic launch Low Settled early 2007; patent expires Feb-09

4Q08 OTC orlistat: CHMP decision Low Already approved in US

4Q08 HuMax CD-20: Filing in refractory CLL Low

2008 mepolizumab: Filing in hypereosinophillic synd, US, EU Low

2008 Promacta: filing in long-term ITP, EU Low

2008 Promacta: filing in short-term ITP, EU Low

2008 LAMA: Phase II data Med Faces competition from Novartis (filing 2010)

2008 Improved 'flu: Phase III data Low

end 08 / early 09 Beyond Advair: Phase IIb COPD data for '444 + '698 High Study started late Feb

end 08 / early 09 HuMax CD-20: Phase II / III data in refractory F-NHL Low

end 08 / early 09 HuMax CD-20: Phase II / III data in 1st-line CLL Med

29-Mar-09 Rezonic: FDA decision in CINV Med Data presented at ASCO 2007

1Q09 Synflorix: CHMP decision High Filing accepted Jan-08

2Q09 Tykerb: EDF107671 Phase II study in brain mets Med

1H09 Cervarix: US re-submission Low Six-month review expected

1H09 '475: Phase IIb data in major depressive disorder Low

08-Jun-09 Advair: HFA new product exclusivity ends Low HFA device patents last out to Apr-2015, ex PED

mid-09 Zunrisa: CHMP decision in PONV and CINV Low Filed 2-Jul-08

2H09 almorexant: Phase 3 RESTORA-1 data Med Ex-US study, licensed from Actelion

2H09 '812: Phase IIb data in schizophrenia Low

2009 Avodart: REDUCE prevention study High

2009 HuMax CD-20: Phase II data in F-NHL CHOP, 1st-line Med

2009 Promacta: Phase III data in HCV-induced TP High Would be a significant new indication

2009 XP13512: Phase II data in neuropathic pain Low

2009 firategrast: Phase II data in multiple sclerosis Low Source: Deutsche Bank

24 July 2008 Pharmaceuticals GlaxoSmithKline

Page 6 Deutsche Bank AG/London

Figure 2: GlaxoSmithKline – Q2 results summary Q2 07 A Q2 08 E ch %

(GBP m) Actual Actual Dbe Cons Actual Dbe Cons

Seretide / Advair 871 964 972 972 11% 12% 12%

Flixotide / Flovent 151 158 158 5% 5%

Total Respiratory 1,260 1,383 1,382 10% 10%

Seroxat / Paxil (all formulations) 140 127 118 (9%) (16%)

Wellbutrin (all formulations) 132 97 114 (27%) (14%)

Imigran / Imitrex 167 173 168 4% 1%

Lamictal IR 271 323 321 19% 18%

Requip / Adartrel 84 58 71 (31%) (15%)

Total CNS 828 818 822 (1%) (1%)

Combivir 117 104 108 (11%) (8%)

Valtrex 226 277 268 23% 19%

Total Anti-Virals 755 751 747 (1%) (1%)

Augmentin (all formulations) 120 129 123 8% 2%

Total Anti-Bacterials 310 329 321 6% 3%

Avandia (all formulations) 349 194 178 193 (44%) (49%) (45%)

Boniva 36 56 56 56% 54%

Total Metabolic 420 285 269 (32%) (36%)

Hepatitis 128 167 139 30% 9%

Infanrix / Pediarix 135 167 154 24% 14%

Influenza 4 39 4 875% 10%

Total Vaccines 398 577 480 45% 21%

Zofran 55 31 24 (44%) (56%)

Tykerb / Tyverb 12 22 30 83% 148%

Total Oncology & Emesis 126 117 124 (7%) (1%)

Coreg (all formulations) 202 44 50 (78%) (75%)

Avodart 67 92 87 37% 29%

Total Cardio & Urogenital 439 435 429 (1%) (2%)

Total Other Therapeutics 239 228 231 (5%) (3%)

TOTAL PHARMACEUTICALS 4,775 4,923 4,805 3% 1%

TOTAL CONSUMER HEALTH 899 951 983 6% 9%

GROUP SALES 5,674 5,874 5,787 5,760 4% 2% 2%

Cost of sales (1,212) (1,375) (1,354) 13% 12%

Gross Profit 4,462 4,499 4,433 1% (1%)

SG&A (1,841) (1,765) (1,781) (4%) (3%)

R&D (789) (802) (809) 2% 3%

Other op inc 97 194 180 100% 86%

Operating profit 1,929 2,126 2,023 10% 5%

Net interest (44) (118) (104) 168% 137%

JVs & associates 11 15 (1) 36% (109%)

Profit before tax 1,896 2,023 1,918 7% 1%

Tax expense (541) (577) (552) 7% 2%

Profit after tax 1,355 1,446 1,366 7% 1%

…minority share (22) 21 (23) (195%) 5%

…shareholders' share 1,333 1,467 1,343 10% 1%

Pre-ex EPS, basic (p) - GSK defined 23.9 27.2 25.7 25.1 14% 7% 5%

Pre-ex EPS, diluted (p) - DB defined 23.7 27.0 25.5 14% 8%

DPS 12.0 13.0 13.0 8% 8%

Ave shares, basic 5,574 5,234 5,225 (6%) (6%) Source: Deutsche Bank

24 July 2008 Pharmaceuticals GlaxoSmithKline

Deutsche Bank AG/London Page 7

Appendix 1 Important Disclosures

Additional information available upon request

Disclosure checklist Company Ticker Recent price* Disclosure GlaxoSmithKline GSK.L 1222.36 (GBp) 23 Jul 08 2,6,7,8,14,17 *Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies.

Important Disclosures Required by U.S. Regulators Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See “Important Disclosures Required by Non-US Regulators” and Explanatory Notes. 2. Deutsche Bank and/or its affiliate(s) makes a market in securities issued by this company.

6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by US law.

7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year.

8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment banking services from this company in the next three months.

14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.

Important Disclosures Required by Non-U.S. Regulators Please also refer to disclosures in the “Important Disclosures Required by US Regulators” and the Explanatory Notes. 2. Deutsche Bank and/or its affiliate(s) makes a market in securities issued by this company.

6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by US law.

7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year.

17. Deutsche Bank and or/its affiliate(s) has a significant Non-Equity financial interest (this can include Bonds, Convertible Bonds, Credit Derivatives and Traded Loans) where the aggregate net exposure to the following issuer(s), or issuer(s) group, is more than 25m Euros.

For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com.

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Brian Bourdot

24 July 2008 Pharmaceuticals GlaxoSmithKline

Page 8 Deutsche Bank AG/London

Historical recommendations and target price: GlaxoSmithKline (GSK.L)

(as of 23/07/2008)

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Previous Recommendations

Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating

Current Recommendations

Buy Hold Sell Not Rated Suspended Rating

*New Recommendation Structure as of September 9, 2002

1. 28/7/2005: Hold, Target Price Change GBP1,330.00 2. 3/10/2005: Hold, Target Price Change GBP1,480.00 3. 28/10/2005: Hold, Target Price Change GBP1,520.00 4. 26/1/2006: Hold, Target Price Change GBP1,570.00 5. 8/3/2006: Upgrade to Buy, Target Price Change GBP1,690.00 6. 29/3/2006: Downgrade to Hold, Target Price Change GBP1,650.00 7. 8/8/2006: Hold, Target Price Change GBP1,600.00 8. 6/11/2006: Hold, Target Price Change GBP1,535.00 9. 5/1/2007: Hold, Target Price Change GBP1,500.00 10. 9/2/2007: Hold, Target Price Change GBP1,550.00

11. 23/4/2007: Hold, Target Price Change GBP1,700.00 12. 24/4/2007: Upgrade to Buy, GBP1,700.00 13. 22/5/2007: Downgrade to Hold, Target Price Change GBP1,530.00 14. 19/7/2007: Hold, Target Price Change GBP1,400.00 15. 19/10/2007: Hold, Target Price Change GBP1,370.00 16. 13/12/2007: Hold, Target Price Change GBP1,340.00 17. 20/12/2007: Hold, Target Price Change GBP1,345.00 18. 8/2/2008: Hold, Target Price Change GBP1,265.00 19. 14/4/2008: Hold, Target Price Change GBP1,240.00 20. 24/4/2008: Hold, Target Price Change GBP1,275.00

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share- holder return (TSR = percentage change in share price from current price to projected target price plus pro- jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share- holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes: 1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of - 10% or worse over a 12-month period

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24 July 2008 Pharmaceuticals GlaxoSmithKline

Deutsche Bank AG/London Page 9

Regulatory Disclosures

1. Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

2. Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

3. Country-Specific Disclosures

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