Good morning or good afternoon, ladies and gentlemen andwelcome to the GSK Q3 Results Call. At this time all participants are in alisten-only mode. Later we will conduct the question-and-answer session andinstructions will follow at that time. (Operator Instructions). Just to remindyou all this conference call is being recorded. I would now like to hand over to today's Chairperson, Dr. J.P.Garnier. Please begin meeting, sir, and I will be standing by.

Thank you very much. Hello everyone. I am here with JulianHeslop, our CFO; and David Stout, our President, Pharmaceuticals, and we willgive a brief presentation followed by Q&A as usual. So, let me start by talking much more about '08 and beyond.Then '07 I think that the situation is clear for '07. If we look at the plusand minuses for '08, you'll see that generic erosion definitely will continue,although '07 is not exactly an easy year for us with Zofran and Coreg and WellbutrinXL. But, clearly the weight of generic erosion was slowdown as we go forward. Avandia is a question mark. It all depends on how we comeout of the FDA and what physicians feel about the drug. Right now they're verysupportive of Avandia, but clearly there will a change in the label. It's justthe matter of what kind of a change. If the FDA decides to mimic Europe, I think we'll be in good shape. If you recall Europe has come out with a change in label thatreconfirms the value of TZDs in the treatment of diabetes and then has adescriptive on Avandia which we feel is balanced. So, it's more unknown thananything else. A big swing factor for us for '08 particularly. But then we have growth drivers, which of course helpexplain why despite a significant loss in Avandia, we were able to hold thesales line pretty much even with last year. So, despite the generic, despiteAvandia in '07, the rest is performing quite well and some of those growthfactors like vaccines are really booming. Vaccines were up 50% this quarter.That's probably above the average kind of growth rate, but remember thatdoesn't even include Cervarix and Cervarix is a tremendousopportunity. I was looking at penetration ratein the target audience and even though Gardasil was probably going to…

JP, thank you. You will see if you look at the first slide,the turnover in the quarter was up 1%. Pharmaceuticals was down 2%, adverselyimpacted by generic competition in the U.S. and lower Avandia sales. Consumer Healthcare as JP has just shown you was up 16%,reflecting the strong performance from the core business including alli andfurther growth in the CNS products acquired last year. The cost of goods marginof 22.5% was not distorted by one-off items and reflects the reduction inrelatively high gross margin U.S.sales of products such as Avandia, Zofran and Coreg. It also reflects fastergrowth in the relatively lower gross margin Consumer Healthcare business. SG&A costs were 3% higher than last year and within thisfigure, Pharmaceutical costs excluding legal and restructuring charges weresome 5% lower. And Consumer Healthcare costs were 18% higher primarilyreflecting higher advertising. R&D expenditure was 9% lower than the previous year dueto low restructuring costs in the quarter and excluding these expenditures was1% lower than last year. Other operating income includes £57 million of royaltyincome and £22 million of asset sale profits, partly offset by £32 millioncharge on the Quest collar. Last year, other operating income benefited fromhigher asset sale profits of £63 million and a profit on the mark-to-market atthe Quest collar of £22 million. If you move to the next slide, you can see that earnings pershare grew 1% compared with a 1% decline in operating profit, which reflectedthe benefit from the lower tax rate and the share buyback program, partlyoffset by higher interest charges. You can see that the quarter was adverselyimpacted by currency with a hit of 5% and this reflected the strength of Sterling against theDollar. The dollar being $2.03 for this quarter compared to $1.88 last year. Moving on to the cash flow slide; you can see free cash…

Thank David, thank you, Julian. And we're going to now openfor Q&A.

Our first question comes from Tim Anderson. Please state yourquestions sir, announce the company name and location please.

Thank you, Tim Anderson at Stanford Bernstein in New York. Couple ofquestions. On Cervarix, can you update us on how you plan to position through Cervarixversus Gardasil. If prescribes or purchasers were to as you, why they shoulduse your product versus Merck. I am wondering what your answer would be. Andthe second question refers to your reference to new selling models. I amwondering, if you can give us specifics on what exactly you are doing with yourpilot projects in primary care areas and develop major markets like the U.S., Western Europe.In terms of what you see as working and not working in the future. I think alot of companies are trying to figure this out and change is probably immediatehere. So, again my question is specific to the big primarily care areas?

Tim, I will take the second question and let David, talkabout Cervarix. We do not wish to share the details of the conclusions andpilots. Suffice to say that, we tested a number of alternative variations onthe theme of face-to-face selling and suffice to say that what works bestvaries per geographic area. There is no universal answer here, not that weexpected one and then it also is important to relate this to your product line.Certain product lines, we could still increase sales force and get someincremental benefits. Some product lines have passed a point where intense effortis no longer required, even in the high noise level environments. So there is alot of complexity I think what works well for GSK, may not actually betransferable to directly towards the companies. But we are not going to givelectures on this, because a lot of it we consider is propriety. We have donevery good quality testing to get to those answers. So that's where we are goingto stay. So, David on Cervarix please.

If you remember Tim, from the beginning, we have said wedesigned Cervarix to be a cancer vaccine and we think that’s the most criticalparticular. As you develop any kind of vaccine, you recognize the more antigensyou put into a product, the more chance you develop for problems withinterference among the different antigen types. We think based on our unique[agilent] system, along with the fact that we focused on these two antigens,the data will continue to play out that we have better cross protection as weget to the related serotypes and the 16 and the 18. And that we'll have alonger duration of protection and we can build economic models that will showthat if you can get even a 5% better cancer protection covering greaterserotypes types. That this more offsets any cost advantage which is basically acosmetic issue with [Genetovas].

Thank you

Our next question comes from Kevin Wilson. Please state yourquestion and also announce your company and location please.

Hi, thank you, guys. Kevin Wilson from Citi in London. Three questions ifI may on Advair. David, you talked in the past about COPD the larger driver orthe key driver. So the question there is what will happen with the 250/50 CRPdata that I think you published recently? And how do you relate you commentstoday on the guideline change for asthma, so that goes patent for Advair. So myfirst question is, is that growth and are the new guidelines going to change? Secondly, on Avandia in Japan, where are you with thatprocess. In the past, you've talked about its importance given what's happenedthis year. Could you update us on that? And finally for Julian, what level of charges for this newOperational Excellence program do you expect in the fourth quarter?

Okay. I will take the first two and then pass it over toJulian. So the Advair on the 250/50, this was the study that was just presentedin an abstract this week. It was a post-marketing study that we had done in theU.S.as a part of the regulatory requirement. And again, it supported the idea thatit's a broader label. It would indicate a broader label as appropriate forAdvair around the COPD indication, where again we showed a significantreduction in exacerbations. Now if you contrast this to the TORCH study, TORCH wasreally a very different study that looked at mortality as a primary endpoint.Of course, we picked a higher dose because we wanted to give the patients agreater opportunity for that. So in terms of the COPD, we think it's still going tocontinue to be a big driver for us. There is a lot of opportunity there and nowwith on top of it, we have the asthma guidelines, which will give us more fireon the asthma side of the equation. So we don’t give specific guidance abouthow Advair is going to grow, but we do firmly believe that it still has a lot ofgrowth in it. In terms of Avandia in Japan, we continued thedevelopment. We've done a lot of the work that the Japanese regulators haveasked. We expect to file sometime in 2008-2009 timeframe I believe. And ofcourse the Japanese regulators -- it's a little bit slower over there so wedon't expect approval. There were some additional studies that we had to do andthat will be sometime probably in the 2010 timeframe.

And Kevin, in terms of what charges in 2007 quarter four,this is all subject to consultation, any number I give you will be wrong, so Iwon't. I think it will be significant, but I don't want to give you a numbernow which will mislead you.

Thank you.

Our next question comes from Graham Perry. Please state yourquestions sir and announce the company name and location please.

All Right, thanks for taking my questions. Firstly aquestion on the margin outlook for 2008 given the restructuring program. If welook at around to £250 million that's about a 150 basis points on operatingmargins that you have to offset some of the off patent exposure. Do you expectany of that to emerge as incremental on your margin over 2007, or is this justall going to offset the operational de-leveraging from patent loss and Avandiadeclines? And second question on the timing of your restructuringannouncements, and just with this coming ahead of the Avandia label, and towhat extent, does this reflect your pessimism over the labeling outcome and theinability to stabilize market share once it's issued? And thirdly on TYKERB, it's annualizing not only GBR64million, this imply still limited penetration even to the approved indicationssecond-line is that tumor refractory patients. And so what do you see as yourpenetration now and what are you doing about enhancing it further?

Okay, on the margin, clearly there will be significantimprovement in terms of the cost saving program, if you look at themanufacturing cost savings. Now they come not at the beginning of the threeyears and that's what I think you have to pay attention to. There is a timingelement. There are site closures and some of the elements of the cost savingcome toward the end of the cycle. But I would say that the picture is thatchange in mix which is a change in a product mix and also in geographic mix,after all this quarter U.S.is not growing as fast as Europe andinternationals. So therefore we also suffer a negative effect there. Butoverall that kind of effect will be compensated by some of the moves we aremaking and also the introduction of new products, which are typically highprofit products. So you have to look at beyond '07 and even into '08 wheregross margin will be a negative, a slight negative and then making a come backas we go forward. On Avandia label, no we were going to do this program simplybecause we were looking for the programs to be executed, particularly inmanufacturing and selling. So we were a little bit dependent on when the pilotswould end and where we could draw the conclusion that has all happened, and infact if you wanted to get an outlook on Avandia. I mean the European label is apositive. It restores the value of those medicines in diabetes, it profilesAvandia in a way that is I think fair and make the product still competitive. So if I had to pick, I would say well that's should be anoptimistic fact, but the FDA is very unpredictable, and frankly I'm not goingto try to guess, but regardless we were going to do this OperationalExcellence. And then whatever label we get then we'll make an assessment ofwhether we can really get Avandia going again and that's why I presentedearlier a question mark on Avandia for '08, because I think nobody could guesswhether it's going to go the way CRESTOR did which is they've made a turn aftersix, nine months and were able to in fact grow back to where they came fromafter a pretty significant safety scare, or whether its going to be a productwhich really stays where it is and becomes a bit of a slow erosion typeproduct. We don't know that. We will not know for a while. And then on the lastpoint, TYKERB, I will let David answer.

Yeah. I am actually surprised the negative comment on it. Ithink right now at £64 million, remember this is only the second full quarteron the market and that £64 million were actually running ahead of consensus andwere most people thought that this was a very narrow indication that wewouldn't even do a $100 million a year with it, and already we are in thesecond quarter, we are ahead of that run rate. So, I remind you that, when Herceptinfirst launched, its sales were quite slow at the beginning. In fact, we are notrunning too far behind where Herceptin was, despite the fact that they had afull pool of patients sitting there and waiting. It wasn't until they had adjuvantindication. And adjuvant data that really the sales took off. So, we're verypleased.

Yeah, I agree David, I think the TYKERB, you can't reallymultiply two quarters and get the year. It's in full growth and we're gettingmore importantly very good quality feedback from oncologist and we can't waitfor Europe to be fully labeled and fully readyto go, because there is a great appetite. I mean in very restricted territory,in Europe we are already generating £5 millionand we don't even have a formal approval, it's just that the product isavailable. There is a real demand in Europe,because the system is different. They don't have infusion chairs in very privatepractice, oncology office in Europe and theyare much more likely to send the patients to the hospital. So, I expect a goodpickup there, but future will tell. But, Graham, I think you are a little bitof pessimistic here. We hope to prove it to you more clearly next quarter.

And just one quick follow-up on the comments on the Avandialabeling, you previously talked about an expectation as class labeling for bothAvandia and Actos. Has anything changed during your discussions with the FDA relatingto that expectation?

Well we don't have any expectation, because we really don'tknow and we can't really influence the FDA beyond what happened at the AdvisoryCommittee. I think its fair to say that if you read the Advisory Committeeproceedings, you can see that the bottom-line is there is an enormous pool ofdata on Avandia and very little on Actos. We have 90% of the data generated,they have 10%. So, we can see a lot more in a picture, it was 90 pieces of thepuzzle that are magnified, then in a tiny puzzle where not very much has beendone in long-term clinical trials. So, I cannot predict what the FDA will say on Actos andwhether there will be class labeling. That was the wise thing to do to give aclass labeling on congestive heart failure and future will tell again, I can'tmake any predictions. Nobody can do it, no, not even the Wall Street Journal.

Thanks very much.

Our next question comes from John Murphy. Please state youquestion then announce the company name and city location please.

Yes, good afternoon. It's John Murphy, Goldman Sachs.Jean-Pierre, can you just pick up on the last question linked in to margins.And I mean, you talked about the tough quarter you had, but in pharma you had afantastic margin of 37%, for many companies growing very, very fast they can'tget close to that level. So, just wondering again whether the cost savingsprogram announced is going to allow further expansion from that level or justto offset some of the pressures that you foresee over the next couple years orso?

Well, I think for '08, as I said, I would not give anindication that gross margin is going to improve. Simply because you get thefull impact of some of the generics, you get the full impact of -- it dependson Avandia. If we make a bit of a comeback let's say in the second part of '08with Avandia then all the bets are off on margin, because that has a bigimpact. But I am just taking the more conservative route that let's say we staywhere we are on Avandia, so there is still a net loss '08 versus '07. I amtaking in to account the generics, but I am taking into account the fact thatin '08 you won't have the bulk of the manufacturing savings. So, that's for '08, and then in '09 everything turns aroundthe right way for us. So, I think you have to look it as a sort of cyclicaleffect on the gross margin. We have always been able to improve the grossmargin. When I look at the products that are going to be introduced, some ofthem are pretty high margin some of them are more middle of the road likeCervarix. But all in all I think '08 I would be conservative and '09 morebullish.

Thanks, just had two quick product questions as well maybefor David. Can you give us any update at all on where things are with gepirone atthe moment? And any anecdotal comments perhaps around Coreg CR and the sort offeedback you are getting from docs on that?

On the gepirone we are still waiting for the FDA, so it's intheir hands, we have heard nothing. So, I can't tell you one way or the otheron that one. In terms of Coreg CR, there's a few dynamics with Coreg that aredifferent than some of the other switches. This is a market where the incidentnumber of patients is much more than the prevalence. So, we are having to waitfor the new patients to come in, but again the feedback is very positive fromthe physicians. We just have to be a little more patient than say we were with WellbutrinXL, where you have very rapid patient switching, where patients go on todifferent antidepressants very quickly. So, I am not concerned at all withCoreg CR over the long-term.

Thanks a lot.

Okay. Thank you, John. Next question please

Our next question comes from Michael Costa. Please stateyour question sir and announce your company name and city location please. Mr.Michael Costa your line is open. Once again, Michael Costa your line is open.

Are you able to hear me now?

Yes.

Hello.

Yes, we can hear you.

Okay good, thanks, sorry about that. Two questions first onthe HIV franchise. Can you talk about what's happened with the pricing sincethe generic introduction of AVT and what will happen with subsequent genericsand also whether the royalty burden that you currently bear on 3TC willcontinue after '09? And also I am wondering if you can comment -- I have heardsome other companies [in your absence] software companies and consumer productcompanies were quite slightly weaker sales in the third quarter and to theextent that you've got mature consumer products in Europe. Have you see anychange in pattern to say that would suggest any impact on the European economy?

Okay, thank you. On the European Consumer Healthcare front,no we are having a very dynamic quarter. So we can't say we would confirm that.It varies but oral care and OTCs are strong, so that's the answer to yoursecond question Mike on the.

On the first one on the HIV pricing we have seen nodifference in the pricing just because of the introduction of generics. This isno different than when we see generics being introduced in to other therapeuticclasses. So things are going well and in terms of royalties beyond 2009 on 3TCI really don't know I'll have to get back to you.

Okay Thank you next question please.

And our next question comes from [Steve Scudal]. Pleasestate your questions and announce your company name and location please.

I think while you said about Avandia and the [CRESTOR]analogy, the release clearly says lower Avandia sales in 2008 and I am confusedas to why you would say that now particularly ahead of the label? I mean yourcomments really do suggest that the company has no new studies or initiativesto turn things around anytime soon so I am really perplexed as to why you wouldcome now ahead of the label? Secondly on Lamictal when we should we anticipate generics sin 2008 and will you launch an authorized generic? And then lastly on HFA albuterol,the company has claimed overtime that it would increase its efforts but it'snot at all evident has Glaxo abandoned that effort? Thank you.

Okay on the Avandia remember we were full blown sales thefirst five months of the year, that's the only reason that if you look at thefuture and you said okay let's say the label is not a case of theirs it'swhatever it is and we start to go back to the marketplace. By the time thesales go up even in a fairly realistic scenario mimicking other examples thathave happened in the past you have to build yourself a back to where you werein the first place that is the May high point level. And then exceed itpossibly while if you do that trust me to on this the simulation shows you thateven in this fairly positive scenario you can't quite compensate for the factthat for five months we are going to look at sales, which are double of whatthey are today. So that's the only reason, but listen we've been wrong beforeon forecasting product sales so I hope you are right I hope it -- we canexecute a even more optimistic scenario but I can't take that as a mainplanning hypothesis and therefore Lamictal and so forth.

Lamictal, in the release, we stated that in mid 2008 youshould see generics and Lamictal and we don't comment on our authorized genericstrategies. In terms of the HFA albuterol, we had manufacturing issues. So, wehave been planning catch up, but this is still a very important opportunity forus and we haven't given up on it.

And we haven't given up and in fact, if you look at ourshare, it is from a small base granted but it is growing. So, we're definitelygoing to be back in this market.

Thank you.

All right, the next question please.

And our next question comes from [Brian Walcoff]. Pleasestate your question sir, announce company name and city location please.

Deutsche Bank, calling from London. A question on the operationalexcellence program please. You told us that you expect to deliver total annualpre-tax savings about GBR700 million by 210 in different parts of the business.I just would like to ask, is that all cash or are there some accrual elements,some cash outlines that would normally have been expensed that might becapitalized and the state of my thinking is related to the move tomanufacturing changes and a move to multi sourcing? Any thoughts there please,thank you.

Yeah, the non cash element of the 700 is under 10%. So, it'sa very small proportion of it.

Okay.

And this is basically an extension of a program but muchlarger and because of site closing and the like there was need for a provision.

Next question please.

Our next question comes from Andrew Baum, please state yourquestion sir, and announce the company name and location please.

Hello, it's Andrew Baum from Morgan Stanley. Just onequestion and answered. Perhaps Julian you might like to have the guess, as tothe outlook for legal costs, anticipating a rash of Avandia (inaudible) as wework into 2008. What do you think is reasonable for us to include within ourforecast?

I never predict legal costs, Andrew, because I would alwaysbe wrong. They will be what they will be. We believe in Avandia, and we willcertainly contest in illegal actions on it. So, we don't see that as aparticular issue at this point in time. But it's impossible to predict what itwill be. As you know, it's been coming down over the years, but I can'tpredict. No reason to think it will go up, but who knows.

The good news is, our book of outstanding litigation isgetting thinner, it's still thick, but it's getting thinner after years ofefforts and many cases which were settled. If you look at all the patentlitigations on Paxil and Augmentin and so forth, which contributed to some ofthose costs. But on the other hand, again, we will take it as it comes, andeven though we have no particular concerns, we don't want to make a specificforecast at this point. Next question please.

Our next question comes from [Louisa Hector]. Please goahead with your question ma'am and answer your company name and your locationplease.

Hi, good afternoon. It's Louisa Hector at Lehman Brothers.Two questions please. I just wonder if you could comment on Advair and whetheryou are seeing any impact from the Symbicor in the US. And then, really going back toJP's earlier comments about the FDA with four out of five drugs getting anapproval letter at the moment, I just wonder if you could give us an update onyour views, the late dilatory environment, clearly seems to be getting tougher.Would you expect that to remain the case for sometime in the future? Thank you.

Okay, thank you. I think Symbicor is just getting startedbecause right now they are not making much of an impact. If you add all the Symbicorprescriptions to the Advair business this quarter, Advair would go up oneadditional point. So, it's not very much. In terms of the regulatory environment, well, you know asmuch as I do, but in our contacts with the FDA, in the tone of the letters wereceived there is clearly a super agenda item called safety and I think itplays differently in different divisions. After all if you are approving lifesaving drugs for people who are in very bad shape, the safety risk and thesafety concern might not be of the same intensity as if you are on the verge ofapproving a drug that's going to be used for chronic disease, which are notlife threatening. So we are going to see that the hurdle has been raised.There is no question about it. What is unclear is exactly how should we modifyour drug development plans to meet this higher hurdle and we hope that therewill be clarifications. And this is more of the FDA than any of the otherregulatory agencies. And we find that the regulatory agencies throughout theworld most of them use science and clinical data to make decisions and therethe lobbying and the political around the agencies is minimum. And in the USthe difference is obvious to everyone who read the paper everyday. So we hopethat the FDA will be left alone to do their job and if they do we will be fine.But I would say from a practical pragmatic standpoint what does it mean for ustoday as we speak? It means that as we are working on 25 launches over the nextthree years some of them will be delayed that probably wouldn't have beendelayed if we had those 25 products even two years ago. But such is life and asfar as raising the bar we are absolutely ready for it and particularly insurveillance. I think it's very important now in every file to have a verydescriptive risk management program. I think that's a good thing personally andI think that companies such as GSK are very ready for this challenge and havebeen working at this for quite a bit. So on that note, I am going to ask I’mgoing to ask one more question and take it as a last.

Our last question comes from Michael Leacock. Please stateyour question and answer your company name and city location please.

Thanks. Thanks a lot for taking my question. It's MichaelLeacock here at ABN Amro in London.Two questions really if I may firstly on the, JP, and I think you said in thepast you are looking towards R&D as a percentage of sales in the long-termrising I think up to 25% was the figure that you hinted at. And as we have seenthe R&D costs stable minus 4% down for the nine months, I just wonderedwhether you are not tempted to put some of your operational expense savingsback into R&D and whether your view on that has changed at all. And secondly for Julian, in the past you have takenrestructuring charges they have been running I think it about a 140 million,200 million I think last year on an ongoing basis. Are all of those charges nowgoing into the clearly delineated operational expense charges or will therestill be an underlying background and change going on?

Very good question, Mike. On the R&D again theaspiration is that we should be more R&D intensive. Now there are severalways to get there. The first way is to reduce SG&A and reinvest in R&Dand that's what we've been doing all along and even though right now and in theimmediate past R&D as a percentage of sales has not gone up, that is, weare doing far more with R&D than before. We are placing more bets. We aredriving more products through the pipeline. If you think about it we nearly doubled the pipeline sizeand we certainly haven't doubled R&D since the merger eight years ago. Thereason this has been possible is because we have made significant efficiencyimprovements within the process of R&D. So, we are doing more for less.Remember the first company to export clinical trials in a big way, firstcompany to do data capture. I mean all those programs have saved remarkablelarge amounts of money. If you look at next year by the way, even though we aresaving money in R&D and we are saying so that we are doing this program ofeliminating duplications and so forth. That's going to raise some money for us. We are alsoinvesting in some parts of the R&D at a faster clip than sales growth. Forinstance the R&D China, the biological space, oncology programs and soforth. So it's a mix of the two and I would say flat-flat, average I would sayflat on sales for a little while but I think that the environment is going toforce pharmaceutical companies to raise their [game] in R&D and if we havea productive R&D and we are still working at improving that why not investmore. So, it will be at some point if we are successful in shrinking a littlebit our resources used for selling and reinvesting them in R&D will be in avery good shape. Clearly an inspirational statement, but one that I hope willbecome a reality in the future and there is very good science out there that wewould like to buy and if you look at the extension of our balance sheet, intothose kinds of deals what you see in terms of R&D expenses isunderstatement of the effort. We are actually having access to more programthan simply the R&D line seems to indicate. On the other hand, in terms ofyour second question?

Michael, you are right. The operational excellence ofexisting programs have averaged between 100 million and 200 million every yearand I expect to take further charges against business performance earningsthat's the first column in quarter four in respect to the existing programsthat are still running. They will carry on and being charged into that firstcolumn. However, the new program is so significant, hence the introduction ofthe middle column that's the ration for it. It would distort our performance ifwe weren't to do it. And as a consequence of focusing all our efforts goingforward on this new program, I would expect that it will be negligiblechallenges in the first column. We will focus our efforts delivering this newprogram and it will take all those efforts. But certainly as far as the fourthquarter of this year is concerned, there will further challenges in the firstcolumn in respect to programs still running. They would decide on it beforethis new program was implemented. Does that answer the question?

Thank you very much.

Yes, and Mike just to complement and that [tale] of costs,related to existing programs, will go over next year as well.

Thank you.

Thank you.

Thank you very much for attending this conference and wewill talk to you in a few months.