GlaxoSmithKline Holds Onto HIV Business in Wake of Deals with Novartis AG
May 6, 2015
By Alex Keown and Riley McDermid, BioSpace.com Breaking News Staff
LONDON – British pharmaceutical giant GlaxoSmithKline will keep its stake in ViiV Healthcare, the company’s stand-alone HIV business, the company confirmed Wednesday.
The company said it cancelled an initial public offering of its holding in ViiV Healthcare, choosing to retain its full holding in the joint venture with equity partners Pfizer and Japanese pharmaceutical company Shionogi & Co., Ltd., the news agency reported. GSK controls about 80 percent of ViiV Healthcare.
Today ViiV Healthcare announced the start of a Phase III trial for to evaluate the safety and efficacy of dolutegravir (Tivicay) and rilpivirine (Edurant) as maintenance therapy for adult patients with HIV. The study will evaluate “48 week viral suppression with a two drug regimen combining an integrase inhibitor (dolutegravir) and a non-nucleoside reverse transcriptase inhibitor (rilpivirine) in patients with HIV who have already achieved viral suppression with a three drug regimen,” the company said .
“An interesting part of this Phase III program is the inclusion of measures of the patient experience -- we’re looking at health-related quality of life and adherence to treatment, in addition to the primary efficacy and safety endpoints,” John Pottage, chief scientific and medical officer, ViiV Healthcare said in a statement.
The decision to hold onto ViiV came at the same time GSK opted to make a deal with Swiss-drugmaker Novartis AG to swap GSK’s oncology business to Novartis in a swap for the Swiss company's vaccines business and cash. On Feb. 4, Glaxo said it had hired three heavy hitting banks to advise on the spin-off of ViiV Healthcare.
Glaxo’s CEO Sir Andrew Witty said in October that the company would be undergoing a strategic review of ViiV and the next portion of that review had been a listing on the London Stock Exchange, which is now canceled.
Those same sources added that Britain’s largest drugmaker have hired Morgan Stanley, Goldman, Sachs & Co. and Citi as financial advisers on the potential IPO of ViiV, of which GSK owns 80 percent. The rest is parceled up between global drugmakers Shionogi and Pfizer Inc. (PFE).
ViiV has 674 employees in 15 nations and is based in West London. Witty said in October that its size and reach put it at around number 40 for the FTSE 100. At the time, Witty appeared to be showcasing the unit’s value, a classic opening gambit in a run at the public market or for showcasing the company to potential suitors.
“This is not a forecast, but this business will make a £1bn profit this year if you simply grossed up the nine months’ year-to-date on a straight line basis. That, I think, tells you straight away what the kind of underpinning profit number of this business might be,” he said. “Obviously, this business is on an accelerating curve, it is an important business going through a very expansionary phase…and obviously we are keen that our shareholders get to be the full beneficiaries of that.”
Glaxo said it had attempted to spin-out ViiV as a way to both please existing shareholders by streamlining its businesses and bring value back into its existing pipeline. ViiV is a good earner for GSK, bringing in billion annually—a leap that analysts have reconfigured to around £1.4 billion in 2013 to £2.5 billion in 2018 after new drug Tivicay saw a blockbuster debut.
Shareholders will likely be nothing but pleased with that news, after a massive bribery scandal in China in 2014 caused Glaxo to write down huge chunks of its earning, causing a 7 percent drop in its stock price over the past year.
Still, GSK has been struggling to regain some of the value currently being enjoyed by its competitors, and is doing so in creative ways: It is almost finished with a $20 billion asset swap with Swiss drugmaker Novartis AG (NVS), which will boost its vaccines and consumer healthcare divisions, and its IPO of ViiV is another potentially lucrative strategy. In addition to the trade in businesses, GSK and Novartis also entered into joint venture that will see GSK will own 63.5 percent and Novartis will hold 36.5 percent.
When reporting first quarter earnings today, GSK said it would reduce a planned return to investors by about one-fourth of what was expected from the Novartis deal. The company said it will give shareholders about $1.5 billion in a special dividend in the fourth quarter.
In its first quarter report, the company said quarterly sales were $6.19 billion, up 1 percent from the same period last year. The company reported 82 cents earnings per share, which was lower than analysts’ expectation of 86 cents earnings per share, according to Morningstar.
Although the company fell short of analysts’ predictions, GSK’s stock was up this morning, trading at a morning high of $46.76 per share, up from Tuesday’s close of $45.61 per share.
GSK experienced a rocky 2014, which saw sales of asthma drug Advair decline due to generic competition. Other GSK respiratory drugs have failed to revive the lost growth.
Respiratory medications make up about one-fourth of GSK’s overall business. In addition to the diminished revenue, GSK was also rocked by a bribery scandal in China. The company was fined nearly $500 million by the Chinese government when it was revealed that some employees of the pharmaceutical company were bribing doctors with extravagant gifts to prescribe Glaxo medications to their patients. Additionally the company was also accused of violating China’s personal privacy laws through illegal videotaping.
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