GlaxoSmithKline, Pfizer to create HIV company

GlaxoSmithKline and Pfizer announced Thursday that the drugmakers agreed to combine their HIV-drug segments into a new company focused on the research, development and commercialisation of HIV medicines. GlaxoSmithKline CEO Andrew Witty stated that "at the core of this specialist business is a broad portfolio of products and pipeline assets, which can be more effectively leveraged through the new company’s strong revenue base and dedicated research capability."

At the closing of the transaction, expected in the fourth quarter, GlaxoSmithKline will control 85 percent of the joint venture and Pfizer will hold 15 percent. According to the terms of the agreement, Pfizer's interest could rise to as much as 30.5 percent in the event that certain sales and regulatory milestones are achieved. Dominique Limet, head of GlaxoSmithKline’s Personalised Medicine Strategy, was appointed CEO designate of the combined entity.

The new company will have 11 marketed products, including Combivir (lamivudine/zidovudine), Epzicom/Kivexa (abacavir/lamivudine), and Selzentry/Celsentri (maraviroc), and will hold a 19-percent share of the HIV market. The company will have 6 drugs in its pipeline, including 4 compounds in mid-stage development, as well as 17 molecules at its disposal to develop in fixed-dose combinations as possible new HIV treatments. Based on 2008 results, sales from the combined portfolio reached 1.6 billion pounds ($2.4 billion).

Commenting further on the deal, Witty remarked that "this is a new and unique way of incentivising research success and deciding how to allocate research and development capital." He said the new company is "going to have two parents out there with, I think, a very rapid decision-making mechanism to allow it to be funded for what it needs to do." The executive also explained that the new venture will not include GlaxoSmithKline's vaccine programme. "Who knows down the road whether or not there would be a commercial collaboration opportunity if and when those vaccines make it to market, but they're not currently scheduled to go into this business," Witty noted.

In response to the news, analyst Navid Malik of Matrix Corporate Capital suggested that "GlaxoSmithKline is looking to consolidate its franchise through this tie-up with Pfizer, who are probably looking to exit HIV." In addition, he suggested that "it's quite a dramatic step, for two rival companies to put their pride aside and work together like this. But if they don't there is a good chance that both their HIV businesses will fade away over time." UBS analyst Gbola Amusa said the agreement could lead to more partnerships that result in company break ups and sales, and speculated that "we'll look back in a few years and highlight this deal as being industry-shifting."

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