GlaxoSmithKline, Pfizer to Combine HIV Businesses
By JEANNE WHALEN and DANA CIMILLUCA
Drug giants GlaxoSmithKline Plc and Pfizer Inc. said they are combining their HIV-drug businesses into a new company that could be worth as much as £5 billion ($7.5 billion).
Glaxo will initially get 85% of the joint venture and Pfizer 15%, the companies said in a statement. The new company will hold 19% of the global HIV market.
The deal marks a rare moment of cooperation between pharmaceutical rivals. Glaxo is a big seller of HIV drugs, but its products are relatively old and aren't growing as much as the company would like. Glaxo's pipeline of HIV drugs in development is also relatively weak. Pfizer has a large pipeline of HIV drugs in development but not many products on the market. The companies hope that by combining their products and research, they will cut costs and create a broader business with better potential for long-term growth.
The combined business had sales of £1.6 billion last year and operating profit of £870 million, the companies said. Analysts typically value such businesses at two to three times sales, which would give the new company a value of roughly £4 billion to £5 billion.
The joint venture is the latest sign of a flurry of deal-making in the pharmaceutical industry, which is trying to cope with a steep drop in revenue from patented products. In a separate move, Pfizer is in the process of combining with Wyeth in a $68 billion deal that will further dilute the contribution of its HIV business to the combined company's results.
For Glaxo, the new deal offers an opportunity to strip out a business that is a drag on its sales growth. Glaxo had HIV sales of £1.5 billion last year, up 5% from 2007. Glaxo's total sales grew 7% to £24.4 billion.
The deal allows Pfizer to increase its stake in the joint venture to 30.5% if enough of its experimental HIV drugs make it to market. If Pfizer's experimental products don't reach the market, Pfizer's share will drop to 9%, the companies said.
The companies said they expect annual, pretax cost savings of up to £60 million from the deal by 2011.
Dominique Limet, currently a senior vice president at Glaxo, will be chief executive of the new joint venture.
