GlaxoSmithKline weighs an IPO for HIV-focused ViiV as it sharpens the budget ax

GlaxoSmithKline CEO Andrew Witty

GlaxoSmithKline ($GSK) is considering taking its HIV joint venture public, tersely dropping hints of an IPO for ViiV Healthcare as it lays out plans to again slash R&D costs and refocus its business.

In the preamble to GSK's latest earnings statement, CEO Andrew Witty heralded the progress of ViiV, majority-owned by his company, since its foundation 5 years ago. Under the leadership of GSK and co-owners Pfizer ($PFE) and Shionogi, the joint venture has successfully developed two promising antivirals and made strides in HIV R&D. Now, as ViiV enters the commercialization phase and continues building its pipeline, it might benefit from access to public markets, according to Witty.

"We believe now is the right time to explore the potential for an IPO of a minority shareholding in this business," Witty wrote. "This will provide greater visibility of the intrinsic value we see in its currently marketed assets and future pipeline and also enhance potential future strategic flexibility."

Any public offering would consist solely of GSK's stake in the joint venture, the company said, and ViiV's other owners would have the option of whether to contribute. A Pfizer spokeswoman said GSK informed the company of its plans in advance but declined to comment further.

Analysts have pushed the idea of a ViiV IPO since as early as 2010, but Witty has repeatedly taken a wait-and-see approach to the proposal. His change of heart could well be tied to ViiV's fortunes over the past 18 months, in which the company won FDA approval for Tivicay, an HIV treatment with blockbuster potential, and Triumeq, a combination treatment for the virus promises to challenge a leading drug from Gilead Sciences ($GILD).

GSK is also rolling out a company-wide reorganization, looking to carve £1 billion ($1.6 billion) out of its annual budget--a move that will almost certainly require layoffs. R&D isn't likely to escape the ax. Moncef Slaoui, who had been chairman of R&D and vaccines, will now focus solely on the growing vaccines business, while Patrick Vallance, who had run R&D on a day-to-day basis, will now take the helm as R&D undergoes another shakeup--5 years after the last one was put in place.

GSK has had some successes on the research side of the business, scoring a slate of new drug approvals in 2013. But its big bets on MAGE A-3 and darapladib--both prominently cited by Slaoui as top prospects--flopped in the past year, leaving the pharma giant without the big megablockbuster it needs to grow sales.

GSK's aging blockbuster Advair has a lot to do with the current need to restructure. Sales for the treatment started to slide in the last quarter, and with new respiratory drugs failing to come on as strong as expected, cuts were the only plausible place to turn.

- read the release (PDF)

John Carroll contributed to this report.

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