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GSK shelves ViiV sale as it lays out growth strategy

Firm now bullish on the HIV joint pharma project’s prospects


GlaxoSmithKline has said it no long intends to float its profitable HIV joint venture ViiV Healthcare as it charts a course back to growth.

Shares in the company traded up in the decision to hang onto ViiV - partnered with Pfizer and Shionogi but with GSK owning an 80% stake - as well as bullish statements from chief executive Sir Andrew Witty about growth prospects between 2016 and 2020.

ViiV is in the midst of rolling out blockbuster-in-waiting Triumeq - having secured US and EU approval for the combination product in recent months - and saw first-quarter sales rocket 42% to £446m ($681m).

Triumeq combines the active ingredient in ViiV's Tivicay (dolutegravir) with established dual therapy lamivudine and abacavir and - having contributed £81m of that total - looks increasingly on course to reach its $2bn peak potential. GSK said it had drawn back from a proposed public offering for a minority stake in the business thanks to its "very positive outlook."

GSK has just emerged from one of the most turbulent periods in its history, marked by the Chinese corruption scandal in 2014 and the restructuring of its business through the sale of its oncology unit to Novartis and purchase of the latter's vaccines operations.

With pricing and competition exerting a negative impact on GSK's important respiratory business in the US, investors have been looking for positive signals from the drugmaker, and Sir Andrew's forecast of a "significant recovery" in earnings next year seems to have been well-received.

GSK now says it expects group sales to rise in low- to mid-single -digits in from 2016 to 2020, with vaccines leading the change followed by its consumer health operations. Pharmaceuticals will remain under pressure but still manage low single-digit growth, it suggests.

Analysts at Berenberg said the outlook for GSK beyond 2016 now seems "steady, if unspectacular" and they welcomed the ViiV decision, saying: "With a stronger balance-sheet position, and clearly strong underlying performance at ViiV, GSK has come to the sensible decision to retain this business within the group."

GSK also expects to accrue the promised cost-savings resulting from its asset swap with Novartis earlier than expected. Overall, the transaction is expected to deliver approximately £1bn of annual cost savings, the majority of which will be delivered within three years at a cost of approximately £2bn.

"We believe the group's new composition strengthens our ability to offer cost effective healthcare options to payors and governments and enables us to increase access for patients and consumers to our products," said Sir Andrew.

First-quarter group sales came in at $5.6bn, with a 10% gain for vaccines and 24% hike for consumer health offsetting a 7% drop in its pharma business. Operating profit fell 14% to £1.31bn.

Article by
Phil Taylor

7th May 2015

From: Sales



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