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Author Topic: Glaxo and Pfizer create new HIV drug company  (Read 967 times)

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Offline lonewolf

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Glaxo and Pfizer create new HIV drug company
« on: April 16, 2009, 03:23:33 PM »
Glaxo and Pfizer create new HIV drug company

Apr 16, 12:21 PM (ET)


TRENTON, N.J. (AP) - Pharmaceutical giants GlaxoSmithKline PLC (GSK) (GSK) and Pfizer Inc. (PFE) (PFE) will pool their resources to create a new company to develop and sell HIV medicines, leveraging a minimal investment into a market-leading position.

The deal, announced Thursday, reflects two key trends sweeping the industry. Companies are narrowing their research areas and cutting costs to improve productivity, and once-ardent competitors are working together to share the risks and costs of developing drugs.

The two companies plan to blend London-based Glaxo's portfolio of HIV drugs now on the market - some with patents approaching expiration - with New York-based Pfizer's more robust pipeline of drugs in development.

With 11 HIV medicines already on sale, the new venture will have a 19 percent market share, ranking it No. 2 behind sales leader Gilead Sciences Inc. (GILD) Other competitors in the field include heavyweights Bristol-Myers Squibb Co. (BMY), Abbott Laboratories (ABT), Merck & Co. (MRK) and DuPont Pharmaceuticals Co.

"The combination of a broad current revenue base and a new diverse pool of pipeline assets provides a significant platform to invest in developing and delivering new HIV medicines," Glaxo Chief Executive Andrew Witty said during a conference call with analysts.

The new company's name will be announced when the deal closes, now set for the fourth quarter.

The new company will be based in London and run by longtime Glaxo executive Dominique Limet, who now leads its personalized medicine strategy. The company's U.S. headquarters will be in Research Triangle Park, N.C., where Glaxo's American headquarters are.

Witty told reporters he expects $90 million, or 60 million pounds, in savings - mostly next year - from cutting administration and marketing overlaps. He said research and development operations would be basically unchanged.

The company will have an initial capitalization of about $373 million, or 250 million pounds, 90 percent from Glaxo.

Glaxo will initially hold an 85 percent equity interest in the new company, with Pfizer holding the remaining 15 percent. As time goes by, Witty said, those stakes will grow or dwindle according to which company is producing more successful drugs.

The new company will have several market-leading therapies, including Combivir, Kivexa and Selzentry/Celsentri. Based on 2008 results, the combined portfolio generates sales of around $2.4 billion (1.6 billion pounds).

The companies said revenues at that level will provide the new company with financial stability and support investment in its pipeline. It will contract research and development services directly from Glaxo and Pfizer to develop new medicines.

"We're going to just simply give it enough cash to support its working capital," Witty said. "It's not going to have any debt."

Witty said the new company can then ask its board, which will include seven executives from Glaxo and two from Pfizer, for more funding.

"It's 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," he said.

The two companies said that the new business "will be more sustainable and broader in scope than either company's individually."

"By combining Pfizer's and GlaxoSmithKline's complementary strengths and capabilities, we are creating a new global leader in HIV and reaffirming our ongoing commitment to the treatment of the disease," Pfizer Chief Executive Jeff Kindler said in a joint statement.

The new venture will not include Glaxo's vaccine program, which will continue separately. That's been an area where multiple industry and government projects that looked promising have failed.

The company will have a pipeline of six drugs in human testing, four in mid-stage tests, and a total of 17 experimental compounds.

Shares of Pfizer fell 20 cents to $13.66, while Glaxo slipped 4 cents to $30.79 in New York trading Thursday.


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