Red ribbon allies

GSK and Pfizer merge HIV businesses to create global joint venture

Amy Swinderman
LONDON—GlaxoSmithKline plc (GSK) and Pfizer Inc., two of the world's largest pharmaceutical groups, announced April 16 that they will pool their HIV drug businesses together and form a new company focused solely on research and development and commercialization of HIV medications.
 
According to the usually competing companies, the new HIV business will be more sustainable and broader in scope than either company's individual units, and will hold a 19 percent share of the growing market with an industry-leading pipeline. The agreement provides for an initial 85-15 percent equity interest split between GSK and Pfizer, respectively. This arrangement will be adjusted if certain sales and regulatory milestones are achieved.
The transaction is expected to close in the fourth quarter of 2009 and is conditional upon certain matters, including receiving certain regulatory and tax clearances and no material, adverse change occurring in respect of either GSK's or Pfizer's HIV business prior to closing.

Announcing the joint venture via video on GSK's Web site, CEO Andrew Witty said the agreement is "an opportunity to bring together two organizations to pool resources, to strive to be more efficient, to try to work together rather than simply compete with each other and to try to ensure that scarce R&D resources are allocated to the products with the highest probability of success and those that will make the biggest difference to people living with AIDS."

"What I'm also convinced of is by creating this specialist focus, by bringing together the strengths of both Pfizer's pipeline and people as well as GSK's, we really can create something novel, something different and something which will, once again, change the landscape of the pharmaceutical industry's attempt to improve the outlook for patients with HIV," Witty said. "We need to ensure that as the current medicines we have mature and come toward the end of their initial phase of commercial life, that we are developing new medicines, medicines that can be added to those which already exist or hopefully make further step-change breakthroughs for patients."

Simply put, Pfizer CEO Jeff Kindler said in a statement that the new company can reach more patients and accomplish much more for the treatment of HIV globally than either company on its own.

"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," Kindler said. "With the strength of the companies' current HIV products, as well as the complementary fit of Pfizer's HIV pipeline and GSK's global distribution capabilities, the new company is well positioned to bring new and improved medicines to patients with more speed and efficiency."

The stated mission of the joint venture is to invest in research and development of innovative HIV treatments and formulations that improve adherence and overcome resistance to the virus. The new company will have a broad portfolio of 11 marketed products, including market-leading therapies such as Combivir, Kivexa and Selzentry/Celsentri. The companies said that the combined portfolio generated sales of approximately $2.3 billion, enough revenue to secure the new company's financial stability and support investment in its pipeline.

The company will also have an industry-leading pipeline of six innovative and targeted medicines, including four compounds in Phase II development. Altogether, the new company will have 17 molecules at its disposal to develop in fixed-dose combinations as possible new HIV treatments. The new company will contract R&D services directly from GSK and Pfizer to develop these medicines. GSK and Pfizer will have exclusive rights of first negotiation in relation to any new HIV-related medicine developed by either company.

The companies said they are also committed to improving access to HIV medicines for everyone. Not-for-profit pricing for HIV medicines will continue for those countries most in need, and the new company will continue to facilitate new voluntary licenses to diversify production and expand capacity in these markets. The new company will also conduct research and development activities specifically to address appropriate access to HIV medicines in developing countries. In particular, the new company will increase its research effort into treatments and formulations for children living with HIV.

"I also want to make sure that this business is truly global in its mindset, not simply focused on the European and American marketplaces, but one which really recognizes HIV for what it is—a global health threat requiring global solutions, one which requires key therapeutic advances but also an enlightened mindset toward pricing, not-for-profit pricing and community support programs such as Positive Action. That's why we're creating this business," Witty said.

The joint venture will be led by Dominique Limet, a trained physician who currently serves as senior vice president and head of GSK's Personalized Medicine Strategy unit. Limet has served as a member of GSK's Positive Action Steering Committee and was a board member of the GSK France Foundation, which supported a range of HIV/AIDS-related programs around the world. Other board members appointed to the new company are: Julian Heslop, GSK CFO, who will serve as chairman of the new HIV company; Cees Heiman, regional president of Pfizer's Specialty Care Business Unit in Europe; Zhi Hong, SVP and head of GSK's Infectious Diseases CEDD division; Abbas Hussain, president of Emerging Markets at GSK; Duncan Learmouth, SVP of Corporate Communications and Community Partnerships at GSK; Martin Mackay, president of Global Research & Development at Pfizer; Ian McCubbin, SVP of Strategy, Logistics and External Supply at GSK; and Ellen Strahlman, SVP and chief medical officer at GSK.

GSK and Pfizer have established an integration steering committee, with representatives from both companies to prepare for the operation of the new company upon the closing of the transaction. A head of R&D will be appointed to oversee all research and development activities. Manufacturing and other services will be provided by GSK and Pfizer.

Analysts by and large agreed that the combination of GSK's and Pfizer's HIV franchises will create a strengthened portfolio, and perhaps even influence other major HIV players to consolidate their portfolios. But as analyst firm Datamonitor pointed out, Gilead Sciences Inc. is set to remain the market leader in the HIV sector with its $3.4 billion portfolio in 2008, and GSK-Pfizer's combined portfolios falling just shy of that.

When Witty signaled that the deal may be a sign of changes to come for Big Pharma when he said, "We'll be looking for ways to do similar things," Datamonitor predicted that "it is possible that the new company, if successful, will eventually be spun off completely into independence, creating a focused, specialty pharmaceutical business."

GlaxoSmithKline to acquire Stiefel

LONDON—Seeking to boost its skin therapy product business, GSK announced April 20 that it will acquire Coral Gables, Fla.-based dermatology company Stiefel Laboratories Inc. in a deal valued up to $3.6 billion.

Under the terms of the agreement, GSK will acquire the total share capital of Stiefel for $2.9 billion in cash, assuming $400 million of net debt upon closing, and may pay Stiefel an additional $300 million based on future performance. GSK will combine its existing dermatological portfolio with Stiefel's products, and Stiefel will operate under its own name within GSK. The transaction is expected to close in the third quarter of 2009.

The companies said the new unit will have combined revenues of approximately $1.5 billion, representing an 8 percent share of the global prescription dermatology market. Stiefel has more than 15 projects in late-stage development, including treatments for acne, dermatoses and fungal infections.

Amy Swinderman

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