The New York Times - April 17, 2009
Natasha Singer

By combining products from both companies, the new entity would have 11 H.I.V. drugs, representing a 19 percent share of the market, and six other drugs in various stages of development.

"It absolutely restates GSK's commitment to be a leader in this field," Andrew Witty, the chief executive of Glaxo said Thursday in a conference call with journalists.

Mr. Witty described the joint venture as having "the focus of a specialist company with the support of two big parents."

Drug makers have often combined forces to develop and market single drugs. Bristol-Myers Squibb and Sanofi-Aventis, for example, are partners in the anticlotting drug Plavix.

But the decision by Pfizer and Glaxo to form a joint venture focused on an entire drug category represents a new model of industry collaboration.

"It does stand as a first," said Kevin Scotcher, an analyst with Liberum Capital, an investment bank based in London and New York. H.I.V. drugs are a lucrative market, with global sales last year of about $12.3 billion -- $7.2 billion of it in the United States, according to IMS Health, a market research firm.

Glaxo will initially have an 85 percent equity interest in the joint venture. The combined entity, which will not have a name until the expected closure of the deal in the last quarter of this year, could save about $90 million annually by merging sales and management infrastructure, the companies said. Glaxo has been struggling to maintain its share of the H.I.V. market in the face of looming patent expirations on several of its drugs and rising competition.

H.I.V. is typically treated with a cocktail of medications -- including one kind of drug to stop the virus from entering cells and other kinds of drugs to inhibit it from replicating. Glaxo formerly led the field with Combivir, a pill that combines two H.I.V. drugs and is taken twice a day.

But three years ago, Gilead introduced a pill that combines three drugs and can be taken once a day. The pill, called Atripla, combines two Gilead drugs with one from Bristol-Myers Squibb.

Last year, Gilead's H.I.V. franchise had sales of about $4.3 billion.

And there are newer competitors. Isentress, a novel H.I.V. drug introduced by Merck in late 2007, had worldwide sales last year of $361 million.

Glaxo's H.I.V. franchise has had effectively flat sales for the last three years of about $2.2 billion annually, according to a note to investors from Alexandra Hauber, a JPMorgan analyst.

Glaxo "had their lunch stolen by Gilead because they lost focus on the H.I.V. business," said Seamus Fernandez, an analyst with Leerink Swann.

Pfizer, which is trying to complete its more than $62 billion acquisition of Wyeth, has not been an H.I.V. powerhouse. For its minority stake in the Glaxo partnership, it stands to gain access to Glaxo's established marketing presence and distribution channels in the H.I.V. field.

Glaxo's portfolio would gain longevity with Selzentry, a new H.I.V. drug from Pfizer that does not face patent expiry in the United States until 2021, as well as several drugs Pfizer has under development. The joint venture could also develop new combinations of the companies' existing drugs, Mr. Fernandez said.

Shares of Pfizer rose 4 cents, to $13.90 on Thursday. Shares of Glaxo fell a penny, to $30.82. Shares of Gilead rose 31 cents, to $44.85.
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