Important note: Information in this article was accurate in 2009. The state of the art may have changed since the publication date.
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Wall Street Journal - April 16, 2009
Jeanne Whalen And Dana Cimilluca
Glaxo will initially get 85% of the joint venture and Pfizer 15%, the companies said in a statement. The new company, which could be worth as much as £5 billion ($7.5 billion), will hold 19% of the global HIV market.
The deal marks a rare moment of cooperation between pharmaceutical rivals. Glaxo is a big seller of HIV drugs, but its products are relatively old and not growing as much as the Brentford, England, company would like. Glaxo's pipeline of HIV drugs in development is also relatively weak.
New York-based Pfizer has a large pipeline of HIV drugs in development but not many on the market. The companies hope that by pooling their resources, they will cut costs and create a broader business with better potential for long-term growth.
The combined business had sales of £1.6 billion last year and operating profit of £870 million, the companies said. Analysts typically value such businesses at two to three times sales, which would give the new company a value of roughly £4 billion to £5 billion.
The transaction is the latest sign of deal making in the pharmaceutical industry, which is trying to cope with a drop in revenue from patented products. In a separate deal, Pfizer is in the process of combining with Wyeth in a $68 billion transaction that will further dilute the contribution of its HIV business to a combined Pfizer-Wyeth.
The HIV business has been a drag on Glaxo's sales growth. Glaxo had HIV sales of £1.5 billion last year, up 5% from 2007. Glaxo's total sales grew 7% to £24.4 billion.
The deal allows Pfizer to increase its stake in the joint venture to 30.5% if enough of its experimental HIV drugs make it to market. If the experimental products don't reach the market, Pfizer's share will drop to 9%, the companies said.
Glaxo said it expects annual pretax cost savings of as much as £60 million from the deal by 2011.
Dominique Limet, currently a senior vice president at Glaxo, will be chief executive of the new joint venture.
Write to Jeanne Whalen at jeanne.whalen@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com
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