Pharma giant GlaxoSmithKline (GSK) is considering floating its HIV drugs business in a move that would see Viiv Healthcare among the top 40 companies in the FTSE 100 with a market valuation of up to £17bn.
Chief executive Andrew Witty told reporters yesterday: “In line with our commitment to identifying ways to realise shareholder value, we have announced today that we are beginning the process to explore a possible IPO [initial public offering] of a minority stake in this business.”
GSK owns nearly 80 per cent of Viiv Healthcare, with Viagra-maker Pfizer and Shionogi owning the rest.
Witty did not give a timetable for a Viiv Healthcare IPO and said there was no rush to sell, since the business would continue to grow strongly for the foreseeable future. Its newest HIV medicine Tivicay has already been a big success.
“The beauty of Viiv is that it is at the beginning of an extraordinary growth run and so I don’t feel under any acute pressure that it has to be done by a certain day of the week. We can be very thoughtful about market conditions and obviously the total focus here is to generate the maximum return for shareholders,” said Witty.
“If it were listed on the UK market, it would be in the upper third or the top 40 of FTSE companies at the very least. That would put it as bigger than Marks & Spencer, Sainsbury’s and one or two other very famous companies within the UK.”
The decision to explore options to spin off Viiv comes after a run of weak quarters, a fine of nearly $500m (£311.6m) for bribery in China and falling sales in GSK’s respiratory medicine Advair in the US, which has heaped pressure on the company.
This year, said Witty, “has been painful for GSK as we have absorbed these impacts in the US but we have adjusted quickly to this situation.”
The announcement came along with GSK’s third-quarter results, in which it stuck to its financial outlook for the full year, predicting profits “broadly similar to 2013”.
Third-quarter sales were £5.65bn, down 10 per cent from a year earlier and below analysts’ expectations, while profits fell one per cent to £1.73bn.
Viiv accounted for around 6.6 per cent of GSK’s total revenues during the quarter, or around £373m, but the division reported growth of 18 per cent at constant exchange rates. Similarly, Viiv’s operating profit grew 19 per cent to £246m.
Analysts at Jefferies said the HIV and Aids division could be valued at about £17bn on the public market.