PHA-Exch> GSK, Pfizer sign pact to create a new world-leading HIV company

[Claudio Schuftan]

From: Vern Weitzel <vern.weitzel at gmail.com>
crossposted from: "[health-vn discussion group]" health-vn at anu.edu.au



GSK, Pfizer sign pact to create a new world-leading HIV company
Saturday, April 18, 2009 09:00 IST
London UK

GlaxoSmithKline plc (GSK) and Pfizer Inc announced they have entered
into an agreement to create a new world-leading HIV company focused
solely on research, development and commercialisation of HIV
medicines. The new HIV business will be more sustainable and broader
in scope than either company's individually, and will hold a 19 per
cent share of the growing market and have an industry-leading
pipeline. GSK will initially hold an 85 per cent equity interest in
the new company and Pfizer will hold 15 per cent.

Andrew Witty, chief executive officer, GSK said: "Today marks a
definitive step by GSK to renew our focus and deliver more medicines,
more efficiently, to people living with HIV/AIDS. At the core of this
specialist business is a broad portfolio of products and pipeline
assets, which can be more effectively leveraged through the new
company's strong revenue base and dedicated research capability. HIV
remains a global threat with increasing incidence and viral
resistance. This new company will be better placed to meet these
challenges and improve access to treatments."

Jeff Kindler, chief executive officer, Pfizer said: "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.
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 new company can reach more patients and accomplish much more for
the treatment of HIV globally than either company on its own."

The new company will have a broad product portfolio of 11 marketed
products including market-leading therapies such as Combivir, Kivexa
and Selzentry/Celsentri. Based on 2008 pro-forma results, this
combined portfolio generated sales of approximately £1.6 billion and
these revenues will provide the new company with financial stability
and support investment in its pipeline.

The clear focus of the new business will be to invest in research and
development of innovative HIV treatments and formulations that improve
adherence and overcome resistance to the virus.

The company will have an industry-leading pipeline of 6 innovative and
targeted medicines, including 4 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.

The new company will also invest in early-stage research and discovery
of HIV medicines, and will benefit from a new Research Alliance
Agreement with GSK and Pfizer. Under this new alliance, GSK and Pfizer
will continue to conduct discovery research and development into HIV
medicines and the new company will invest in this activity and will
have exclusive rights of first negotiation in relation to any new
HIV-related medicine developed by either GSK or Pfizer.

The new company will continue GSK's and Pfizer's commitments to
improve 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 licences 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.

The new company will continue GSK and Pfizer's strong record of
community support for HIV. GSK's long-standing Positive Action
programme will transfer to the new company, maintaining a focus on
prevention, tackling stigma and discrimination, and building capacity
and treatment literacy within the global community. Since 2002, GSK
has conducted 65 partnership projects across 63 countries and the new
company will continue to invest in Positive Action.

Pfizer has made substantial investments in the fight against HIV/AIDS,
as evidenced through its partnerships with key stakeholders and
organisations. The Pfizer Foundation remains committed to its
continued support of ConnectHIV in the USA, the Diflucan Partnership
Program in developing countries and the Infectious Diseases Institute,
a global centre of excellence for teaching, research and healthcare
delivery in Africa.

The management of the new company will bring a new focus to the global
HIV therapy area and will be able to rapidly prioritise and access
internal and external investment opportunities.

Dominique Limet has been appointed as chief executive officer
designate of the new company and as a member of its board.

Dominique is currently senior vice president and head of GSK's
personalised medicine strategy. He is a trained physician and has held
a number of senior leadership roles at GSK including as regional
president for Southern and Eastern European markets and as general
manager of GSK France. Dominique 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
programmes around the world.

Other Board members to be appointed to the new company are: Julian
Heslop, chief financial officer, GSK and chairman of the new HIV
company; Cees Heiman, regional president, specialty care business
unit, Europe, Pfizer; Zhi Hong, SVP and head of infectious diseases
CEDD, GSK; Abbas Hussain, president emerging markets, GSK; Duncan
Learmouth, SVP corporate communications & community partnerships, GSK;
Martin Mackay, president, global research & development, Pfizer; Ian
McCubbin, SVP strategy, logistics and external supply, GSK; Ellen
Strahlman, SVP and chief medical officer, 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.

The combination is highly complementary and serves both companies
strategically. For GSK, the transaction will expand its marketed
portfolio, helping to reduce the impact of patent expiries to several
of its HIV products in future years, and it will provide access to a
broad range of new pipeline assets. For Pfizer, the collaboration will
provide Selzentry/Celsentri and its pipeline assets with access to
GSK's global HIV commercial organisation and HIV distribution network
to better reach patients in need.

Upon completion of the transaction, GSK will hold an 85 per cent
equity interest in the new company and Pfizer will hold 15 per cent
reflecting the value of their currently marketed products. To reflect
the potential future performance of their respective HIV pipeline
products, GSK and Pfizer have agreed a structure for their equity
interests to be adjusted in the event that specified sales and
regulatory milestones are achieved.

If all milestones were to be achieved, GSK's equity interest in the
new company would be 75.5 per cent and Pfizer's would be 24.5 per
cent. In the event that the only milestones achieved are in respect of
the pipeline assets originally contributed by GSK, GSK's equity
interest in the new company would be 91 per cent and Pfizer's would be
9 per cent. In the event that the only milestones achieved are in
respect of the products and pipeline assets originally contributed by
Pfizer, GSK's equity interest in the new company would be 69.5 per
cent and Pfizer's would be 30.5 per cent.

The dividend entitlements of GSK and Pfizer in respect of their
respective equity interests also include provision for preferential
dividend payments if specified sales thresholds are met in respect of
the marketed products and pipeline assets that they each originally
contributed to the new company.

The new company will be fully consolidated in GSK's financial
statements and Pfizer's share of the new company will be reflected as
a minority interest. As part of the transaction GSK and Pfizer will
exchange assets, and as a result GSK will be required to add Pfizer's
marketed and pipeline assets into its accounts at fair value.
Consequently, under accounting rules which apply to acquisitions
completed prior to the end of 2009, this asset exchange will result in
a one-off non-cash, pre-tax accounting gain for GSK on the closure of
the transaction, which is expected during the fourth quarter of 2009.
GSK will report this gain within other operating income.
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