GlaxoSmithKline Brings Three Banks on Board to Advise on Potential IPO

February 4, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

GlaxoSmithKline has hired three heavy hitting banks to advise on the spin-off of its HIV unit, ViiV Healthcare, as Big Pharma once again rushes to take advantage of the hottest initial public offering market in a decade, Sky News reported Wednesday.

Glaxo’s CEO Sir Andrew Witty said in October that the company would be undergoing a strategic review of ViiV and the next portion of that review appears to be a listing on the London Stock Exchange, sources close to the deal said this week.

Those same sources added that Britain’s largest drugmaker have hired Morgan Stanley, Goldman Sachs and Citi as financial advisers on the potential IPO of ViiV, of which GSK owns 80 percent. The rest is parceled up between global drugmakers Shionogi and Pfizer Inc. —all of whom declined to comment on the report Wednesday.

ViiV has 674 employees in 15 nations and is based in West London. Witty said in October that its size and reach put it at around number 40 for the FTSE 100. At the time, Witty appeared to be showcasing the unit’s value, a classic opening gambit in a run at the public market or for showcasing the company to potential suitors.

“This is not a forecast, but this business will make a £1bn profit this year if you simply grossed up the nine months’ year-to-date on a straight line basis. That, I think, tells you straight away what the kind of underpinning profit number of this business might be,” he said. “Obviously, this business is on an accelerating curve, it is an important business going through a very expansionary phase…and obviously we are keen that our shareholders get to be the full beneficiaries of that.”

Glaxo is due to release its full-year financial reporting today and analyst have long projected that it will attempted to spin-out ViiV as a way to both please existing shareholders by streamlining its businesses and bring value back into its existing pipeline. ViiV is a good earner for GSK, bringing in billion annually—a leap that analysts have reconfigured to around £1.4 billion in 2013 to £2.5 billion in 2018 after new drug Tivicay saw a blockbuster debut.

Shareholders will likely be nothing but pleased with that news, after a massive bribery scandal in China in 2014 caused Glaxo to write down huge chunks of its earning, causing a 7 percent drop in its stock price over the past year.

Still, GSK has been struggling to regain some of the value currently being enjoyed by its competitors, and is doing so in creative ways: It is almost finished with a $20 billion asset swap with Swiss drugmaker Novartis AG , which will boost its vaccines and consumer healthcare divisions, and its IPO of ViiV is another potentially lucrative strategy.

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