GSK Announces Incremental Restructuring Plan; Considers IPO for Viiv Healthcare
GlaxoSmithKline (GSK) has announced a new restructuring plan to rescale its commercial operations, global support functions, and relevant R&D and manufacturing across pharmaceuticals to deliver incremental cost savings in addition to the company’s existing cost-savings initiatives and synergies that would be derived from its pending three-part transaction with Novartis. Under that deal, the companies are combining their consumer healthcare businesses into a new joint venture company, GSK is divesting its oncology assets to Novartis, and GSK is acquiring Novartis’ vaccine business (excluding flu). That deal, announced in April 2014, is expected to close in the first half of 2015.
Under the new restructuring program, GSK says it expects to achieve annual cost savings of £1 billion ($1.6 billion) over the next three years, with around 50% delivered in 2016. This new program is expected to result in costs of £1.5 billion ($2.4 billion), predominantly in cash. Initial savings in 2015 from the program will help offset the earnings impact from declining sales of its respiratory drug Advair (fluticasone propionate and salmeterol xinafoate).
“We have recently concluded new contracts for Advair in the US, which gives us greater visibility on the outlook for 2015,” said GSK CEO Sir Andrew Witty, in the company’s third-quarter earnings release. “As we go forward, we expect US sales of the product to continue to decline in line with recent trends as some recovery in volumes is offset by lower price levels set in 2014.” Witty said that the company’s transition in its respiratory business is “significant and clearly challenging” but expects that total global respiratory sales (residual and new products) will return to growth in 2016.
GSK also said it is considering an initial public offering (IPO) of its minority stake in the specialist HIV company, ViiV Healthcare. ViiV Healthcare was established in November 2009 by GSK and Pfizer with a specific focus on HIV treatments. Shionogi joined as a shareholder in October 2012.
In the company’s third-quarter release, GSK CEO Sir Andrew Witty said: “We believe now is the right time to explore the potential for an IPO of a minority shareholding in this business. This will provide greater visibility of the intrinsic value we see in its currently marketed assets and future pipeline and also enhance potential future strategic flexibility.”
With regard to its pending three-part transaction with Novartis, GSK said that it expects the deal to result in an increase in overall revenues of £1.3 billion ($2.1 billion). The company is targeting total annual savings from the transaction of £1 billion ($1.6 billion) by the fifth year from closing, with approximately 50% delivered by year three.
Source: GlaxoSmithKline