As a new chair prepares to take over at GlaxoSmithKline, the drug giant says it will not spin off its majority holdings in a promising HIV drug developer.
CEO Andrew Witty also says GSK (NYSE: GSK) won’t return as much of the profits from its big deal with Novartis to shareholders.
The drug giant, which is cutting hundreds of jobs at its operations in Research Triangle Park, is going through a massive reboot. And on Wednesday Witty spelled out his strategy for taking the company forward. New chair Philip Hampton, formerly of Royal Bank Scotland, takes over soon as well.
Witty announced that GSK had canceled an initial public offering of its holding in the HIV business, ViiV Healthcare, opting instead to retain its full holding in the joint venture with equity partners Pfizer and Shiongi.
“We’ve made all of our decisions on the medium to long-run value creation – let’s not chase the quarter or even two years. There is an increase in optimism around the portfolio and with the increase in opportunity in R&D, we really think [an IPO] at this time would be a mistake,” he said, according to The Telegraph in London.
GSK owns some 80 percent of the joint venture.
Drugmakers have been trying to either grow or eliminate noncore investments to focus on their strengths amid pressure from generic drugmakers. Those deals included GSK’s sale of its cancer-drug business to Novartis in a swap for the Swiss company’s vaccines business and cash.
GSK also said it would reduce a planned return to shareholders from the Novartis deal. It will give shareholders 1 billion pounds ($1.5 billion) in a special dividend in the fourth quarter, a fourth of what was planned.
Transaction cost savings from the Novartis deal will be accelerated, with over 50 percent of total savings of 1 billion pounds expected in 2016, versus 2017. GSK said it has three major restructuring programs underway and expects to deliver 3 billion pounds annually annual cost savings.
GSK has faced in-house problems, including a bribery scandal in China. It is restructuring and is in a period of transformation, with the new chairman, Philip Hampton, taking charge.
The company reported sales of 5.6 billion pounds, a 1 percent increase from the same quarter in the previous year. Sales of Advair, which is used to prevent asthma attacks, continued to decline because of competition from generic competitors.
