ViiV Healthcare, a joint venture (JV) between drugs giants GlaxoSmithKline and Pfizer, is to acquire the exclusive global rights to the assets of Shionogi-ViiV Healthcare, a JV set up with Shionogi, the Japanese pharmaceuticals firm.
The assets include the investigational medicine dolutegravir and other early stage HIV integrase inhibitor compounds.
As a result of the deal, Shionogi will receive an ongoing royalty and dividend stream, and will also receive a 10% equity in ViiV Healthcare. As a result of this, Glaxo's stake will be diluted to 76.5% and Pfizer's stake will be reduced to 13.5%.
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Specifically, Shionogi will receive a royalty on net sales of the integrase inhibitor portfolio averaging in the high teens. For a defined period post-launch, while the franchise gets itself established, the royalty applies to sales above certain minimum thresholds; after that period, the royalty applies to all sales.
Shionogi will be entitled to representation on the ViiV Healthcare board, and will, for a defined period, continue to have ongoing involvement in the formulation of the development and commercialisation plans for the integrase inhibitor portfolio.
The deal kicks in on October 31st, and replaces the existing joint venture agreement between ViiV Healthcare and Shionogi.
With ViiV Healthcare in exclusive control of the development and commercialisation rights to the integrase inhibitor portfolio, the hope is that this will streamline research & development and commercial operations.
"Both ViiV Healthcare and Shionogi believe that now is the right time to simplify and evolve their existing arrangement," said David Redfern, Chairman of the board of Viiv Healthcare. "In doing so, we will deepen the relationship as shareholders and at board level. We will also unlock synergies through simplifying processes and avoiding duplication. We believe this new agreement will create long-term value for ViiV Healthcare and its shareholders," he added.
Glaxo will continue to consolidate 100% of ViiV Healthcare into its consolidated financial statements. The portion of ViiV Healthcare's after-tax profit attributable to the non-controlling interests of Pfizer and Shionogi will be reflected in the Glaxo income statement.
As a result of this transaction a non-cash accounting gain is expected to be recognised in Glaxo's fourth quarter 2012 non-core results.
Future royalty payments to Shionogi will be recorded as a reduction of the royalty obligation on Glaxo's balance sheet.
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