The world's two biggest drugs companies, GlaxoSmithKline and the US group Pfizer, are to pool their resources and form a new company in the search for new HIV treatments.
The new group, which will be launched and named towards the end of the year, will share the two companies' existing treatments and pipeline products, giving it a market share of 19 per cent.
GSK, which is contributing 90 per cent of the £250m start-up costs, will be the major shareholder with an initial 85 per cent of the equity. This also reflects the UK company's bigger portfolio of marketed drugs, which will initially contribute the most of the new group's revenues.
The equity split will change, however, depending on which company's medicines and molecules contribute most to profits in the future. The US group has a stronger line of less well developed HIV treatments and will capture a bigger slice of the equity, as much as 30.5 per cent, if its pipeline treatments successfully negotiate clinical trials.
When the new company is incorporated at the end of the year, it will have 11 marketed medicines and six molecules in its portfolio.
Andrew Witty, GSK's chief executive, stressed yesterday that the deal will help the group to guard against the loss of the revenues it will suffer over the next few years as its leading HIV treatments, including Combivir, lose their patent protection and are open to competition from generic drug makers.
Mr Witty also said that the agreement was a continuation of the policy to avoid spending large amounts on research in the hope of finding new blockbuster treatments. GSK has increasingly targeted emerging market sales since Mr Witty's appointment last year, and has signed several small-scale acquisitions and licensing deals, eschewing the mega-merger which has been popular with several of its rivals.
Jeremy Batstone-Carr, the head of research at Charles Stanley, said yesterday that the deal is typical of GSK under Mr Witty: "While the rewards associated with HIV treatments are potentially huge, there is no silver bullet and visibility is very low. It is difficult to recommend the shares because it is a high-risk strategy, and as such the stock is somewhat hamstrung."
The board of the new group will be dominated by GSK executives, with Dominique Limet, GSK's head of Personalised Medicine Strategy, becoming chief executive.