GlaxoSmithKline's mulled HIV spin-off 'bigger than M&S and Sainsbury's combined'

GlaxoSmithKline is looking to float the HIV business it set up with Pfizer five years ago in a move that would create a listed company "bigger than Marks & Spencer and Sainsbury's" combined.

Sir Andrew Witty, chief executive, said he expected Viiv Healthcare to attract a "significant" capitalisation due to its rapid growth.

GSK and its US rival Pfizer established ViiV Healthcare in 2009 by combining their HIV research efforts. In 2012, Japanese drug maker Shinogi, already a research partner, also bought a stake.

Sir Andrew said ViiV could be valued at up to £15bn, making it larger than Marks & Spencer and Sainsbury's combined. He added that GSK - which owns nearly 80pc of the joint venture - plans to float a "minority" stake.

He said he was unperturbed by the recent market turmoil which has caused a string of companies to scrap or delay their flotation plans.

"The beauty of ViiV is that it is at the beginning of an extraordinary growth run and so I don’t feel under any acute pressure that it has to be done by a certain day of the week. We can be very thoughtful about market conditions," he said.

ViiV's newest HIV medicines, Trumeq and Tivicay, have debuted in the last year in what Sir Andrew described as "one of the most successful new product launches in the category". The group's portfolio includes 11 other HIV medicines, with one other in clinical trials.

Its raked in £373m in the third quarter, an 18pc increase on sales in the same period a year earlier.

GSK unveiled its plans for ViiV as it launched a fresh assault on its cost base in an effort to plug the gap left by its falling lung drug sales in a "painful" quarter for the company.

The pharmaceuticals giant said it would cut £1bn out of its costs over the next three years, and would make half of these savings in 2016.

Richard Hunter, head of equities at Hargreaves Lansdown, described the IPO plans and restructuring as a "shot in the arm" for Glaxo.

GSK posted a 3pc drop in revenues to £5.6bn for the third quarter of the year, due to declining sales across several divisions.

Pharmaceuticals and vaccines sales dipped 3pc despite strong growth in emerging markets. This was largely due to an 8pc sales decline in the company's key respiratory franchise, which is facing intensifying competition for its top inhaler Advair in the crucial US market.

Sir Andrew said the higher price pressure on Advair reflected a "new reality in the US primary care marketplace" but that the franchise would return to growth by 2016 thanks to GSK's new lung drugs, Breo and Anoro.

However analysts questioned GSK's optimism for a turnaround at its respiratory franchise. Dr Mick Cooper, analyst at Edison Investment Research, said: “The results are not as bad as feared but attention remains focused on the respiratory franchise, 30pc of total sales. So far there have been modest sales from its new respiratory products while its leading product Advair facing increasing competition.”

GSK's consumer healthcare unit posted a 3pc drop in sales, which it blamed on supply chain problems.

The company posted a 59pc drop in earnings per share to 8.3p, though core earnings per share - which excludes certain items - was flat at 29.7p.