Experts' comments on GSK floating its HIV business

The announcement this week by UK pharma giant GlaxoSmithKline (LSE: GSK) that it is mulling a possible  initial public offering (IPO) for its HIV joint venture ViiV Healthcare has attracted a fair amount of comment, including from Warwick Business School Professor of Practice John Lyon, who has worked in the pharmaceutical industry for more than 20 years and was global vice president of US drug development company Covance.

Prof Lyon said: “GSK has disappointed over the last few quarters, with falling sales of some of its product lines in major territories, particularly in the USA, which has been reflected in its share price. With such a large basket of products and future medicines in clinical trials, good news and hidden asset value are often camouflaged by bad news, which is often acted on by investors quickly by pricing the stock down rather than upgrades reflecting better news flow.

“By hiving off assets associated with good news stories, such as an asset based in growing therapeutic areas where chronic treatments mean increasing and sustained sales, value is unlocked. A further advantage of such an arrangement is the ease which analysts and the general public can assess the business and business model, through which they can evaluate cash flows with more certainty.