The UK’s largest drug-maker GlaxoSmithKline (GSK) improves 2.9% to £13.81 after saying it would consider demerging its HIV business ViiV Healthcare to become a separately-listed company.

The potential deal is part of a £1 billion cost-cutting programme and was announced in its third quarter results which beat expectations despite pre-tax profit falling to £548 million from £1.4 billion a year earlier.

ViiV’s potential public debut could value the business at some £17 billion, according to investment bank Jefferies.

The subsidiary's revenues grew 18% to £373 million in the third quarter compared to a year earlier on the back of its Tivicay and Triumeq drugs. Operating profits grew 19% to £246 million.

ViiV was created five years ago by GSK, which owns more than 70% of the business, while US giant Pfizer (PFE:NYSE) and Japanese outfit Shionogi (4507:TYO) also hold shares.

Web - GSK - 22 October 2014

It’s a tough IPO market at the moment. Virgin Money, Aldermore bank and car retailer BCA have postponed their market debuts this month. Shoe-maker Jimmy Choo (CHOO) did manage to get its deal away, but at the bottom of its price range. We believe the Glaxo business, which generates a 66% margin through making and selling HIV drugs, should nonetheless attract investor interest.

As  a combined group, GlaxoSmithKline has reported 13% drop in operating profit for the third quarter to £70.3 million. Pricing pressure in the US has hit its asthma treatment Advair; a strong pound and a fine for bribing doctors in China have also been blamed for the disruption to earnings.

Issue Date: 22 Oct 2014