Spinoff fervor grows: GSK looks at ViiV spinoff and investor tells Amgen to break things up

GlaxoSmithKline CEO Andrew Witty

Breakups and spinoffs are in the air. GlaxoSmithKline ($GSK) said today it is considering a spinoff of ViiV, the successful HIV-centric business it shares with Pfizer ($PFE) and Shionogi. Its talk of unlocking the "intrinsic" value of the business mirrored the language a hedge fund investor used hours earlier to suggest that Amgen ($AMGN) do much the same thing, breaking into two companies, one for legacy drugs and one for new launches.

GSK said the ViiV partners are considering an IPO in which investors would get a minority stake, a move similar to what Pfizer did last year when it spun off its animal health business into a separate company. GSK reported that ViiV had growth of 18% in the third quarter, to hit £373 million ($598.3 million ) in sales. But GSK CEO Andrew Witty pointed out that growth was more than offset by revenue declines of 10% in the U.S. and 2% in Europe as sales of respiratory powerhouse Advair fell faster and harder than expected following its patent loss.

ViiV in August got FDA approval for Triumeq, a drug pegged at $5 billion in peak sales, but the upside of that is obviously dampened by the difficulties GSK is having in other parts of its business. Witty suggested a spinoff of ViiV would provide investors with something that is growing from a company that is not right now. GSK revenues were down 3% for the quarter.

ViiV Healthcare,"has made very significant progress in both R&D and commercial execution, culminating in the recent successful launches of Tivicay and Triumeq. We believe now is the right time to explore the potential for an IPO of a minority shareholding in this business. This will provide greater visibility of the intrinsic value we see in its currently marketed assets and future pipeline and also enhance potential future strategic flexibility."

Hours before, hedge fund investor Daniel Loeb suggested something even more drastic for Amgen. His Third Point fund has a stake in Amgen and he told investors that Amgen CEO Robert Bradway and his board needed to take "bold action" and break the California biotech into a mature drug company and a growth drug company. He said his fund figures such a move could return more than 80% in share price value in two years, moving shares to $249.

Loeb said that the Bradway's plans to cut Amgen's workforce by 15%, announced in July, "do not even scratch the potential opportunity." He said that given its revenue growth, Amgen's operating margins should be much better but that the company has made questionable capital allocations, including its $9 billion deal to Onyx Pharmaceuticals.

Amgen in a statement politely thanked Third Point for its constructive suggestions and said it looked forward to updating shareholders next week, as previously planned, on its restructuring efforts.

Spinoffs are nothing new but are in vogue again. Besides Pfizer's spinoff of Zoetis, Abbott Laboratories ($ABT) last year spun its pharma business into AbbVie ($ABBV), and Baxter International ($BAX) is about to do the same thing with plans to unleash its biopharma operations, while keeping its diagnostics business under the Baxter moniker.

GSK is in the midst of other moves with Novartis ($NVS) to try to dig some growth out of its business, combining their consumer units, selling Novartis much of its oncology assets, while taking over much of Novartis' vaccine business. As Witty said today, "This is a clear catalyst to fundamentally reshape GSK."

- here's GSK's release
- here's Third Point letter (PDF)
- here's Amgen's response

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