GlaxoSmithKline Won't Sell Its HIV Drugs Unit, Cuts Shareholder Payout

NEW YORK (The Deal) -- The U.K.'s GlaxoSmithKline (GSK) on Wednesday pulled plans to list its HIV medicines business because of a "strong positive outlook" for the unit.

Britain's leading drug maker also cut the planned payout to shareholders from the sale for up to $16 billion of its oncology business to Novartis (NVS) by three-quarters, saying it would return £1 billion ($1.5 billion) instead of the £4 billion previously planned. It announced the moves as it forecast a brighter earnings outlook from 2016 after a period of contraction following a costly bribery scandal in China and price pressure at its respiratory drugs business.

The initiatives put the beleaguered company back on the offensive. GlaxoSmithKline said it will prioritize capital allocation for ordinary dividends, "accelerated investments to realize synergies," and to accommodate any decision by HIV unit joint venture partner Pfizer (PFE) and consumer health care joint-venture partner Novartis to exercise their respective put options. GlaxoSmithKline said it may also funnel capital into measures to deal with the future introduction of a generic version of its Advair respiratory drug in the U.S.

"We want to make sure we retain the flexibility to deploy capital in response to events that may or may not occur in the next five years," said CFO Simon Dingemans in a video presentation. "We believe these decisions support the long-term interests of shareholders."

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