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UPDATE 1-GSK raises bet on AIDS drug with new Shionogi deal

Monday, 29 Oct 2012 | 9:02 AM ET

* Shionogi takes 10 pct stake in GSK, Pfizer joint venture

* Deal lifts GSK interest in dolutegravir to 60-66 pct

* Reduces upfront costs of developing drug for Shionogi

* Revised deal doesn't change long-term options for ViiV

(Adds interview with GSK executive, background on drug)

LONDON/TOKYO, Oct 29 (Reuters) - GlaxoSmithKline has raised its bet on a promising drug for HIV/AIDS by redrawing a deal with Japan's Shionogi, giving it a much bigger economic interest in the new product.

Dolutegravir, a once-daily drug that has performed strongly in clinical trials, is seen by analysts as a potential multibillion-dollar-a-year seller and a strong competitor to treatments from market leader Gilead Sciences.

Under the new agreement, Shionogi will take a 10 percent stake in Viiv Healthcare - an HIV drug joint venture set up in 2009 between Britain's biggest drugmaker and Pfizer - in exchange for its rights to dolutegravir.

Previously, income from the medicine would have been shared 50:50 between ViiV and Shionogi, which analysts calculate would have given GSK only around a 40 percent interest in the drug, after taking account of Pfizer's minority stake in ViiV.

Now GSK's economic interest will be between 60 and 66 percent, GSK Chief Strategy Officer David Redfern told Reuters.

``It's an affirmation of our belief in dolutegravir as a potential important medicine in HIV,'' he said in an interview. ``We're taking in house, in this case through ViiV, what we deem to be an important growth asset.''

Dolutegravir is scheduled to be filed for regulatory approval in the United States and Europe by end of this year. It belongs to a novel class of drugs known as integrase inhibitors that block the virus causing AIDS from entering cells.

Redfern said the new arrangement was expected to dilute GSK's earnings by around 1 pence a share in 2013 and 2014 but should boost earnings thereafter.

Shionogi, which will save money it would otherwise have had to spend in the run-up to the drug's launch, will gain one Viiv board seat and receive royalties of 15 percent to 19 percent on sales of dolutegravir and future related products.

After the deal GSK will hold 76.5 percent in the venture, while Pfizer will hold 13.5 percent.

There has been speculation that ViiV might be spun off at some point through an initial public offering (IPO). Redfern, who is also chairman of ViiV, said the new arrangement made this neither more or less likely.

``I wouldn't rule anything in or out, but for the foreseeable future we are very comfortable with where ViiV is,'' he said.

(Reporting by Ben Hirschler and Mayumi Negishi; Editing by Edwina Gibbs)