UPDATE 2-GSK raises bet on AIDS drug with new Shionogi deal

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

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

* Reduces upfront costs for Japan's Shionogi

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

(Adds sales forecast, context on Human Genome acquisition)

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 which gives 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 multi-billion-dollar-a-year seller and a strong competitor to treatments from market leader Gilead Sciences.

The drug belongs to a novel class known as integrase inhibitors that block the virus causing AIDS from entering cells.

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, its 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 on Monday. ``We're taking in house, in this case through ViiV, what we deem to be an important growth asset.''

Dolutegravir is scheduled to be submitted for regulatory approval in the United States and Europe by end of this year. Industry analysts expect a launch by late 2013, with sales ramping up to around $1 billion by 2016, according to consensus estimates compiled by Thomson Reuters Pharma.

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. Analysts currently expect earnings of just over 120p a share in 2013.

The decision fits with the group's strategy of increasing investment in its new drug pipeline and echoes a move made in July to take full control of new lupus drug Benlysta by buying Human Genome Sciences for $3 billion.

GSK, like its rivals, has suffered a string of patent expiries in recent years. Despite coming through this so-called ``patent cliff'' earlier than most other drug firms, it is still struggling to grow sales.

Results for the third quarter, due on Wednesday, are expected to show another difficult period of trading, weighed on by price cuts in Europe and weak vaccine sales.


Dolutegravir, which is designed for combination with existing drugs to control HIV, should help GSK rejuvenate its HIV/AIDS business - an area it used to dominate but where it has fallen behind rivals, notably U.S.-based Gilead.

Shionogi, meanwhile, will save money it would otherwise have had to spend in the run-up to the drug's launch. In exchange for ceding some of its interest in the drug it 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, which takes effect from Oct. 31, GSK will hold 76.5 percent in the venture, while Pfizer will hold 13.5 percent. GSK currently holds 85 percent of ViiV and Pfizer 15 percent.

There has been speculation that ViiV might be spun off at some point through an initial public share offer. Redfern, who is also chairman of ViiV, said the new arrangement made this neither more nor 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.

The creation of ViiV three years ago marked an unusual drug industry collaboration because of the way in which it pooled GSK and Pfizer's HIV/AIDS operations into a new business.

The current structure, however, could easily form a stepping stone to a fully independent business, which some analysts believe might be better placed to take on Gilead.

(Editing by Edwina Gibbs and Greg Mahlich)