GlaxoSmithKline (GSK) and Pfizer set the pages of the financial press ablaze on April 16 with an announcement they’re teaming up to create a new company—yet to be named—that will be exclusively devoted to the sale and development of HIV drugs. While business analysts attempt to make heads or tails of the partnership, a central question remains: Will the new HIV-focused company, created by the two pharma giants, yield benefits for people living with the virus?

When it comes to the drug industry, the question of making money is not limited to the overall bottom line; it also includes whether or not a given company can reap enough profit in a certain disease category, such as HIV, to afford ongoing research, development and commercialization of antiretrovirals (ARVs). Companies in the business of HIV treatment increasingly find themselves dealing with challenges that can adversely affect their bottom lines—a crowded market consisting of more than two dozen ARV options, stringent requirements to prove a drug safe and effective, and heightened governmental restrictions on sales and marketing tactics, to name a few. The end result has been a dwindling interest in the development of new HIV drugs, especially among leading companies such as GSK and Pfizer that have their eyes set on other, potentially more profitable, disease markets.

“Many of us in the advocacy community have been very concerned about [drug] companies leaving HIV/AIDS [behind],” says Lynda Dee, president of AIDS Action Baltimore and a longtime treatment activist. “It’s harder to find new compounds and more expensive and complicated to obtain drug approval.”

Bob Huff, editorial director and ARV project director of the New York–based Treatment Action Group, agrees. Whatever the reason, he says, the development of this novel, HIV-specific company “reveals the diminishing interest in investing in new HIV treatment research. I hope we can get to a new generation of better and more tolerable drugs before progress in this field halts.”

The joint creation of a fledgling company is just one example of the HIV drug industry scrambling for new business models to circumvent challenges it has never had to face before. There have been mega mergers between two companies to gain a competitive edge, including Merck’s recent purchase of Schering-Plough. We’ve also seen partnerships between two companies to develop a single product—the marriage of Bristol-Myers Squibb’s Sustiva (efavirenz) and Gilead’s Truvada (tenofovir and emtricitabine) to form the one-pill, once-daily Atripla union being a prime example.  

Jeff Kindler, chairman and chief executive officer of Pfizer, explains the creation of a new company with focus on a single disease confirms GSK and Pfizer’s continued interest in the field of HIV. “The new company can reach more patients and accomplish much more for the treatment of HIV globally than either company alone,” he says.

The penned GSK-Pfizer deal involves a complex calculus but encourages both companies to perform well and play nicely together. Unlike most publicly traded drug companies, GSK and Pfizer will be the sole owners of their spinoff business. GSK will initially own 85 percent of the new company, whereas Pfizer will own 15 percent—the ratio is based on the performance of each company’s approved ARVs in today’s market. Depending on the future performance of the experimental drugs each company brings to the table, Pfizer’s stake may increase to more than 30 percent or shrink to as little as 9 percent.

The new company will assume responsibility for selling 11 ARVs developed by GSK and Pfizer, including Epzicom (abacavir and lamivudine), Lexiva (fosamprenavir) and Selzentry (maraviroc). But the focus of the company, explains GSK chief executive officer Andrew Witty, will be to invest in research and development of innovative HIV treatments and formulations that improve adherence and overcome resistance to the virus.

Together, GSK and Pfizer are bringing six experimental agents to the table. Currently in the pipeline are: an integrase inhibitor, two non-nucleoside reverse transcriptase inhibitors, a CCR5-blocking entry inhibitor in Phase II studies, a PK enhancer (a Norvir alternative to boost the effectiveness of other HIV drugs) and a second CCR5 entry inhibitor in Phase I studies. Both companies also say they have a commitment to look for and test new HIV compounds. “At the core of this specialist business,” Witty says, “is a broad portfolio of products and pipeline assets, which can be more effectively leveraged through the new company’s strong revenue base and dedicated research capability.”

HIV treatment advocates agree that such a partnership makes sense. “In order to compete in the market place,” says Ken Fornataro, director of the AIDS Treatment Data Network in New York, “I think Pfizer and GSK determined, much like Gilead and BMS realized, that doing something together might actually be less costly to both of them. It sounds as if they’re sharing costs—and diluting risk.”

An April 16 article in the Financial Times suggested Fornataro is right. The new business, the analysis points out, will provide both companies with cost savings by 2011 of $80 million a year.

Both companies will likely benefit from the joint HIV-specific business. “GSK, arguably the first company to make a large commitment to HIV research, has been looking in earnest for new compounds unsuccessfully for some time,” Dee says. “Pfizer has had disappointing efficacy, and, as a result, market share from [Selzentry]. This merger means they will both remain in HIV and work together, pulling much needed resources to continue the fight against HIV.” 

Jeff Berry, director of publications at Test Positive Aware Network in Chicago, also sees potential. “The newly formed company will most likely be more competitive in the marketplace than either one of them alone, since they’ll own nearly 20 percent of the market share in HIV,” he suggests. “In theory, it might also mean that they could develop a fixed-dose combination pill, [similar to] Atripla, much sooner than if they [remain] two separate companies.”

The recent general trend of mergers and partnerships between companies of all kinds as a way to realize efficiencies, bundle capabilities and save money in today’s challenging economy may be an indicator of things to come. “What this signals to me is the beginning of the end of an era that got us to where we are today, with 27 different FDA-approved drugs to treat HIV,” Berry says. “Maybe it’s okay—[having many companies develop and market different drugs] was a model which worked then, but one that may not work so well in today’s global economy, which is all about streamlining and the pooling of resources. On the flipside, if it’s true that competition breeds innovation, and if we end up with only a few major players, it’s unclear what that will mean for HIV drug development in 10 or 15 years.”