Under-pressure GSK sells stake in respiratory diseases partner Innoviva

GlaxoSmithKline has sold its entire stake in its respiratory partner Innoviva, raising $392 million and simplifying its business ahead of a split into two.

GSK is pushing ahead with a split into an innovative drugs business and a consumer healthcare firm, while the spectre of activist investor Elliott Management hangs over it.

The fund run by billionaire Paul Singer has bought a significant stake in GSK and is notorious for demanding and often enforcing significant changes in the companies it invests in and there is speculation that GSK’s CEO Emma Walmsley may be forced out.

While it waits for a move from Elliot, GSK is pushing ahead with its plan that could be aided by the sell-off of all of its Innoviva stake.

Innoviva is buying back 32 million shares, or 32% of its outstanding common stock, at $12.25 per share, a 3% discount to the average price over the last five days.

The move will simplify GSK’s business, while creating a windfall that the pharma will be able to use to invest in its “strategic priorities”.

GSK has developed a series of respiratory medicines with Innoviva and pays royalties to the US pharma under this agreement.

This will remain unchanged with GSK continuing to give Innoviva its cut of sales on Trelegy, Relvar and Anoro respiratory products.

Together these products generated sales of almost $2.5 billion in 2020, with Trelegy showing the strongest growth of the three drugs.

From Innoviva’s point of view, the buyback deal means it can boost the value of its own shares and keep its other investors on side.

Shares in Innoviva were up more than 8% following the announcement, while GSK’s ticked down.

Innoviva’s CEO Pavel Raifeld said that the company plans to continue working with GSK in respiratory diseases.

Raifeld said: “GSK was our largest shareholder for many years and remains a key commercial partner. We are confident in the collaboration products’ excellent commercial prospects, especially given strong recent performance in the face of a challenging environment.”