GlaxoSmithKline and Pfizer have announced plans to combine their HIV operations into a new entity that will have products worth £1.6 billion a year on the market, operating profits of £870 million and “an industry-leading pipeline”.

The two pharmaceutical giants said that “the new HIV business will be more sustainable and broader in scope than either company’s individually”. The UK firm will initially hold an 85% equity interest in the new company and Pfizer’s stake will be 15%, though that ratio could change, depending on how many products come through the pipeline and where those compounds originate from.

The as-yet-unnamed company will have 11 products on the market, led by GSK’s Combivir (zidovudine and lamivudine), Kivexa (abacavir and lamivudine) and Viracept, plus Pfizer’s new oral drug Selzentry/Celsentri (maraviroc). That represents a 19% share of “the growing market”, the firms said, noting that the new entity will have initial working capital of £250 million.

The company will also have “an industry-leading pipeline of six innovative and targeted medicines”, including four compounds in Phase II. Its chief executive will be Dominique Limet, head of GSK’s Personalised Medicine Strategy and he will lead a nine-strong board that includes GSK’s chief financial officer Julian Heslop and Martin Mackay, head of R&D at Pfizer.

Andrew Witty, GSK’s chief executive, said that setting up the venture means the business “can be more effectively leveraged through the new company’s strong revenue base and dedicated research capability”. His counterpart at Pfizer, Jeff Kindler, said that by combining the firms’ complementary strengths and capabilities, “we are creating a new global leader in HIV and reaffirming our ongoing commitment to the treatment of the disease”. He added that it can reach more patients and “accomplish much more for the treatment of HIV globally than either company on its own”.

Reflecting its “greater contribution of marketed products to the new company, and the pipeline investment required”, GSK said that the transaction is expected to result in “marginal near-term earnings per share dilution” of 1%-2% in 2010 and 1% in 2011. It will be slightly accretive to Pfizer’s earnings in 2010 and 2011 and the deal is expected to close during the fourth quarter.