By Ben Hirschler and Freya Berry
LONDON (Reuters) - GlaxoSmithKline
The move is part of a reshaping of the drugmaker's business, which also involves a major asset swap deal struck last month with Novartis
Chief Executive Andrew Witty said last month that Britain's biggest pharmaceuticals company could dispose of individual medicines or a broader portfolio of older established products.
A GSK spokesman had no further comment on the potential disposals on Thursday.
Private equity firms approached by GSK include Advent International, Blackstone
GSK said at its first-quarter results on April 30 that it was evaluating options to "maximise the value of our portfolio and currently reviewing our Established Products Portfolio". The portfolio includes products such as the antidepressant Paxil, migraine treatment Imitrex and Zantac for stomach acid.
The company has started breaking out results for these mature medicines for the first time this year as a prelude to a potential divestment of at least some of them.
"You should not be surprised if we were able to transact a disposal of some of that established product portfolio in the next year or two," Witty told reporters last month. "That is not part of our future."
One person familiar with GSK's thinking said it was in "no rush" to dispose of the 50 or so older medicines in the division and it also planned to retain rights to most of the products in emerging markets, where they form an important part of GSK's business.
Sales of established products totalled 814 million pounds ($1.36 billion) in the first quarter of 2014, down 11 percent on a year earlier, reflecting increased competition from cheaper generic copies. Around half of those sales were made in emerging markets.
Although sales of these older medicines are declining, they are still very profitable. Core operating profit for established products was 485 million pounds in the first quarter, down from 609 million a year earlier, representing an operating margin of 59.6 percent against 27.3 percent for the group as a whole.
The drugmaker's approach to private equity firms was first reported by Sky News.
GSK shares ended 0.5 percent higher, after falling 1.6 percent on Wednesday following news that Britain's Serious Fraud Office had launched a criminal investigation into the company's commercial practices.
WIDER INDUSTRY TREND
GSK has already disposed of some non-core products. Last September it agreed to sell thrombosis medicines Arixtra and Fraxiparine to South Africa's Aspen Pharmacare
Assuming a similar sales multiple, the Western-markets half of the current established drugs portfolio might be worth around 3.25 billion pounds, based on the level of sales reported in the first quarter.
GSK's decision to review its portfolio of older prescription drugs is part of a wider industry trend. Once companies divest their mature drugs, the remaining faster-growing and newer products can boost the top-line sales rate.
Finding a keen buyer, however, may not be so easy. The appetite among rival drugmakers for such ageing assets is limited, leaving private equity firms as the most obvious purchasers, since they can milk the cash flow without having to worry about the expense of drug development.
(Additional reporting by Anjuli Davies; Editing by Pravin Char and Keiron Henderson)