GlaxoSmithKline (GSK) and Pfizer, the two biggest pharmaceuticals companies, are to merge their HIV and Aids treatments into a new company in one of the most far-reaching shake-ups the industry has seen as they seek to cut costs and salvage sales.

The new company, to be named when it begins operating later this year, will have 11 products on the market, with a further six in the pipeline, and 19 per cent of the global market. Together it would have had sales of £1.6 billion in 2008. GSK will own 85 per cent and Pfizer 15 per cent.

The move comes as GSK faces the loss of key HIV drug patents, such as its Combivir treatment, in the next few years and increasing competition from rivals such as Gilead, the fast-growing US pharmaceuticals group.

Group sales of its HIV treatments last year were £1.5 billion, 6 per cent of total revenues for the year, yielding an estimated £300 million profit, or about 6.5 per cent of the group's total.

Navid Malik, an analyst for Matrix Corporate Capital, forecast that, without some kind of a deal, GSK's revenues from HIV treatments will fall this year and next, before slumping to £1.2 billion in 2012 and £1.04 billion in 2013 as patents begin to expire.

Mr Malik said: “It's quite a dramatic step for two rival companies to put their pride aside and work together like this. But if they don't there is a good chance that both their HIV businesses will fade away over time.”

The deal will give GSK access to Pfizer's pipeline of treatments and its new Selzentry drug as its older portfolio of drugs, such as Epzicom, starts to come off patent. Pfizer will benefit from GSK's greater distribution capability.

The new company will have its headquarters in London and will employ several hundred staff from GSK and Pfizer.

Andrew Witty, GSK's chief executive, said the creation of the company would cut £60 million a year from the cost bases of its component parts and hinted that part of the saving would come through redundancies.

GSK is the bigger of the two partners in terms of its present market share, with 18 per cent of the global market, compared with 1 per cent for Pfizer. Gilead, the market leader, has a 31 per cent share of the market.

Sales of Aids treatments in the seven biggest markets are expected to grow from $10 billion in 2008 to $15 billion by 2017. GSK's shares rose by 11p, or 1.07 per cent, to £10.35.

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