GlaxoSmithKline''s plans for Affymax runs aground

 In March this year global pharmaceutical giant, GlaxoSmithKline (GSK), decided to hive off its California-based drug discovery outfit, Affymax, as part of its restructuring efforts to following the merger between Glaxo Wellcome and Smith Kline Beecham. (see ) Glaxo Holdings had earlier, in 1995, bought this boutique drug company, which employs over 200 persons in two laboratories in Palo Alto and Santa Clara, for an estimated $533 million.

Analysts had, in March, estimated that the sell-off would fetch GSK about $400 million. Four months down the road, GSK has decided to give away a majority stake in Affymax to a group of US venture capitalists, led by Patricof & Co., for free. The group, which is said to include Sprout Group, MPM Asset Management and Apax Partners, is understood to be planning to replace Affymax''s management and make some staff redundant. The decision to give away the majority stake is understood to be the inability of GSK to find a suitable buyer for Affymax, even after several months of efforts in trying to locate one.

While GSK would retain 22 per cent of the non-voting shares in Affymax the move would help it save about $30 million in costs. In the recent past, GSK is said to have raised approximately $515 million through the sale of shares in Affymetrix and Maxygen, two subsidiaries of Affymax. These subsidiaries, like Affymax, were boutique drug discovery firms.

The decision of GSK to give away the stake in Affymax is likely to result in an exceptional charge of about $435 million, which includes about $425 million to be written off to reserves on account of goodwill in the books.

GSK has, however, said that it will continue to use Affymax''s technology, which produces libraries of millions of potential drugs to test in screens, in its laboratories.