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* Exploring IPO of minority stake in ViiV Healthcare
* GSK dividend to be held at 2014 level in 2015
* Company going through "painful" period as Advair slides
* Q3 sales 5.65 bln pounds vs consensus 5.75 bln
* Q3 core earnings per share 27.9p vs consensus 23.9p (Adds detail on cost savings, closing shares, story links)
By Ben Hirschler
LONDON, Oct 22 (Reuters) - GlaxoSmithKline, batteredby weak U.S. drug sales and a bribery scandal in China, islooking to float its fast-growing HIV drugs business as part ofa recovery plan that includes a fresh round of cost cutting.
As a standalone company ViiV Healthcare would be among thetop 40 companies in London's FTSE 100 index, outranking suchhousehold names as retailer Marks and Spencer, GSK ChiefExecutive Andrew Witty told reporters.
Analysts at Jefferies said they valued the HIV and AIDSdivision at about 17 billion pounds ($27 billion).
Announcing third-quarter results, Britain's biggestdrugmaker said the new restructuring programme would save 1billion pounds in annual costs within three years, with half ofthat achieved by 2016.
GSK also put a floor under its dividend by pegging the 2015payout to the same level as this year's 80 pence a share.
"Glaxo has announced that it is giving itself a shot in thearm, with a more streamlined approach to its business model,"said Richard Hunter, head of equities at Hargreaves LansdownStockbrokers.
Shares in the company closed 2.6 percent higher, clawingback some of this year's decline.
While the European healthcare sector has risen 14percent this year on optimism over new drugs and a spate ofdeal-making, GSK stock has lost a similar amount on fallingsales and earnings forecasts, despite April's far-reaching assetswap deal with Switzerland's Novartis.
A central concern for investors has been GSK's ability topay its dividend in the face of slowing growth. The companyfinally broke a run of steadily rising payouts by announcing anunchanged third-quarter dividend, but softened the blow bysaying it would return an additional 4 billion pounds toshareholders next year through a special share scheme.
A run of weak quarters and a fine of nearly $500 million forbribery in China has heaped pressure on Witty. The most pressingconcern, however, is the sharp fall in sales of GSK's15-year-old respiratory medicine Advair, particularly in theUnited States, where price pressure is acute, and the slowuptake of new respiratory drugs Breo and Anoro.
Witty acknowledged that the company is going through a"painful" period but said the respiratory business was set toreturn to growth in 2016.
PIPELINE ISSUES
The weak showing in respiratory medicine, a field GSK hasdominated for decades, comes on top of recent disappointmentswith high-risk experimental drugs in heart disease and cancer.However, the company said its pipeline is expected to produce asustained flow of new drugs over the next 5-10 years.
In the face of these challenges, investors are keen for GSKto unlock value and Witty said the decision to explore aninitial public offering (IPO) of a minority shareholding in ViiVHealthcare showed the company's financial flexibility.
"It signals a patient but enduring commitment to exploreavenues to create shareholder value," Witty said.
GSK has a stake of nearly 80 percent in ViiV Healthcare,with Pfizer and Shionogi holding the rest.
Witty did not give a timetable for a ViiV Healthcare IPO andsaid there was no rush to sell, since the business wouldcontinue to grow strongly for the foreseeable future. Its newestHIV medicine is Tivicay, which has been a big success.
Some analysts have suggested GSK could go further inbreaking itself up, with speculation of potential spin-offs forconsumer health and vaccines. The vaccines unit has anexperimental Ebola vaccine that GSK is racing to develop.
Witty said he would remain "extremely pragmatic", noting thecompany had already announced plans to divest certain olderoff-patent drugs.
OUTLOOK UNCHANGED
GSK stuck to its financial outlook for the full year,predicting core earnings per share (EPS) "broadly similar to2013" in constant exchange rate terms. That outlook was alreadypared back in July from a previous forecast of an increase of4-8 percent.
Third-quarter sales were 5.65 billion pounds, down 10percent from a year earlier. Core EPS - the measure mostfollowed by investors - were flat at 27.9 pence.
Analysts had forecast sales of 5.75 billion pounds and coreEPS, which excludes certain items, of 23.9 pence, according toThomson Reuters data.
The earnings beat was helped by lower sales, administrativeand research costs, as well as a reduced tax rate.
(1 US dollar = 0.6231 British pound) (Additional reporting by Atul Prakash; Editing by DavidGoodman)
