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* Reduces cash return to shareholders, protects dividend
* Sets mid-term targets for growth of business units
* Q1 core EPS 17.3p vs consensus 17.4p
* Q1 revenue 5.62 billion pounds, in line with consensus (Adds reaction and context)
By Ben Hirschler
LONDON, May 6 (Reuters) - GlaxoSmithKline scrappedplans to float its HIV drug business on Wednesday and promisedto pay a steady dividend for three years, setting out long-termgrowth targets after the biggest shake-up in its 15-yearhistory.
It also scaled back plans to return 4 billion pounds ($6billion) of cash flowing from a $20 billion-plus asset swap withNovartis to investors, opting instead to pay a 1billion special dividend.
Chief Executive Andrew Witty is under pressure todemonstrate that the Novartis deal can revive GSK's fortunes byfocusing it on consumer health and vaccines, following a slidein lung drug sales and a damaging corruption scandal in China.
Despite a worse than expected earnings outlook for thisyear, Witty said GSK was on course to return to growth in themedium term and group sales would rise by a low-to-mid singledigit percentage rate annually from 2016 to 2020.
Its pharmaceuticals, vaccines and consumer health businessesshould increase annual sales by low single digits, mid-to-highsingle digits and mid single digits respectively.
Deutsche Bank analyst Richard Parkes said the forecastshould boost investor confidence, particularly since GSK saidits pharma outlook included the impact of potential genericcopies of its lung drug Advair launching in the United States.
Witty said he had ditched plans for a multibillion-poundlisting of its HIV unit ViiV Healthcare because of the strongoutlook for the business.
And he played down the chances of GSK splitting up into itscomponent parts within the next four to five years, althoughthis could still be an option in the longer term.
LESS RISKY
Britain's biggest drugmaker sold its cancer drugs portfolioto Novartis, while buying Novartis's vaccines and at the sametime increasing its consumer health business through a jointventure with the Swiss company.
This reduces GSK's reliance on risky drug development andincreases its exposure to more stable consumer and vaccinesoperations, both of which have long-lasting products but, in thecase of consumer health, lower margins.
Some investors question the wisdom of reducing exposure toprescription drug development at a time when rivals in theindustry are exploiting the latest science to produce a range ofpotential new blockbusters, particularly in cancer.
But Witty is betting on diversification and sees itsenlarged consumer health division as a powerful player in anexpanding market.
"We have a different view to other companies," Witty toldreporters, arguing that fiscal pressures meant prescription drugprices in the United States could not keep on rising.
He may not have much time to prove his case. With newChairman Philip Hampton taking the helm at the drugmaker'sannual meeting on Thursday, Witty needs to show his strategy canreverse several years of underperformance.
"Andrew Witty desperately needs this to succeed in order toleave a legacy worth remembering," said Mick Cooper, analyst atEdison Investment Research.
GSK also announced a fall in first-quarter earnings, hit bydeclining sales and prices for Advair.
Quarterly sales were 5.62 billion pounds, unchanged from ayear earlier in sterling terms, while core earnings per share(EPS) fell 18 percent to 17.3 pence.
Analysts, on average, had forecast sales of 5.62 billionpounds and core EPS, which excludes certain items, of 17.4pence, according to Thomson Reuters.
GSK shares were 1.3 percent higher by 1405 GMT. ($1 = 0.6572 pounds) (Editing by Keith Weir)
