GSK R&D Initiative Sees Early Success: Phase II NCEs Up Three-Fold

GlaxoSmithKline's R&D productivity program has experienced some early successes in the number of compounds coming out of the early-stage pipeline.

The amount of new chemical entities entering Phase II trials in 2003 will be about three-fold higher since the start of the Centers for Excellence in Drug Discovery program, CEO J.P. Garnier told investors Feb. 12 during a fourth quarter review in London.

GSK has budgeted for 13 Phase II starts in 2003, compared to four to six NCEs per year between Glaxo Wellcome and SmithKline Beecham in 1999-2001. "We are experiencing right now, anywhere from 200% to 300% improvement in productivity," Garnier declared.

While 2001 - the first year of the CEDDs program - did not show much of a change, "that's not surprising. It takes time to get out of the inertia and start to move the programs faster," he said. GSK researchers "were heavy-duty pushing programs through faster and picking more bets and so forth, but they didn't deliver that many more."

"The second year is a different story. We're seeing a jump in productivity, and it is not a one-year fluke."

"We'll see if it's long-lasting, but...we think this is sustainable and this is a major encouragement for us. It takes a long time to rebuild a pipeline [and] more importantly, it takes a long time to change the significant trend of going down in R&D productivity, [but] we are encouraged by these data."

GSK undertook the CEDDs program to attempt to stem its "R&D productivity erosion." In addition to the seven centers for each GSK disease area, the company has added four CEDDs from partnerships: Tanabe, Exelixis, Cytokinetics and Shionogi.

"We took notice a long time ago that R&D productivity erosion was continuing....Twenty years ago, the industry spent $2 bil. and got 30 drugs out of the FDA, and in 2001, 20 years later, they spent $35 bil. and still got only 30 drugs out of the FDA. You can say it is even less than 30 drugs." Seventeen NMEs cleared FDA in 2002 (¹ (Also see "FDA Faster Approval Times For 2002 NMEs Aided By Resubmissions" - Pink Sheet, 6 Jan, 2003.), p. 10).

"So the productivity has gone down...and I don't know, but it's just in my simple mind, if you keep doing the same thing and getting the same result, maybe you should change the way you do things to try to get better results," he declared.

GSK describes the CEDDs system as an attempt to merge the entrepreneurial spirit of a smaller R&D organization with the "critical mass" of a global scale pharma company made possible by the Glaxo/ SmithKline merger (² (Also see "GSK Florida Medicaid Deal Close; Discounts Are Not "Difficult," Garnier Says" - Pink Sheet, 1 Oct, 2001.), p. 18).

"The reason we merged in the first place was to take on the single, and by far most important issue facing the industry. All the rest pales in comparison," he said. "If you can't sustain the business model of changing your product line constantly by improving it, well then, the rest doesn't really matter, does it?"

Some of the 13 Phase II starts in 2003 are NCEs with the potential for multiple applications. For example, GSK has a corticosteroid in development with "an exquisite profile and selectivity better than fluticasone" ( Flovent and Flonase ).

"It's going to be applied and obviously become two different products. It will become the next Flovent, and the next Flonase," Garnier said. "We're going to try this drug in allergic rhinitis and in asthma, and possibly in COPD, so for one NCE, you might get three drugs in some cases."

GSK is also on track to double the number of NCEs entering Phase I. In 2003, the company is budgeting for 32 starts, compared to 14 or 15 in 1999-2001. In 2002, GSK initiated Phase I trials on 25 compounds.

The numbers indicate that the percentage of compounds successfully advancing from Phase I into Phase II has increased under the CEDDs program. Forty percent of Phase I compounds in 2001 and 2002 advanced to Phase II, compared to 26% to 35% in 1999 and 2000.

GSK has also decreased the amount of time to candidate selection from the five- to six-year industry standard, Garnier said. "This is a major milestone for our scientists, when they authorize some candidate to be selected...to the IND stage."

For example, GSK moved an HCV polymerase inhibitor from gene cloning to candidate selection in 2.25 years, a urotensin-II receptor antagonist in 3.25 years and a vanilloid receptor antagonist in three years. "This is important, because it also improves patent life" and "gives us a little bit more time in the marketplace."

Garnier updated investors on the productivity of the CEDDs program ahead of a comprehensive R&D presentation scheduled for later this year - the first such event since the merger in 2000.

GSK acknowledged that it has not been ready to discuss its R&D pipeline, and waited until early results from the CEDDs program were available.

"We'll talk more about this at our R&D day later this year. Why later this year? Because we have lots of shots on the goal, we'd like to share them with you. A number of those products are going through proof-of-concept. Clearly, many of them will bite the dust, so there's no point talking about it in details at this point."

"But the ones that cross proof-of-concept, we'll have a very high probability of success in terms of going all the way, and that's really what we want to discuss with you later this year," Garnier said.

The increased attention to improving R&D productivity is essential to counterbalance the number of GSK patent expirations. Augmentin generic erosion is just beginning, and Paxil and Wellbutrin SR/Zyban generics could come as early as 2003 (see ³ (Also see "GSK Switch Success: Paxil CR Has 31% Of New Scripts; Augmentin ES, 49%" - Pink Sheet, 17 Feb, 2003.)).

"There are many rockets attached to the mother ship, and if one rocket doesn't work very well, it's OK, because there are many others that can pick up the slack," Garnier said. "That's really what's happening to counterbalance the patent losses that we are incurring like everybody else."

Overall market conditions will force the industry to downsize growth expectations, he added.

"The market is shrinking a little bit. The market growth is not as dynamic as it used to be, even two or three years ago, particularly in the U.S. And we have to learn to grow with maybe a more modest sales line and yet leverage this to the max."

"If you can watch what you spend, you can really make the most out of a fairly modest sales increase on your profits," he said. "I think it's a way to go forward. We are way past the stories of savings and cost synergies from the merger. We are into true productivity improvement."

"I know a lot of industrial companies that do this, day in and day out. That's what we've become. We are much better at this, and we still have a long way to go. We still have many targets. We're going to improve our ratios as we come forward."

One key to rebuilding the pipeline is finding successful partnerships, Garnier said.

GSK has become more aggressive in signing on to clinical compounds since the merger, completing 16 partnerships in 2001-2002, compared to eight in 1999-2000. The number of pre-clinical deals has remained relatively the same: seven versus six.

"In terms of partnerships, you know we've done that very well....This is key: the ability to attract products that have been discovered by somebody else."

"It's so hard to discover products. Because of our ability to clinically developed those products...to market them, to commercialize effectively throughout the world, we are an appealing partner, and we've clearly proven that by getting more than our fair share," Garnier maintained.

"Everybody can write the same check in the end, so it's not the money. There's a price to in-licensing, but everybody will pay the price."

"Once you get the price you want for your asset, you pick a company that you think is going to develop the asset better and market it better because that's really where the big money is - not in the milestone payments. It's in what the drug becomes."

In-licensed GSK products in Phase III trials include Roche's ibandronate for osteoporosis and Gilead's Hepsera (adefovir) for hepatitis B, to which GSK owns ex-U.S. rights.

GSK also listed two partnered products that are pending at FDA: Bayer's erectile dysfunction agent Levitra (vardenafil); and an sNDA for Scios' Natrecor (nesiritide) in acute heart failure, to which GSK has European rights.