GSK Offers a Window Into Attempts at Biotech-like R&D

During a nearly two-hour R&D seminar, executives at GlaxoSmithKline PLC described the company's evolving strategy, detailing the organization's goals, capital allocation, and productivity performance, and providing a glimpse into the ongoing work within six of its 40 biotech-like discovery performance units.

Moncef Slaoui, chairman of research and development, led the seminar with a 10,000 foot aerial view of early-stage R&D at GSK, with particular emphasis on how GSK has reengineered discovery through ongoing adjustments to the discovery performance unit (DPU) structure created in 2008 (Also see "Putting The Pieces Together Again: GSK Creates End-To-End Business Units " - In Vivo, 1 Jan, 2011.). These are the small, focused, accountable teams of scientists aligned by disease area, biological pathway, or therapeutic modality.

Slaoui began by framing the fundamental strategic goals that underpin GSK's quest for sustainable growth: grow the diversified business – including prescription drugs, consumer products, and vaccines – to deliver more products of value and simplify the operating model to extract more costs from it. The strategic framework, he said, had implications for R&D. For instance, it allowed the big pharma to transition from being “blockbuster dependent” to “blockbuster capable,” which, in turn, determines which therapeutic strategies and medical needs its scientists pursue.

Slaoui detailed four specific imperatives for R&D that flowed from the overarching corporate strategic goals:

• Rebuild the late-stage pipeline
• Reengineer the discovery engine
• Enhance the return on R&D by shrinking the cost base and improving attrition
• Improve decision making especially around R&D capital allocation.

Regarding the last, he noted that R&D is an investment opportunity, and as such it competes with all other capital-intensive activities around the enterprise. As for how the R&D spend has changed over the past five years, Slaoui said the overall budget had declined in absolute terms by £200-£300 million, with the sharpest drop in discovery (-10%) and an increase in later-stage development costs (+4%). He attributed the drop in discovery costs to external innovation, observing that half of GSK’s current early stage activity is through partnerships. However, other contributing factors include reductions in headcount, elimination of facilities, and aggressive program attrition. These reductions “freed up resources to invest in our late-stage pipeline” resulting in a doubling of GSK’s Phase III pipeline, he said.

Changes To The Shape Of The DPUs

Changes in R&D spend also tracked the company’s changing therapeutic footprint over the past five years, changes that were partially reflected in evolving mix of DPUs. Slaoui mentioned exits from commercially unattractive and scientifically challenging areas such as GI, hypertension, and pain/depression/anxiety, as well as a “refocus” on metabolic pathways, infectious disease, and respiratory, and expansion of oncology and biopharmaceuticals.

Patrick Vallance, president of pharmaceuticals R&D, said that between the years 2008-2011, eight new DPUs were created, while six were closed, and four changed focus. More recently, as a result of the DPU review at the end of 2011 capping the first 3-year funding cycle (Also see "GSK Says R&D Productivity Up, But Story Is About Culture, Not Numbers" - Pink Sheet, 20 Feb, 2012.), he said in the past year the overall number of DPUs went from 38 to 40; four were created, three were closed, and one was split in two. Moreover, six won greater than 20% increased investment, and five had greater than 20% decreased investment. Nonetheless, he noted, the overall discovery budget was unchanged in the past year.

A Window Into The DPUs

Half of the seminar was given over to presentations by the heads of six DPUs that successfully passed the recent review by GSK’s discovery investment board (DIB). Each speaker lent some color to the themes that Slaoui and Vallance touched on earlier: the virtues of co-location, the push to externalize, the value put on innovative science, the diverse backgrounds of DPU heads, and the need to do more with less.

Edith Hessel, for instance, heads up the Refractory Respiratory Inflammation DPU, one of several respiratory DPUs located in Stevenage, UK. A veteran of Berkeley, CA-based Dynavax Technologies Corp., where she worked on oligotherapeutics for inflammatory respiratory conditions, she was recruited at a JP Morgan breakfast by a “senior leader” from GSK who sketched out the DPU model on the back of a napkin. She explained that she was at pains to show the DIB that her group was “not on a fishing expedition,” and went on to describe a novel method for target discovery that her group developed and which likely won the endorsement of the DIB.

Hessel said that her team made progress in stratifying COPD patients, which made it possible to test any new treatments “in a more efficient clinical paradigm.” Her team furthermore “changed the starting point in target discovery.” Normally, Hessel explained, researchers pick a target by making a theoretical assumption based on the pathophysiology of the disease. “We reversed the process, and started our thinking about the target in the patient.” Her team also eschewed in vivo animal models and opted for rapid novel screening platforms.

Hessel described how she organized her team, assuring that the right skill-sets were on board, and changing from a hierarchical model, which she found when she took over, to a flatter structure consisting of smaller, more highly integrated teams. The integration was needed, she said, to discourage “lobbing over the fence” behavior when researchers reach the next stage. Hessel’s DPU was rewarded with another three-years’ funding by the DIB.

The presentations of the DPU heads provided unusual color on how GSK’s R&D leaders are motivated and what they’re working on. GSK leads the industry with 11 drug approvals over the past four years. It has roughly 30 assets in Phase III or registration, with 15 of them set to report data and five of those “with sufficient data in house to file in 2012,” said Slaoui. GSK appears to be making good on its goal to deliver its late-stage pipeline, though how these molecules perform on the market and are received by payers is still an open question. Whether it will have similar or greater success eight to ten years out with the discovery projects now moving through the DPUs is an even bigger mystery.