AstraZeneca’s Menelas Pangalos: An Interview With “The Pink Sheet” DAILY

With AstraZeneca in the midst of a major R&D overhaul, Menelas Pangalos, the company’s head of discovery research and early-stage development in small molecules, talked to “The Pink Sheet” DAILY about how the new R&D structure will improve the big pharma’s research productivity.

AstraZeneca PLC unveiled a massive R&D overhaul March 18, a cornerstone of CEO Pascal Soriot’s plan to turnaround the big pharma, which has struggled to bring innovative, high-growth new drugs to market to offset lost sales of key products to generic competition.

Soriot is expected to outline more details of his turnaround strategy during an investor presentation in New York March 21, but Menelas Pangalos, the company’s head of discovery research and early-stage development in small molecules, provided additional details about how the new structure will help to improve R&D productivity in an interview with “The Pink Sheet” DAILY March 19.

The restructuring aims to consolidate AstraZeneca’s research in three key hubs located in Cambridge, U.K., Gaithersburg, Md., in the U.S. and Mölndal, Sweden, while reducing the company’s presence in other locations like its Alderley Park, U.K., site and U.S. headquarters in Wilmington, Del. The restructuring will trim the research group by about 1,600 employees (Also see "AstraZeneca’s R&D Restructuring Follows Hot Spot Trend" - Pink Sheet, 18 Mar, 2013.).

Pangalos was appointed to head early small-molecule R&D following a senior management shakeup announced in January. Soriot created three management roles to oversee R&D in place of the one formerly held by R&D President Martin Mackay. Bahija Jallal of biologics unit MedImmune LLCwas appointed to oversee discovery and early-stage development in large molecules and Briggs Morrison was charged with overseeing late-stage development for both small and large molecules (Also see "AstraZeneca’s Executive Shakeup Includes Global Strategist To Be Named Later" - Pink Sheet, 15 Jan, 2013.).

Pangalos joined AstraZeneca in 2010 from Pfizer Inc., where he served as senior VP and chief scientific officer in neuroscience research since the end of 2009, following Pfizer’s acquisition of Wyeth.

“The Pink Sheet” DAILY: How will consolidating research improve collaboration and productivity at AstraZeneca?

Menelas Pangalos: Take the U.K. All my global scientific capabilities are in Alderley Park. The oncology iMed sits in Alderley Park and all the development people sit in Alderley Park. It will all move to Cambridge. [Certain] MedImmune people in cardiovascular/metabolic/oncology and development sit in Cambridge, so we’ll [consolidate] those groups at the new site. We’re also going to bring our commercial and corporate people, who are in London right now, together with R&D people.

So, all our people who are in three different places will be in one purpose-built facility, which will allow us to much better utilize our science, to more easily talk about projects and much more easily talk about moving them forward and doing so aggressively.

That brings large and small [molecules] together and brings our research platforms together into Cambridge … It brings our commercial leaders and other leaders together. And we’re doing something similar in Gaithersburg, where we are large-molecule-focused but small-molecule research teams will also be moving to Gaithersburg. Then, in Mölndal, we have commercial teams there and small-molecule teams in the cardiovascular and respiratory space.

It’s streamlining. That’s what we’re doing. There’s no perfect solution. It’s taking advantage of the assets that we have and where ever we can, simplifying by bringing people together.

“The Pink Sheet” DAILY: How will you actually staff the Cambridge site? Will you be able to relocate the employees currently in Alderley Park to Cambridge – some 167 miles away? And how will you prevent interruption to programs from that migration? [AstraZeneca plans to eliminate R&D at Alderley Park, but expects to relocate 1,600 roles primarily to Cambridge, but also to other nearby facilities or overseas].

Pangalos: We’ve had pretty good experience in doing this kind of thing over the past few years where we’ve closed some significant sites and we managed to transition all our programs to the designated sites. Over a three-year period, we should be able to manage this transition as well.

We’ve put very good [financial] packages in place to attract our best scientists and to induce them to move. I think many of our scientists will in fact be excited about a move to somewhere like Cambridge because from a career perspective there is a lot of opportunity in that area. And this gives us time to plan and allow transitioning of projects from, for example, Phase II to Phase III. You can transition the project to the new site rather than keep it on the site that’s closing down. [We] have plenty of time to do the transitioning given that the moves have to be done by the 2016 period.

“The Pink Sheet” DAILY: Part of the rationale for the restructuring is to locate research near scientific hubs. How does expanding in Gaithersburg and Mölndal play into that?

Pangalos: You’re not going to solve all of your problems with every site. If you think of the three major things [we] want to shift, this is increasing the number of R&D colleagues that are in scientific hotbeds, or scientific clusters, decreasing the number of empty spaces on our sites – so that our buildings are filled to near capacity rather than half-empty – and relocating leaders so that we have our decision-makers on two or, at a maximum, three sites.

Take the case of Gaithersburg. It’s a very large facility … And, Wilmington, Del., is not too far away so bringing our Wilmington and Gaithersburg sites together makes sense. It’s not Boston. We do have a small site in Boston with about 500 people and we’ll keep that. Gaithersburg [has] a reasonably vibrant biotech presence but it’s not Boston. But it captures many of the things that we’re trying to do in terms of improving the shape and size of our footprint.

In Mölndal, I look at [its proximity to] Gothenburg in taking advantage of the Swedish ecosystem … The Swedish scientific thinking and culture offers a different way of looking at some of our projects, which I think is important. And if you look at what the government is trying to do, they’re very much trying to increase their presence in the life-sciences sector.

Meanwhile, we have a very good university hospital in Gothenburg. We have a very good relationship with the Karolinska Institute that we’ll be expanding. And we’re working very closely with Lund University as well, which has some very good capabilities.

In the areas that we’re in, Sweden is actually reasonably attractive. Again, it’s not Cambridge, but I think there’s some competitive science there that we can take advantage of. So, it’s about making the best of the science that we have in Mölndal and making sure that we capture that while also thinking globally. Just because we’re going to be just on three sites doesn’t mean we’re not going to collaborate in San Francisco, New York or in Shanghai.

“The Pink Sheet” DAILY: Will AstraZeneca focus R&D efforts in emerging markets?

Pangalos: Our path in emerging markets will continue as it has been. I have my infectious disease operations in Bangalore, India, which is part of the infectious disease group that’s headquartered in Boston. And I have a small R&D group in Shanghai headed by Steve Yang, and that will continue as well.

“The Pink Sheet” DAILY: Do you expect there will be much more pipeline culling in store?

Pangalos: No, we’re pretty much through much of that. We’ve spent the past two to two-and-a-half years pruning our pipeline. We’ve now got programs of interest focusing on our key disease areas, and we’re really upping the ante regarding the rigor of our science and consolidating our footprint and getting us to be more streamlined.

“The Pink Sheet” DAILY: AstraZeneca’s effort to improve access to innovation by putting its scientists in close proximity to life-science hot spots follows similar moves by other big pharmas. Do you see AstraZeneca’s changes as part of a broader pharma trend?

Pangalos: What we’re doing is very bold. Some [organizations] are moving very small groups of 10, 15, 20 people to interact with academic groups. I think you’ll see much closer interaction with top academic groups and academic institutions with pharma now because everyone understands that it truly is a symbiotic relationship. Much of the innovation needs to come in partnership and collaboration with academia and this will continue.

I think the difference between that and what we are doing is that we’re putting our headquarters in the middle of it all. That’s quite an unusual step, bold and extremely exciting.