Issue Date: November 30, 2009
Thinking Big, Acting Small
A drug company that is simultaneously big and small sounds like something out of Alice’s Adventures in Pharmaceutical Wonderland, but it’s a notion that GlaxoSmithKline’s research unit is trying to realize. The British firm has rearranged its drug discovery operations to dismantle organizational hierarchy and give small teams of scientists power to control individual research projects. It will be years before GSK learns whether the approach was wise, but the firm expects to gain a more robust—and less expensive—new-drug pipeline.
Across the pharmaceutical industry, companies are struggling to produce a steady flow of new drugs. Faced with generic competition and sputtering growth engines, they are rethinking how they discover and develop drugs. Firms are both looking to outside collaborators for promising technology and trying to make better decisions about what happens in their own labs.
Last year, GSK unveiled a new strategy to diversify away from its heavy reliance on blockbuster small-molecule drugs for the developed world. In 2007, the company had taken a major hit when a prominent cardiologist questioned the safety of its small-molecule diabetes drug Avandia. In 2008, sales of the drug fell by half to $1.5 billion, and this year they are expected to be halved again.
At the time, GSK Chief Executive Officer Andrew Witty compared the search for the next billion-dollar drug to finding a needle in a haystack. “In the past, there has been almost an industry mantra that ‘We have to find a blockbuster,’ ” he said.
The firm’s new strategy involves selling more products in emerging markets and expanding beyond chemistry-derived small molecules with more investment in biopharmaceuticals created in living cells.
Amid the diversification effort, GSK is also changing to improve the productivity of its internal research. The goal, says Moncef Slaoui, GSK’s chairman of R&D, is to double the number of products from the pipeline in 2015 compared with 2006. And the company wants to do it without increasing research spending from its 2006 level.
The goals are not far-fetched. On a constant-dollar basis, GSK’s R&D budget will be lower in 2010 than the $6.8 billion spent in 2006, while productivity arguably has gone up. In 2006, the company had eight drugs in Phase IIb clinical trials or beyond; this year, it has 19 drugs in late-stage trials.
Success will require changing how research is funded and managed. After being one of the first drug companies to create research hubs, or what it calls “centers of excellence in drug discovery,” GSK last year created “discovery performance units” (DPUs) within each hub. Each of the 38 DPUs operating now has a multidisciplinary team of up to 60 scientists focusing on a therapeutic area, a disease pathway, or some aspect of basic biology.
GSK also formed a “discovery investment board” that makes funding decisions for the research projects in each DPU. The idea is to bring diverse perspectives on the merits of each project: In addition to Slaoui, the board includes a biotech company CEO, a senior public health official, and GSK’s heads of drug discovery, late-stage development, and business development.
DPUs are intended to operate like a biotech company housed in a big pharma firm. Much as a biotech gets funded by venture capitalists, a DPU receives an initial bolus of money and then extra cash when certain project goals are met. Each DPU had an initial review after a year of operation and will undergo another review this month, the 18-month check point. The board meets a last time at the three-year mark.
With a smaller number of people focusing on a therapeutic area or a key biological question, accountability is heightened, Slaoui says. “You can’t hide behind 15 projects.”
Indeed, the DPUs have changed how GSK scientists work, says John Lepore, head of the firm’s heart failure DPU. When Lepore joined the company four years ago, the cardiovascular group was spread across five buildings at GSK’s sprawling complex in Upper Merion, Pa. Now, the group is centered on one floor.
More important, after the initial board meeting, the DPU is left to its own devices to manage the project. “A year ago, we had a very hierarchical system for decision-making,” Lepore says. “We dismantled a lot of that structure, and the team is now empowered to do a lot of the decision-making.”
The DPU model represents “a huge change in the way we do discovery,” Slaoui agrees. Just three years ago, he says, only four or five people were making all of the R&D decisions in the company.
Now, each group apportions its own budget and sets its own agenda. Scientists appear to have cottoned to the new level of responsibility, even if it also means being responsible for the success or failure of a project. “At the end, you’re called to the carpet for what you have and have not accomplished,” Lepore adds.
Industry experts are curious to see how GSK’s experiment will work, and they seem to appreciate the effort to bring an entrepreneurial spirit to big pharma. “Traditionally, pharmas and entrepreneurs have coexisted in a symbiotic relationship geared around innovation,” says David Steinberg, partner at the life sciences investment fund PureTech Ventures. “The pharma industry brings tremendous resources and staying power, and entrepreneurs bring a nimble, risk-tolerant approach.” The GSK approach, in contrast, puts the entrepreneur inside the big firm.
Yet entrepreneurs are typically driven by the ability to take risks, to make decisions, and to follow their passions, not to mention “the knowledge that there’s no fallback, so they have to make it work,” Steinberg says. He says he’s interested to see how far GSK will go in incorporating “some of the elements that have made the biotech industry so dynamic.”
Several moves have enabled GSK to establish a more robust and cost-efficient pipeline. The British firm has exited several therapeutic areas, including urogenital diseases, women’s health, and gastrointestinal diseases. It redirected the roughly $335 million from those programs to other research.
The company is also overhauling what Slaoui calls the least efficient part of the R&D process: clinical development. In the past, for any given trial, hundreds of clinics would receive the test drug, but on average 25 to 30% of those sites never recruited a single patient, he says. It can cost $30,000 to $40,000 just to validate the center and then more to supply it with the drug candidate. “We’ve changed all that,” Slaoui says, yielding tens if not hundreds of millions of dollars in savings.
In another instance of savings, each of GSK’s three high-throughput-screening facilities will soon boast a new liquid-handling system that uses sound waves rather than pipettes to transfer droplets of dissolved compound into well plates. According to GSK, the technology substantially lowers costs by reducing the amount of material screened and eliminating much of the solvent required.
GSK executives recognize that not all good science comes from their own labs. So in tandem with internal changes to make research more successful and cost effective, the firm is giving its late-stage pipeline a jolt from aggressive deal-making. Increasingly, scientists from the DPUs are playing a role in finding and assessing those acquisition opportunities.
Several acquired drug candidates have already yielded success. The Food & Drug Administration recently approved Arzerra, a monoclonal antibody developed with biotech firm Genmab, to treat chronic lymphocytic leukemia. Benlysta, an antibody discovered by Human Genome Sciences, could represent the first treatment for lupus in more than 50 years. And GSK and partner Valeant Pharmaceuticals recently filed for regulatory approval for retigabine, an epilepsy drug.
GSK has more than 40 drug discovery partnerships today, and in the future Slaoui wants to invest in technologies that are not just “me-too.” He is interested in adding to GSK’s portfolio other companies such as Sirtris Pharmaceuticals, which GSK bought last year for $720 million.
The Cambridge, Mass.-based biotech firm is developing small-molecule activators of the seven human sirtuins, enzymes involved in aging. Some sirtuins seem to turn up the activity of mitochondria, the energy factories of cells, potentially helping to increase cell survival. “We see this as really transformative science. It’s getting at the heart of making cells more energetic,” Slaoui says.
He argues that GSK has become really good at identifying winning science. In an analysis of its in-licensing activities, the company found that 80% of the outside R&D programs brought in since 2003 are still alive. By contrast, just 20% of the programs it considered, but did not invest in, are still alive.
Internal research falls between those extremes: Roughly 40% of internal projects started since 2003 are still active today. “When it is our own babies, we don’t always make the right decision,” Slaoui acknowledges. Only time will tell whether the new DPUs will boost that success rate.
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