GSK Makes Deep Cuts To R&D

GlaxoSmithKline is significantly shrinking activities in Research Triangle Park, N.C., as it shifts most of its R&D operations to sites in Stevenage, England, and Philadelphia. The move is part of a global restructuring program—announced without detail in October—that is expected to produce $1.6 billion in savings over the next three years.

Currently, GSK’s RTP site employs about 4,500 people, 2,500 of whom work in R&D. Among the notable drugs developed at the site are Avodart, which treats enlarged prostate; Tykerb, a breast cancer drug; and AZT, the first HIV/AIDS treatment. Although the firm hasn’t detailed the jobs impact, it sent the North Carolina Department of Commerce a letter saying 900 positions will be eliminated at RTP in 2015.

In parallel with the downsizing, GSK and contract research organization Parexel plan to establish a dedicated unit within Parexel that will provide clinical development services to the drug company, according to GSK spokeswoman Melinda Stubbee. To be based primarily in RTP, the unit may take on some of the affected GSK researchers. Some scientists will relocate to Philadelphia, Stubbee adds.

Employees at other GSK R&D sites are also bracing themselves for cuts. GSK has not provided details of other jobs at risk but says it will “sharpen the focus in discovery and development and reduce funding in certain areas of the pipeline.”

Although GSK received five drug approvals in 2013—more than any other big pharma firm—sales of the drugs have been modest. And they have not been enough to offset hits to the firm’s once-strong respiratory franchise. In particular, sales of the multi-billion-dollar seller Advair have eroded this year because of competition from branded drugs in the U.S. and generics competition in Europe.

GSK is the latest big pharma company to outsource more R&D functions. The practice took off in 2008 after Eli Lilly & Co. sold its Greenfield, Ind., R&D site to Covance in a deal that included a 10-year service agreement.

Earlier this week, Sanofi and the German contract research firm Evotec revealed plans for a five-year outsourcing partnership worth $310 million. The pact includes the sale of Sanofi’s R&D site in Toulouse, France, to Evotec. The Toulouse site, which employs some 200 scientists who work on small-molecule drug discovery, houses Sanofi’s compound library.

The cutbacks at RTP and other R&D sites across the industry are a result of the industry’s realization that its enormous and expensive infrastructure is no longer conducive to innovation, according to Bernard Munos, founder of the InnoThink Center for Research in Biomedical Innovation.

“As big pharma companies became very large, they also became somewhat inhospitable to science,” Munos says. “Those large, stalwart sites that once upon a time were very creative are no longer adapted to carry out the innovative research that needs to be performed today.”