GSK’s R&D Review: Successes & Lessons Learned

Three years after reorganizing its discovery research activities into small, multi-disciplinary units, GlaxoSmithKline is providing a first peek at how its new approach to R&D is faring. A healthy chunk of its year-end earnings presentation yesterday was devoted to discussing the productivity of its research engine, and what can be expected out of its labs in the next three years.

As we described, the goal of its 2008 revamp was to create a biotech-like, entrepreneurial feel within the walls of a big pharma firm:

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 [GSK R&D head] 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.

GSK says there are clear signs that the DPU approach is working. Although the company is spending less on R&D and has raised the bar for moving a drug candidate into late-stage development, it has increased the number of molecules in its late-stage pipeline, Patrick Vallance, GSK’s president of R&D told the Haystack. Under the new R&D regime, 22 molecules have moved into late-stage development, and Vallance wants to see 30 molecules pushed forward in the next three years.

And in what Vallance believes is a sign that scientists are becoming more ambitious and attempting to do genuinely novel early research, roughly 17 publications in came out of GSK’s labs last year. Prior to the DPU approach, basically no papers were being submitted to prestigious journals, he says.

The board, which had its final review in November, decided to shut down three DPUs, and create four new DPUs. Funding for six existing DPUs was upped by more than 20%, while five units saw funding decrease by more than 20%. Overall, 40 DPUs were funded for the next three-year cycle, with a budget that has remained unchanged.

So what has GSK learned at the end of three years? On a practical level, reviewing all projects on the same schedule “is just too complicated,” Vallance says.

And the largest DPUs, which had 60 to 70 scientists, need scaling back in order to maintain their focus, he says. “What some of those units did was filled the activity to meet the number of people rather than the size of the opportunity,” he says. And the number of scientists needed for a DPU is entirely project dependent, “I do think there is an upper limit, beyond which the returns become diminishing,” he adds. “When you get above 60, I don’t think you see more, I think you see less.”

The review process also brought some surprises. Some DPU heads told the board “we don’t think you should reinvest,” either because the project didn’t get as far as originally planned or the scientific problem turned out to be different than they expected, Vallance says. “The confidence of people to say, ‘This isn’t right, cut it and move on to something else,’ was a positive surprise.”

Leaders also came from unexpected places. Vallance points to the case of a bench chemist who came before the board with a proposal for a DPU that was so strong that not only did the project get funded, but the chemist is now heading it up.

Other big phama firms surely keeping a close watch on how GSK fares—and how investors respond to their pipeline progress. Since GSK unveiled the model in 2008, several others have adopted similar strategies.

*story amended on 2/9/12: Patrick Vallance is currently president of R&D for GSK.

Author: Lisa Jarvis

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