Wednesday, August 27, 2014
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GSK explains R&D approach

GlaxoSmithKline says it has reduced costs, through plant closures and staff reductions, but improved the outlook for research and development by being more efficient and geographically diverse.

GSK explains R&D approach

GlaxoSmithKline leaders in research and development presented more specifics Thursday about their relatively new (2008) process for organizing and funding the company's search for new drugs.

The investor event was held in London, where GSK is based, but it was webcast on the company site.

GSK has employees in Center City and suburban Philadelphia.

The company has created 40 or so Discovery Performance Units, with hopes each will show sufficient progress in 18 to 36 months.

CEO Andrew Witty did not preside over the event, but he has said that some of the effort is to save money. More of it is to diversify in several ways, including geographically.

Moncef Slaoui, chairman of R&D, said the effort has made "robust" progress.

"We want to make GSK less reliant on white pills in western markets, as Andrew puts it," Slaoui said.

A slide indicated that GSK's revenue is now 22 percent in such places versus 40 percent in 2007.

But the diversity is also meant to reduce reliance on one blockbuster drug, in hopes that profits will be more predictable and not plummet when patent exclusivity expires. Blockbusters are beloved, of course, but hard to produce or predict.

"R&D does not have to play only the big bet and come up with the blockbuster all the time," Slaoui said. "We've moved from being blockbuster dependent to blockbuster compatible and capable. We always welcome them, but we don't have to have them all the time."

The fixed costs have been reduced 16 percent since 2007, full-time employees by 28 percent and facilities by 46 percent.

Bernstein Research analyst Tim Anderson sent a note to clients afterward:

"It is difficult to judge the true value of process changes like these. There is no consensus in industry on what the exact right approach to R&D is, and GSK has - in the past at least - talked a lot about R&D process but failed to deliver much.

"That said, there have been signs that GSK's late-stage pipeline is improving. The only new news on a late-stage asset was that phase 3 data for GSK's BRAF inhibitor (melanoma) is now in hand and it will file for approval in 2012."

Anderson rated GSK as a "market perform" based on valuation.

 

 

David Sell
About this blog
David Sell blogs about the region's pharmaceutical industry. Follow him on Facebook.

For Inquirer.com. Portions of this blog may also be found in the Inquirer's Sunday Health Section.

Reach David at dsell@phillynews.com.

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