Interesting article in the WSJ last week on GSK's research activity:
Glaxo's Drug Discovery
Mimicks Nimbler Firms
By GAUTAM NAIK
Staff Reporter of THE WALL STREET JOURNAL
LONDON -- Two years ago, GlaxoSmithKline PLC embarked on an unusual effort to make its drug discovery process more efficient by mimicking smaller, nimbler biotechnology firms. Though it got off to a bumpy start, the approach is starting to show signs of success.
In the crucial middle stage of drug discovery -- in which scientists must decide whether to take a particular compound into large-scale clinical tests or to discard it entirely -- Glaxo has dispensed with a traditional hierarchical structure. Instead, the British company has created six "Centers for Excellence in Drug Discovery," or CEDDs, each focused on a separate therapeutic area.
The key element: The CEDDs compete against each other for resources, and their scientists can reap financial rewards, including a share of royalties, if drugs they have backed end up on the market.
Glaxo expects to have some 45 experimental drugs in Phase 1 and Phase 2 trials this year, up from 35 last year. And after being tight-lipped about its research efforts for about two years, Glaxo recently agreed to provide investors details about its drug pipeline by the end of the year.
"I'm feeling very confident" that the CEDDs approach is working, says Allan Baxter, who oversees the six research centers. "We have so many compounds in the clinic that handling that workload" has become the challenge, he asserts. He acknowledges, however, that it will be three or four years before any of these are ready for the market.
The lack of promising new medicines is a problem facing not just Glaxo, but every large pharmaceutical company. In 2001, the drug industry spent about $30 billion (?28.39 billion) on research, more than three times what it spent in 1991, according to the Pharmaceutical Research and Manufacturers of America, a trade group in Washington. But the industry launched just 24 new drugs in 2001 -- half the number it did in 1996.
Glaxo, created two years ago through the merger of Britain's Glaxo Wellcome and SmithKline Beecham of the U.S., is already using the advantage of size in the first, highly automated stage of drug development -- hunting for new drug targets and then screening compounds that might work against these targets. Size also is an obvious asset in the final stage of drug development, where promising compounds are tested over several years on thousands of patients.
One of the trickiest areas is the middle stage, where scientists need to determine whether a compound has a good chance of faring well in those final, large-scale human trials. To improve efficiency at that stage, Tachi Yamada, chairman of R&D at Glaxo, created the six CEDDs. Each was given no more than 350 scientists, and each had to compete as a entrepreneurial entity.
Not everyone was convinced that the approach would work. Critics said it would fragment scientific activity at the giant company, and make it harder for scientists in different therapeutic areas to cooperate. By mid-2002, three of the six CEDD heads had resigned, triggering concerns about morale problems.
Glaxo maintains that its three senior scientists left because of attractive opportunities elsewhere, or for personal reasons. One, Bob Ruffalo, left to take a senior R&D position at Wyeth. "He's doing Tachi's job there and has a helicopter," quips Mr. Baxter of Glaxo. "We don't give CEDD heads helicopters."
After a year of the CEDD experiment, investors were still unsure how the effort was faring. It didn't help when Mr. Yamada told a British newspaper early last year that Glaxo might one day spin off the six research units. The company later backtracked and insisted that the CEDDs were crucial to the company's research efforts and that it had no desire to spin them off.
Since then, Glaxo has come under increased pressure, partly because of concerns about potential generic competition for several of its big-selling drugs, and the lack of new late-stage drugs to offset any lost sales. The incremental sales required by Glaxo to maintain, say, 10% annual growth "puts pretty daunting expectations on the new drugs" currently being evaluated by the CEDDs, says Jeffrey Stevens, analyst at J.P. Morgan in London.
Glaxo has a huge R&D effort. It employs some 16,000 scientists and spends about $4 billion annually in hunting for new medicines and trying to take some of them to market. But the vast expenditure isn't as efficient as it could be, say analysts.
Lehman Brothers estimates that the current value of Glaxo's overall research and development effort, when looked at over the coming 25 years, is equivalent to 39% of its current sales. By comparison, the figure is a far higher 67% for the average European company, and 100% for the average U.S. company. Given that many large pharmaceutical companies spend similar amounts on research, "the conclusion is that Glaxo's R&D effort has been less productive in the last five years," says Jo Walton, a Lehman Brothers analyst in London.
Glaxo maintains that things are improving. For example, the company has set high hopes on a cancer drug known as a dual kinase inhibitor, which attacks two separate targets in tumors. Those tumor targets are the same ones attacked separately by AstraZeneca PLC's Iressa drug and ImClone Systems Inc.'s Erbitux drug. When both AstraZeneca and ImClone separately reported negative data from clinical trials of their medicines, scientists involved in the Glaxo project had to react quickly. They changed some of the tumor targets they had previously chosen for their drug and switched to different combinations with existing chemotherapy drugs, compared with the ones that had been used in the Iressa and Erbitux trial.
In a more traditional set-up, those changes "would require a large presentation to a review committee," says Peter Ho, an oncologist involved in Glaxo's dual-kinase inhibitor project. But at Glaxo, that decision was taken at the CEDD level "cutting several weeks to a couple of months" from the decision-making process, he says.
Write to Gautam Naik at gautam.naik@wsj.com3
URL for this article:
online.wsj.com
Updated March 21, 2003
Peter |
