GlaxoSmithKline PLC’s leadership is “more confident than ever” that it has found the right model to improve research and development returns and productivity, according to CEO Andrew Witty, speaking at the company’s full year results meeting Feb. 7.

Key to that model was the creation in 2008 of multiple disease- or pathway-focused discovery performance units (DPUs), small groups with highly accountable leadership and defined scientific goals, designed to mimic biotech.Also see "GSK Tries to Mimic Real-World Biotech" - In Vivo, 1 February, 2009.

And like biotech, the DPUs must prove to their investors that they are making sufficient progress, and that their approach remains scientifically and strategically relevant, in order to win further funding. GSK’s 38 DPUs faced their first three-year review during the second half of 2011.Also see "GlaxoSmithKline R&D Under Scrutiny In Bid For Fresh Funding" - Pink Sheet, 17 October, 2011.

The outcome: GSK shut three DPUs, including one looking at small-interfering RNA (siRNA) in drug development, and reduced funding of five more by over 20%. The cull adds to the handful of DPUs that were closed along the way, including four in areas of CNS discovery. But although this proves that GSK’s management is prepared to follow its words with action, the idea isn’t to cut costs – the group’s discovery budget remains the same. It instead will allocate resources more productively, by shutting down avenues that aren’t generating positive results, and funding smart new ideas instead.

Thus along with the cuts, four new DPUs were born, including one housing a new proposal for hemoglobin research. Six saw their budgets increase by more than 20%.

Still, Witty claimed the story is less about the number of surviving DPUs, and more about the new culture generated by this set-up – a culture where creative freedom and cross-disciplinary teamwork sit alongside tight cost-controls and budgetary responsibility. “Although some are fixated on the output of the discovery board review, that’s not the story. The story is the new culture created within GSK,” he claimed. “We’re absolutely focused on the disciplined assessment of progress. We’re not prepared to allow organizations to drift off for 10 years against failing targets or hypotheses.”

Cultural Shift: Responsibility, Not Entitlement?

One encouraging aspect of the review process, according to R&D Chairman Moncef Slaoui, was that at least one DPU leader came forward to suggest that his field didn’t warrant further funding. Thus the siRNA-focused unit was looking at what’s needed to make such medicines more palatable. The conclusion was that the challenge isn’t around designing or producing siRNA sequences, but is instead about delivery and formulation sciences – not the unit’s focus. So “the best strategy for that … is looking outside of GSK,” recounted Slaoui. “It was a clear scientific conclusion, and I’m very glad it happened that way. I don’t want the organization looking for work, I want work to look for the organization.”

Not that the other DPU closures were all that easy; “there were some difficult, but important, discussions,” Slaoui revealed, without giving further details. But no one was forced out of the organization as a result of the failures, he said, although several DPU heads have left during the three years. Of those, at least one has started a spin-off company (pain-focused Convergence Pharmaceuticals Ltd.), and another has one in the works, according to Slaoui, who says GSK “heavily supports” such ventures Also see "GSK Spins Out Pain Assets Into Convergence" - Scrip, 1 October, 2010..

For one external DPU advisory board member, the review outcome wasn’t drastic enough to really drive home the live-or-die link between funding and progress. “Stopping just three DPUs – less than 10% of the total – won’t have had much of an impression,” the board member said. Retaining the employees of even defunct DPUs likewise looks far more Big Pharma than biotech-like.

Slashing costs and headcount was never the plan, though. And according to Slaoui, even with more DPUs created than culled, the mindset has shifted. “This notion of entitlement has been dramatically moderated,” he suggested, “even if it hasn’t disappeared entirely.”

It hasn’t: the team within one DPU, whose budget was drastically increased, was nevertheless disappointed not to have not received anything like the full amount it had requested. “It’s the same old Big Pharma R&D organization mindset,” said one insider. “Instead of saying “what’s the best possible thing I can do with the cash I have?” they instead grumbled about getting less than they asked for.”

Still, grumbles aside, with constrained resources, they’ll have to make tough choices – and that’s the idea. Further resource efficiency is expected from what Slaoui refers to as a flexible tool of talent: scientists from within now-closed DPUs will be available to join other units as and when they’re needed, but encouraged in the interim to take sabbaticals and/or to move into other parts of the organization, or into academia, ostensibly to expand their expertise. “What we don’t want is to create new projects just because we have 10 more people that need to work,” Slaouisaid.

New Ideas Include More Platform Technology-Focused DPUs

But they do want to fund exciting new roads of discovery, including those suggested by GSK employees at any level. Thus Andrew Benowitz, who went from bench-chemist to DPU head in just four months, was highlighted by Witty as the shining example of how GSK offers all staff the opportunity to own and run something – if that something is sufficiently compelling. Benowitz’s “very sensitive, brilliant idea” in hemoglobin research was one of 60 new DPU proposals submitted to the discovery investment review board by individuals within the organization, according to Slaoui.

The other new DPUs came from therapeutic area heads, or from DPU leaders who decided, ahead of the 3-year review, to close their existing DPU and – with strong justification -- open a new one instead.

But a third source of new DPUs was GSK management’s own realization that they were overly focused on making medicines, and potentially neglecting a host of new platform technologies – such as boron chemistry, novel formulation sciences or new screening techniques -- with the potential to radically change the way those medicines are made. A call for technology proposals led to “more than one” of the new DPUs being platform-focused, according to Slaoui.

Three years is too short a time in which to judge the success of the DPUs per se – but it is long enough to tell if things aren’t working. And it is appropriate, in 2012, to begin to assess the outcome of the far longer-term R&D overhaul begun at GSK shortly after the 2000 merger. According to Witty, with 10 potential new product filings during 2012, 30 full development programs, yet a lower cost-per-asset and increased internal rate of return on R&D, GSK’s pipeline is “unrivalled in the industry.”

That may say as much about its peers’ pipelines as about GSK’s own. But meantime, while Witty and Slaoui both emphasize the importance of culture over numbers, they’re nevertheless keen to quantify their R&D productivity gains. So the expected rate of return on GSK’s R&D has increased from 11% in 2010 to 12%, according to Witty, who claims that the strict cost controls coupled with increased program survival rate puts the company on track to reach its 14% goal. (GSK calculates this by taking the current late-stage pipeline, looking back 10 years and calculating the R&D budget required to create it, then projecting both future investment and future sales from those products over 10 years going forward. It uses its own sales forecasts – which may be why at least a couple of analysts say they disregard this calculation altogether-- but Slaoui claims that these forecasts have over the last two years been shown, by real-world sales generated in that time, to be conservative.)

As for the DPU review process: it will continue, broadly speaking, on a three-year basis, according to Slaoui. But not all the DPUs will be assessed simultaneously, since this process was more disruptive to the organization than it needed to be, the company said, and a “ridiculous time-drain on senior management,” according to one insider. In future some DPUs will have shorter review periods, others longer, depending on the project in question. After all, “VCs review their portfolios on a company-by-company basis, not all at once,” said the insider.

If productivity continues to progress as GSK management claims it is, the scientists may at least enjoy a break from the extensive rounds of organizational overhaul that it’s taken to get thereAlso see "Putting The Pieces Together Again: GSK Creates End-To-End Business Units " - In Vivo, 1 January, 2011..

GSK Says R&D Productivity Up, But Story Is About Culture, Not Numbers

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