GSK's Witty Knighted For Services To UK Economy

With the New Year in the UK comes the Honours List, recognizing outstanding achievements and service across the country. Amid a flurry of awards and medal ceremonies -- including In Vivo Blog's own highly-esteemed Deals of the Year Awards -- (voting time is now down to only a few hours, so please cast if you haven't already), joining the Honours List bestows individuals with a certain cachet that few other accolades can provide.

Henceforth, then, we'll be requesting interviews with Sir Andrew, aka GSK chief Andrew Witty, upon whom the Queen bestowed a knighthood for services to the UK economy as well as services to the pharmaceutical industry. Smith & Nephew's chairman John Buchanan also became a 'Sir', and, not forgetting R&D, Her Maj. bestowed awards on a couple of well-known biotech researchers.

Cynics may be suspicious of the timing of this flurry of biopharma-focused decorations. They came only a couple of weeks after the UK government outlined its new Life Sciences Strategy, in which much hope was placed on the sector helping to pull the UK economy out of the doldrums. Surely, though, courting the sector with awards doesn't spell a lack of confidence in the success of the goverment's apparently more solid set of support programs?

Either way, no one wants the UK to have to swallow another Pfizer Sandwich (aka the huge R&D facility that was shut down in Kent).

Sir Andrew's distinction, although fine, probably underlines the hours spent in UK Prime Minister David Cameron's Business Advisory Group. (Ouch. We don't mean that.) Sir Andrew also has a European string to his bow, as the current president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), but obviously Cameron didn't hold that against him.

Still, Sir Andrew's award may have a bitter tang to some of those R&D chiefs that may have seen their Drug Performance Units culled as part of GSK's high-profile three-year review cycle (results expected to be made public in February).

The timing of Sir John's award came just prior to the latest in series of acquisitions and divestments that he has overseen since 2006 at the artificial hip and knee maker. Smith & Nephew on Jan. 4 announced it was spinning off its biologics business into a US-based JV with private equity firm Essex Woodlands.

Other knights of 2012: obesity expert Prof. Steve Bloom of Imperial College London, who co-founded the UK biotech Thiakis Ltd in 2004, to research the therapeutic potential of gut peptide hormones in controlling appetite. Thiakis was acquired by Wyeth (now Pfizer) in 2008. Prof. Mark Pepys, formerly of University College London, also becomes a Sir. He co-founded Pentraxin Therapeutics, a UCL-spin out with a focus on the rare disease, amyloidosis. Pentraxin entered into a research collaboration with GSK in 2009.

Order of the British Empire Awards (OBEs) were awarded to Richard Barker, who retired as director general of the UK trade association, the ABPI, in the middle of 2011, and Dr John Stageman, currently vice-president of UK science affairs at AstraZeneca. Stageman was closely involved in developing AZ's biotech strategy, including the acquisition of Cambridge Antibody Technology and the US company, MedImmune Inc.

image courtesy of flickrer sincerelyhiten

GSK Notes: We Have More Sales Reps in Emerging Markets than in West

GlaxoSmithKline's earnings call on April 28 was pretty routine, with no big surprises – nice growth, health care reform and all that, but executives did an interesting albeit somewhat shallow, dive on emerging markets.

GSK is one of the few, if not the only, Big Pharma to break down its emerging markets operating margins, which is laudable considering interest in the region (Even as pharma emerging markets sales skyrocket--and they were up 45% for the quarter at GSK--profitability isn't transparent).

Tim Anderson of Sanford Bernstein picked up on this topic, one of his favorite themes, on the earnings call: GSK's operating margins in emerging markets, at 36%, for example, is only slightly more than half of its margins in established markets. "Where do you think operating margins and emerging markets can realistically go from here over the next three to five years given what is likely to be a continual pricing disparity?" Anderson asked.

That led CFO Julian Heslop to respond: "Difficult to predict the future"…but 36% operating profit margin in any business is "excellent." And emerging markets don't require the heavy R&D investment that Western markets demand, so cost of goods sold is lower. If pharma R&D costs tend to run about 16% of sales overall, the products emanating from the labs account for only a third of emerging market sales, Heslop said. So a thumbnail calculation could charge a third of R&D costs to emerging markets.

After all, R&D priorities are driven by Western demands, chimed in CEO Andrew Witty. His further point: GSK's definition of emerging markets does not include Southeast Asia, Australia, or Japan, which GSK breaks down separately Clarification: Its emerging markets group consists of 10 countries, and does include India and China. That's important because GSK's Indian business is huge –Witty couldn't help pointing out that it is in the top three manufacturers of all types in India (GSK doesn't break down sales that far, though).

Overtime, GSK should be able to better leverage its growing infrastructure investment in emerging markets as it expands its sales capacity (not only for its own home-grown products; it has an aggressive in-licensing program specifically focused on bringing in late-stage products to sell in emerging markets, with its most visible success to date its alliance with Amgen to sell Prolia). And growing it is, both organically and through bolt-on acquisitions. Of the 11 bolt ons it did in the past year, most were in emerging markets, Witty said.

"For the first time over the last 3, 4, 5 months, we actually have now more sales personnel in the emerging markets than we do in America and Europe combined," he added, "…a pretty big shift." After all, he reminded investors, "This is one of those moments where we are seeing fundamental economic shifts go on in the world economy."

Moreover, Witty noted--and here's a comment to wake you up: "every dollar spent on SG&A in emerging markets in the past two years has been paid for by a dollar taken from Western budgets."

Glaxo's Witty Tries To Fix An Industry Problem

For the second time in a year, Andrew Witty has succeeded in getting in front of a contentious issue that plagues the pharmaceutical industry – finding ways to provide greater access to medicines to poor countries. Last year, the GlaxoSmithKline ceo trumpted plans to create a patent pool for tropical diseases; reinvest 20 percent of profits from meds sold in the Least Developed Countries, and reduce prices there by 75 percent.

The February 2009 effort (see the pronouncements here) won him kudos for addressing topics that his peers had mostly confronted in fits and starts. Generally pleased with the reaction, Witty this week embarked on what amounted to a 24-hour media blitz – including a widely telegraphed speech this morning before the Council on Foreign Relations in New York – to announce his next steps.

His latest moves read like a laundry list of NGO initiatives: creating an ‘open lab’ with $8 million in seed money and space at a Glaxo facility in Spain so that up to 60 scientists from erstwhile locales can research neglected tropical diseases. Glaxo is also contributing 13,500 compounds – including chemical structures and assay data – that will be available on web sites for developing new malaria treatments. There’s more: BIO Ventures for Global Health will run the ‘knowledge’ pool announced last year and collaborations were inked with the Emory Institute for Drug Discovery and South Africa’s iThemba Pharmaceuticals. Finally, in a related development, he promised to limit profits on a malaria vaccine, which is in Phase III testing, to 5 percent and contribute the proceeds to Glaxo’s R&D budget for vaccines to combat neglected tropical diseases (see more in The Pink Sheet).

“The speech I made this morning really tries to build on what I started a year ago,” Witty told a handful of bloggers (including yours truly) at the majestic New York Academy of Sciences offices in lower Manhattan following his morning speech. “We’re really trying to identify a more pluralistic approach to solve very difficult problems rather than constantly use the same approach…and be much more open-minded and be prepared to try new things.”

Certainly, Witty deserves some credit for taking these steps. For years, drug makers have been skewered for failing to do more to make their meds widely available in various countries. Over the past year, the Glaxo ceo has managed to alter many perceptions by conveying a willingness to listen and act. Compare that to the running battles between drug makers and governments that, sometimes, led to brinksmanship over compulsory licensing. Of course, those disputes were generally over very profitable treatments for heart disease, cancer or AIDS. By comparison, malaria treatments are the equivalent of low-hanging fruit, not best sellers that command top dollar in developed countries.

When questioned about the intellectual property and commercialization rights to the 13,500 compounds donated for malaria research, Witty was quite firm in saying that Glaxo wouldn’t benefit from any malaria treatment that may be discovered and developed, unless a company later approached his team for a deal of some sort. “But a cardiovascular medicine,” he added, “that’s a different consideration.”

And he tried hard not to appear defensive when asked about an idea being pushed by Medicines Sans Frontieres and Unitaid, the international drug-purchasing agency based in Geneva, to create a patent pool for HIV medications. Recent reports mention several drug makers that have held talks, but Glaxo wasn’t among those listed. By contrast, Glaxo’s interest in AIDS drugs did make headlines last year, but largely in connection with a joint venture formed with Pfizer, called ViiV. Nonetheless, Witty insisted that Glaxo is, in fact, willing to explore the possibility.

“We actually have eight voluntary licenses for a variety of HIV drugs and each one covers 44 countries…That’s a huge portfolio of openness. These are licensed to both African and Indian manufacturers and they are royalty-free. And we gave permission to generic companies to create combination products. As a result, last year they supplied more than four times the volume than what GSK supplied,” he argued. “So we’re already doing what you’d envision what the pool would generate.

“Where are we with the (Unitaid) pool? Not surprisingly, we’re very aligned with the goal. And we’re engaged in conversation to try to work with them, as are others, in ways that are practical. The ViiV team met (with them) just yesterday or the day before…The meetings are constructive and cordial, and we’re engaged in the spirit of trying to get details hammered out…But the decision lies with the management board of ViiV. As the biggest shareholder, we’re pretty close to knowing what’s going on there. But we’re very aligned with their goals…The devil is in the details and we need to get the details to work.”

Ironically, Witty acknowledged a wee bit of disappointment, but not much surprise, that other large drug makers have yet to embrace the patent pool for neglected tropical diseases he would like to develop. To date, only Alnylam Pharmaceuticals has agreed to join. In explaining the paucity of cooperation, Witty put on a brave face while also trying hard not to deliver a spanking:

“I do hope other companies will join,” he lamented. “…I can completely understand why they take their time. For those other companies, it came a little out of the blue. They’ve had to assess their response after the impact of (the announcement last year). There’s a fair degree of interest among some. But not to overstate, I think there are some (companies) that will never come into it…I hope they will join…But a year’s not a long time…Maybe it is in the blogosphere, but not in the pharmaceutical industry.”

Prodded by another question, Witty then conceded that his idea for a patent pool may one day expand to include prospects to treat other conditions beyond tropical diseases. For now, though, he pointed to the fact that there is little “market stimulation” for discovering meds to treat tropical diseases, unlike so many other illnesses. “But if it works, engages people and inspires people,” he said, “then, absolutely.”

Not everyone is enamored of his efforts, however. Health Action International, an advocacy group that pushes for greater access to medicines, says it’s still waiting for Witty to respond to questions posed last spring about Glaxo’s initiative to lower prices in countries in which this has taken hold. For his part, Witty yesterday preached patience.

“If we sit back as a group and constantly look to design the perfect model to fit the situation, to see what’s working, we’ll never do anything. So let’s see what opportunity we can create and move to the next problem,” he offered. “…This is a step on a journey and journeys have multiple steps.”

Is Biotech Running GSK?

"Smaller, biotech-like units" have been the name of the game at GlaxoSmithKline ever since the CEDDs (Centers of Excellence for Drug Discovery), round one, were announced post-merger in 2000.

Fast-forward eight years and now it's not just biotech's size that's influencing the pharma giant. These days biotech CEOs are showing GSK pod-chiefs how to run an R&D business--and, since earlier this week, one is running part of GSK himself.

Christoph Westphal, former-CEO of Sirtris, which GSK acquired for $720 million in April (one of our Deals of the Year Nominees), will now head up the externally-focused CEDD (or CEEDD), along with Sirtris' VP Corporate Development Michelle Dipp. While remaining at Sirtris' premises, Westphal will "challenge the norm and stretch us to consider new ways of working" in drug discovery, according to GSK's head of Discovery Patrick Vallance.

The idea is that Westphal’s experience founding, running and investing in biotech will help the CEEDD attract promising assets into GSK’s pipeline via alliances and partnerships.

Westphal’s appointment isn’t the first of incoming CEO Andrew Witty’s attempts to infuse the group with biotech-like management, accountability and creativity. Ian Tomlinson, former CEO of Domantis (which GSK acquired in 2007 to beef up its next-generation biologics capabilities) is a senior R&D exec at the Big Pharma. And earlier this year, Witty invited Actelion CEO Jean-Paul Clozel to talk to GSK CEDD heads about how biotech manages research—and give them a few lessons from one of Europe’s few biotech success stories. (Actelion has since signed a deal with GSK on sleep drug almorexant.)

The moves make sense. GSK’s CEDDs are supposed to be run as more or less autonomous units with their own P&L responsibility, but structure alone doesn’t create a mindset. Thus far the CEDDs haven’t exactly revolutionized Glaxo’s pipeline, even though several other Big Pharma, including Roche and Pfizer are trying similar things. “The challenge is to make the CEDD heads entrepreneurial,” comments one analyst--and to incent them to perform, or else.

Witty’s June announcement of the latest CEDD-like iteration, 50-person-strong Drug Performance Units focused on specific biological pathways and competing internally for resources, sends a clear message: We’re no longer just pretending to be like biotech, cushioned within a comfortable, cash-rich bureaucracy. We are a series of biotechs.

And as is abundantly clear out in the real biotech world, there ain’t many safety nets about.

jacket image by flickr user ckount used under a creative commons license

Andrew Witty Has Seen the Future and the Future Is Mouthwash

Biotene mouthwash. And toothpastes and gels and chewing gum to alleviate dry mouth. GSK bought the Biotene brand for $170 million, it announced today, from the private firm Laclede.

Biotene generated about $50 million in revenue last year, according to GSK's release, and joins a host of consumer oral-care brands at the Big Pharma, including Aquafresh. (For the low-down on all things consumer healthcare, visit our colleagues at The Tan Sheet.)

GSK's other news today is that it is opting out of its collaboration with Vitae Pharmaceuticals. The two firms were developing Vitae's preclinical renin inhibitors for hypertension under a deal signed in 2005. (Read about Vitae's strategy in this 2005 Start-Up article.) Vitae plans to continue development of the renin program on its own.

The timing of the two moves by GSK is certainly coincidental. Still their juxtaposition illustrates well where this Big Pharma--and probably a lot of Big Pharmas--are moving. Cardiovascular drug development isn't extremely popular these days, especially in areas like hypertension that are relatively well-served by existing (often generic) therapies; companies (like Pfizer) are opting out of that space in particular and much of the generic-heavy primary care areas in general.

And they're also diversifying into consumer medicine at an increased clip. Pfizer's likely kicking itself for offloading its consumer business to J&J--brands like Zyrtec helped boost growth overall at J&J despite a poor showing by the branded pharma unit in the last quarter's results. GSK's CEO Andrew Witty said on a recent earnings call that consumer medicine R&D is also more predictably successful. As Roger Longman wrote in the September IN VIVO:

At GSK's earnings meeting, Witty described OTC product development as the antidote to R&D attrition. Its Aquafresh White Tray tooth whiteners cost £6 million to develop and, in its launch year of 2007, did £21 million in sales. Its Commit smoking-cessation lozenges, launched in 2001, cost £26 million to develop and did £329 million in 2007 sales. Witty claims that 70% of GSK's consumer R&D projects end up creating marketed products. Meanwhile, he says, the average approved GSK drug takes two years to recoup its R&D costs – but that figure, he says, doesn't include the many projects which fail along the way (indeed Witty couldn't say whether pharmaceutical R&D was actually generating positive returns).

Of course not every consumer medicine story has a happy ending. Sales of GSK's own OTC weight-loss product Alli, for example, have fallen flat after a significant and expensive roll-out. But look for GSK and other Big Pharma to continue to diversify away from their traditional strengths in branded primary care medicines: into OTC, branded-generics, me-too biologics, etc.

You don't need Witty's crystal ball to see that it's in pharma's future.

New CMO Means Business For GSK

No new CEO in our industry has done more to shake up his organization than GlaxoSmithKline's Andrew Witty (except perhaps Severin Schwan of Roche with his bid for Genentech--but that's another story).

Earlier this spring he created high level positions devoted to corporate strategy and emerging markets and the formation of a new $500 million corporate venture fund. Just days after rumors concerning also-ran Chris Viehbacher's departure were confirmed comes news that Witty's lured Ellen Strahlman, MD, away from Pfizer, where she served as VP Licensing and Worldwide Business Development, to the role as GSK's chief medical officer.

As the press release announcing Strahlman's appointment helpfully points out:

"the Chief Medical Officer is the most senior physician leader of the company with primary responsibility for matters of patient safety, general medical governance, ethics and integrity, medical information, and investigation involving human subjects relating to any GSK products in development or on the market."

Which is what makes Strahlman's appointment so interesting. Yes, she's a well respected physician--an ophthalmologist by training. And since she once served as CMO and Global Head of R&D for Bausch and Lomb, so she's no stranger to the duties a CMO title brings with it. But her most recent stint at Pfizer, where she was at least partly responsible for spin-outs and outlicensing, means she comes with a business focus that's atypical of most of the industry's CMOs.

And Strahlman's background is by no means unique in the boardroom at GSK. When you look at who occupies the top spots at this pharma, a number of them have deep biz dev experience. Among them: Russell Greig, head of the new GSK Venture Fund, who was GSK's senior VP of world-wide business development before becoming president of Pharmaceuticals, International; David Redfern, the company's new strategy guru, who has held stints at GSK as SVP Corporate Strategy and Development and SVP of Northern Europe; and Moncef Slaoui, who was SVP world-wide business development for GSK before becoming chairman of the R&D program.

And that leads this IN VIVO Blogger to wonder...With so many top brass at GSK--including now the CMO--trained to look for products outside GSK's own pharm system, what's the importance of internal R&D to GSK?

It's a fair question. GSK has never shied from inking big deals to fill its late stage pipeline drought. In recent months that's meant tie-ups with Valeant for their Phase III anticonvulsant, Actelion for their Phase III insomnia drug, and Cellzome for their Kinobead technology and kinase inhibitor discovery/early development. And in attempt to spur innovation within GSK's walls, Witty announced in July a reorganization of the CEDDs into discovery performance units that will compete for internal financial resources much the way biotech start-ups vie for VC funding.

“Externalising R&D enables GSK to capture scientific diversity and balance expenditure and risk in drug development. In the future, we believe that up to 50% of GSK’s drug discovery could be sourced from outside the company,” Witty said in a press release announcing the new strategic priorities.

No one is suggesting that Witty wants to jettison GSK's internal R&D--at least for now. But the structural changes that have already been announced and this most recent appointment of Strahlman to CMO suggest that more and more business as usual at GSK will also come with an external focus.

While You Were Watching the Upsets

This weekend we were in Cardiff for the Rugby World Cup quarterfinal between France and New Zealand, which saw France upsetting the favorites. Earlier in the day defending champs England upset heavily-favored Australia, setting up a very surprising all-Europe semifinal next weekend. Suckers for a lost cause, we managed to keep tabs on the Phils into the wee hours, and showed our support on the streets of Cardiff amongst the hordes of Kiwi and French fans (see below--it's a jungle out there).

So what'd we miss?

• The repercussions of the failure of Merck's HIV vaccine are being felt across the entire field, points out the Philadelphia Inquirer.
  
• Roche isn't raising its offer for Ventana, the company said this weekend, but it remains convinced Ventana shareholders will see the light.
  
• And the winner is ... Andrew Witty. GSK's head of Europe appointed CEO-designate, will replace JP Garnier in May 2008.

gotta support the team

GSK's War of Succession

It's GlaxoSmithKline's turn to find a new chief executive, after incumbent JP Garnier retires next May. Apparently there's no shortage of internal candidates: three senior executives are battling for the position, according to the UK's Daily Telegraph.

Like a roman emperor--or, a more contemporary analogy, The Apprentice's Donald Trump--JP has chosen to watch the three wannabes fight it out in the corporate ring over the next year.

David Stout, president of global pharmaceuticals, is tasked with re-thinking supply-chain management. Chris Viehbacher, head of US pharmaceuticals, must work out how to improve GSK's public image, and Andrew Witty, Viehbacher's European counterpart, needs to sort out marketing; he's testing "new selling models" in a dozen world markets, according to an insider.

They’re big tasks, requested on top of the day job. But it’s a big reward, too—not just the kudos of running one of the largest drug firms (and, according to analysts, one with an above-average pipeline), but large pay-checks. One of the many controversies around JP’s reign was his fat-cat pay package, famously thrown out in 2003 by irate investors—the first such embarrassment for a FTSE-100 company chief.

It’s an unusual way of selecting a successor--AstraZeneca, Merck and Pfizer (which picked a relative outsider) apparently didn't have such a choice of candidates when they appointed new CEOs over the last year or so--but one which has merits. Each of the tasks is important to GSK’s future, and this is one sure way of making sure they’re tackled. And whoever wins will be able to build on the output of all three projects.

When the candidates enter the boardroom on judgment day, one of them will be hired. It’s unlikely that the other two will stick around to see their projects through, however.

Source: Telegraph