GlaxoSmithKline had a busy day: It announced its fourth-quarter/full-year results along with a split of the company to focus on R&D on one side and consumer health on the other (and maybe sell off its dermatology biz), all the while quietly cutting and scaling back three pipeline efforts.
On a call Wednesday afternoon, analysts were interested in how GlaxoSmithKline’s research capacity could and would expand, its focus and whether more buyouts were in the cards.
Graham Parry from Bank of America Merrill Lynch asked: “When you talk about building R&D capabilities going forward, to envisage that’s more weighted towards technologies or products and how do we intend to fund those acquisitions, if external M&A?”
GSK has certainly been looking to spread its R&D into new technologies. It has been seen as something of a research laggard, seemingly willing to almost divest much of its oncology business about five years ago, but it’s looking to come roaring back in cancer, specifically with its anti-BCMA asset, as well as other key areas.
CEO Emma Walmsley checked out projects early on she didn’t think would fit and has been signing deals with the likes of 23andMe, originally a DNA testing firm that has branched out rapidly into developing and out-licensing its own drugs.
Speaking to the Financial Times after the J.P. Morgan Healthcare Conference a month ago, Walmsley said GSK and 23andMe had picked their first drug target and expect to kick-start a clinical trial by year-end. The company penned a $300 million deal with the consumer genetics testing firm two years back and is now seeing some tangible effects.
Walmsley said at the time that a big driver of this deal was for it to help shore up GSK’s R&D productivity, predominantly by providing genetic information as a way to eventually reach new and, in terms of what it’s looking for, better trial participants.
This also dovetails with its venture on Verily, Alphabet’s life sciences arm, which is working on bioelectronics.
GlaxoSmithKline’s R&D lead Hal Barron talked on this in regard to Parry’s question: “So by R&D capabilities, I think I would think about that in three different buckets. First one you mentioned, which is technologies such as AI/ML [artificial intelligence/machine learning], functional genomics, human genetics and our cell therapy programs.
“I think we have made terrific progress there, and advancing them further we will probably be focused on identifying new synthetic lethal combinations and some new targets that are already emerging from some of the preliminary functional screens, and that combined with, we have already had eight targets from 23andMe, we are just going to have a lot of stuff coming out of the technology that we need to execute on.
“So, that would be the second bucket as sort of executing on all the emerging data from the technologies. And lastly, capabilities to actually build up the ability to actually get the trials done and filed. The pipeline is very robust now, a lot of successes and we need the people and tools to actually turn all these medicines into approved drugs. So, capabilities on all three of those are where we are focused.”
After its $5 billion buyout of Tesaro to boost its cancer drug arsenal, Walmsley was also not giving much away about M&A targets this year. Citi’s Andrew Baum asked about GSK’s “financial capacity and bandwidth for further BD [business development] on the pipeline.”
Its CEO said: “The answer on this is: There is absolutely no change to what we have said previously in terms of the prioritization of our capital allocation. Our No. 1 priority is to continue to strengthen the pipeline, be that organically or inorganically.
“Obviously, we are particularly pleased with the positive data that’s read out more recently and also pleased with the quality of the execution of the business development that we have done to date. So, we will continue to keep an eye out for that with due alignment to the R&D strategy that Hal Barron laid out and obviously the discipline in terms of some allocation of capital.”