Science and TechnologyWritten evidence submitted by GlaxoSmithKline (GSK)

1. Introduction to GlaxoSmithKline (GSK)

GSK is one of the world’s leading research-based pharmaceutical and healthcare companies, developing and supplying medicines to improve patients’ quality of life. We employ over 96,000 people in over 100 countries. Our products cover a wide range of healthcare areas: prescription medicines, vaccines, rare diseases, dermatology, and consumer healthcare, and we produce medicines that treat six major disease areas—asthma, virus control, infections, mental health, diabetes and digestive conditions. In addition, we are a leader in dermatology and we are developing new treatments for cancer and rare diseases.

GSK is the largest pharmaceutical company by value in the UK, is British-owned, and is headquartered in the UK, employing more than 14,700 people. We are the largest private sector funder of R&D in the UK, spending £1.8 billion in the UK in 2010; over 40% of our global R&D expenditure.

2. The Changing Pharmaceutical R&D Model

The pharma business model is changing—declining R&D productivity, patent expiries, increasing regulatory demands and increasing demands from payers, a shift to new technologies such as biologicals that will require new skill sets (in both R&D and manufacturing) and new technologies; this is coupled with downward price pressures, but also external opportunities, such as the ever-increasing rate of technological innovation.

This has a range of implications:

Need to boost innovation and spread risk resulting in increasing importance of collaborations with external partners, both in industry and in academia, to access the best science and develop differentiated medicines which patients need.

Need to find cost-savings across the business, which is driving increased efficiency in R&D, manufacturing, and in our commercial operations.

Need to demonstrate value of our products to payers as well as healthcare professionals, and ensure that payers understand the need to balance delivering value for money in health systems with the need to value and reward medical innovation.

These developments place increasing emphasis on the importance of an effective and efficient life sciences ecosystem in the UK—from early discovery research, through clinical trials, manufacturing and commercial use once licensed—where industry flourishes, patient outcomes improve and the economy thrives.

The UK has historically been a strong environment for GSK—a world-class science base, skilled workers, a national health service that provided an opportunity for first global launches of new medicines, a strong IP framework, and an established and trusted relationship with Government.

In recent years other countries, such as Singapore and Ireland, have attracted a significant share of investment by companies such as GSK; the UK Patent Box will make a significant contribution to ensuring the UK can continue to compete to maintain and grow its share of global life sciences investment. Furthermore, the Growth Review commitment to decrease clinical trial times will have a positive impact on patient numbers recruited into clinical trials, once changes are implemented.

However, the global environment for medicines is extremely challenging and the industry is shrinking; it is likely that in 10 years, the landscape will look very different with fewer players. Part of this is the natural evolution of the industry as a response to an environment that has changed significantly; 10 years ago any medicine with regulatory approval was available to patients.

There is a still a need for new medicines for many diseases that have no treatments or where treatments could bring patient benefits. There is a wealth of good science around the globe. With 11,000 people in GSK R&D, we still only represent <1% of science and we know we cannot come up with all the good ideas. Academia and biotechs are increasing their partnerships with larger pharmaceutical companies (and vice versa). Biopharmaceuticals will represent the largest type of new medicines in future.

3. How GSK has Changed its R&D Model

GSK is changing our R&D model, making it more agile, focussing our efforts in areas where the patient need is greatest and science is more fertile. This will improve our productivity and our return on investment. We have re-personalised R&D—created an entrepreneurial environment in drug discovery, pursuing the best scientific opportunities whether internal or external. We are focused on furthering our R&D efforts through externalisation in pursuit of the best science. We take a long-term, customer-driven approach to building external alliances.

We have been leading the industry in forming progressive new alliances and collaborations with biotechs and academia to further the best science that can help us deliver new medicines to patients. We are building our biopharmaceuticals s investment and research and seeking to continue investing in this area to diversify the platforms we can use to make medicines. We have made fundamental changes to how we allocated our R&D expenditure, directing it to our late stage pipeline; reducing cost and risk through externalising parts of our early-stage discovery; dismantling infrastructure; and terminating development in areas with low financial and scientific return.

Internally we have created Discovery Performance Units (DPUs) which are groups of between 5–70 empowered scientists, with each group focusing on one particular disease or pathway, or platform technology and responsible for driving discovery and development of potential new medicines through to early stage clinical trials (up to completion of Phase IIa). Externally, over the past 10 years, GSK has signed more late stage collaborations than anyone else in the industry, and about 70% of them are still active today. In fact, a large portion of our current late stage pipeline comes from these collaborations.

4. The Development of Open Innovation within GSK R&D

GSK has been active in assessing the potential of pursuing an open innovation strategy to help speed up R&D for diseases of the developing world (DDW). This includes being more flexible with our intellectual property and providing access to our know-how and resources, and sharing our data with the research community. At our DDW—focussed R&D facility in Spain (Tres Cantos) GSK has been developing an “Open-lab” concept. The open lab has space for visiting scientists from universities, not-for-profit partnerships and other research institutes to come to the site, work on projects with us, learn from our expertise and share our world-class facilities.

GSK’s Academic DPU/Discovery Partnership in Academia initiative provides an opportunity for world-class academic researchers to work very closely with GSK. For example, GSK outlines assets available for collaborative partnerships with the academic group proposing innovative ideas for evaluation of their therapeutic potential or academic groups with disease and biology (target) understanding work jointly with GSK to discover new medicines, with both partners providing their key areas of expertise.

The Stevenage Bioscience Catalyst (SBC) is being developed as the first UK bioscience open innovation campus. The campus will create a unique bioscience community providing small biotech and life sciences companies and start-ups with access to the expertise, networks and scientific facilities traditionally associated with multinational pharmaceutical companies.

GSK and Wellcome Trust are founders of SBC and the phase I development opened for business in February 2012 with the completion of an incubator and accelerator building. Phase I construction was funded by GSK, EEDA, BIS, TSB, and the Wellcome Trust.

5. GSK Views on the Availability of Funding for Bioscience Companies in the UK

Funding at the early stages can either be through VCs (independent or corporate VCs) but is more often through Angel funding or the provision of grants from, eg, the Wellcome Trust or the MRC. GSK notes that VCs tend to be very selective in choosing the early companies they invest in but securing investment from a VC (independent or Corporate) usually means that the biotech will have a stronger support system and be better able to access the knowledge it needs to grow and to then be able to secure Series A and future follow-on funding. GSK understands fully the desire of VCs to focus on companies with excellent science and strong, experienced leadership.

GSK considers that funding by Business Angels and through grants can be positive. However, we suggest that early stage bioscience companies need to be encouraged to access good advice about how they structure these early financings with a view to what will be needed to raise further capital as the company develops. Otherwise they can often fail to secure follow-on funding and Angel/grant funding alone is insufficient to support anything other than very early stage companies.

GSK’s Corporate Venture group SR One invests globally in emerging life science companies that are pursuing innovative science which will significantly impact medical care. SR One has a team of investment professionals, located in the US and Europe, with experience spanning basic science, industry and the market. SR One takes an active role in its portfolio companies and works with management teams and fellow venture investors to create significant value. SR One’s current portfolio includes approximately 30 private and public companies and since its founding in 1985, the fund has invested over $600m in the biotech space. SR One’s expanded remit also focuses on maximizing the value of GSK technological innovation to establish new businesses and revenue opportunities across a range of industries.

In the UK, SR One has a lot of experience in seeing proposals for follow-on funding from companies that were created with Angel/grant funding where the companies have not progressed their assets or technology sufficiently to secure follow-on funding and has thus declined to invest. Many such companies seen by SR One were considered un-fundable for a number of reasons including the credibility or experience of management, an overly complicated company structure, an inflated valuation or expectation of value by founder investors or management, poor asset differentiation, a business model not well enough constructed, or the fact that the company had been in existence for some time with little progress to date. While there is undoubtedly a lot of great science in the UK, a number of elements need to come together to make a fundable company. This is one reason, along with the limited number of early stage VC investors with which to syndicate deals (see below), why investing the £50m GSK has committed to spend on UK biotechs will remain a challenge for SR One.

GSK is not in a good position to quantitatively assess the amount of funding available to the sector, but there is no doubt that there are now less VCs operating in the biotech space; the players investing in early stage opportunities have reduced from around 12 to 4–5 in the last few years. This is due to a number of issues, primarily the 2002–08 financial crises and the pressure on financing generally. There has though been some recent good news with new investors emerging including the Wellcome Trusts Sigma Fund, CRT’s Pioneer Fund and the TSB/MRC’s Biomedical Catalyst Fund.

However, our experience is that money follows great science, coupled with experienced leadership. SR One will invest based on the science, the heritage of the leadership in the company and the ability to pull together a syndicate of experienced investors. Experienced leaderships where the UK tends to fall short compared, for example, to the talent pool available in US biotech hubs such as Boston and San Francisco as there are still only a limited number of experienced biotech entrepreneurs in the UK.

It is worth remembering that the end customer of most biotechs is the pharmaceutical industry; a few companies do make it and grow into successful stand-alone companies but most are purchased or partner with pharma to develop and commercialise assets thus understanding how to make this model succeed is critical.

6. What would a Successful UK Life Sciences Sector Look Like?

The UK would be a true life sciences ecosystem, with trusted and collaborative partnerships between and within industry, specialist life science investors, academia and the NHS that turn cutting-edge ideas into commercial products that are used by the NHS, delivering patient benefit and contributing to UK economic growth. In particular, it would have:

A culture within academia and within the NHS that proactively seeks engagement with industry and understands the contribution that collaboration with industry can bring to advance research, improve patient outcomes, and drive growth in the economy.

A strong cohort of entrepreneurial academics driving forward the translation of excellent science into clinical benefit, supporting a vibrant SME sector that is able to secure sustained funding.

A vibrant advanced manufacturing sector in life sciences, able to forge well-funded public-private partnerships to develop new technology that can then be deployed in the UK swiftly with minimal regulatory delay.

A pricing and reimbursement environment for medicines which ensures that the NHS’s need to deliver value to the taxpayer also considers the significant economic impact of the life sciences sector and the UK’s potential to impact the global profitability of the sector.

An NHS environment which embraces new technology and medicines more rapidly than other European countries, providing benefits to patients, to research and to the growth of UK-based companies.

April 2012

Prepared 12th March 2013