Divide and innovate? GSK’s new CEO wants competing discovery teams

RESEARCH TRIANGLE PARK, N.C. - Internal drug development at pharmaceutical giant GlaxoSmithKline (NYSE: GSK) is about to get much more competitive in what’s being described as a “radical shakeup.”

Witty's interview came just before GSK announced a drop in profits today with the firm citing increasing competition from generics as a major reason.

Spelling out his plans to the Financial Times, new GSK Chief Executive Officer Andrew Witty spelled out plans to split researchers into smaller teams. They will then compete for $1 billion a year in funding. He calls these groups “discovery performance units.”

"This will be analogous to a university spin-out going to a venture capitalist, and having to answer the questions of whether their strategy stacks up with the market place and is the team the right one to deliver,” Witty said.

Adding further to the competitive mix, Witty told the FT that he’s bringing in a venture capitalist and a CEO of another biotech firm to help judge the development team’s efforts.

More changes are in the works as well, the FT reported. Witty plans to focus less on ‘blockbuster” drugs of $1 billion or more a year in sales and he wants governments to indicate whether they might buy certain drugs if the compounds were developed. Also Wednesday morning, GSK signed a deal with Aspen, a South African-based firm, as part of a plan to expand sales in global emerging markets.

However, the internal competition changes certainly appear to be the most striking. As the FT noted, Witty wants to break up teams called “centres of excellence for disease discovery” that were launched eight years ago into smaller groups of five to 80 from 600 or so.

These moves by Witty, who won an intense internal competition late last year for the CEO job, certainly will be of keen interest in RTP where GSK maintains one of its two U.S. headquarters and employs several thousand people. Much drug research is done in RTP.

With an aging drug pipeline threatened ever more by generics and after the deluge of criticism about its diabetes drug Avandia over the past year, Witty is under a lot of pressure to get new drugs to market. GSK has struck several high-profile partnerships with smaller firms to help them explore new candidates. Among the partners is Winston-Salem based Targacept. And GSK persevered long delays to help bring Triangle-based Pozen’s new migraine drug to market.

But GSK also has internal development teams, and the company recently disclosed plans to lay off a number of workers.

Now Witty is ratcheting up the pressure on these researchers to deliver.

Who says large companies can’t be agile? Witty wants to prove that notion wrong.