GSK's CEDD strategy is it working?

But a new report released last week by Deutsche Bank and GSK’s announcement of its annual results, have gone a long way toward easing some of those fears.

By Editor on Feb 18, 2003

But a new report released last week by Deutsche Bank and GSK's announcement of its annual results, have gone a long way toward easing some of those fears. With double the number of NCEs entering clinical trials and four times as many going to phase II trials, GSK's pipeline is looking pretty healthy - healthy enough, in fact, for Chief Executive Jean-Pierre Garnier to announce a long-awaited R&D day for late this year.

When GlaxoWellcome and SmithKline Beecham merged in 2000, the new company announced the creation of six independent Centers of Excellence for Drug Discovery (CEDD) focused on different therapeutic areas, a unique concept that sought to bring the entrepreneurial culture of biotech R&D to the monstrous new company. At the time, many were skeptical and feared the approach might create highly competitive rifts in the company's R&D organization that would actually hinder the R&D process.

It appears, however, the approach may be meeting with success. One positive pointer in our view, is that the flow of products in early stage R&D has hastened, said the Deutsche Bank report. These metrics could be taken as the first evidence that GSK's novel Centres of Excellence for Drug Discovery are delivering an uplift in productivity.

"The most important thing about Glaxo's pipeline is understanding why the structure means they are better placed to deliver than anyone else," David Crawley, pharmaceuticals analyst at Schroder Salomon Smith Barney, told Reuters. "In my view, the CEDD structure gives them greater flexibility in allocating resources and much better integration between pre-clinical discovery and clinical development."

The proof is in the pudding, however, and investors may have to wait until the R&D day at the end of the year before they get any substantial data on the real success of the company's current pipeline. This is an undeniably huge early-stage pipeline and we would expect GSK to begin generating proof-of-concept data on a decent number of phase II compounds during the course of 2003, Deutsche Bank said.

No doubt, last week's news has many of GSK's competitors taking a closer look at the CEDD structure and how it can be adapted to their own organizations. One thing's for sure the whole R&D process is in need of re-thinking and re-tooling and GSK, it seems, has hit on an important first step toward the R&D organization of the future.