GlaxoSmithKline is acquiring a $300 Million stake in genetic-testing company 23andMe

July 26, 2018

GlaxoSmithKline Plc is acquiring a $300 million stake in genetic-testing company 23andMe and revamping its approach to research as the U.K. drugmaker races to catch up with rivals in developing multibillion-dollar blockbusters.

With a four-year collaboration deal, Glaxo and Silicon Valley’s 23andMe said July 25 that they will tap genetic data to find new drug targets and better select patients for clinical studies. Hal Barron, a former executive at the biotech firm Genentech, is leading a new strategy that will focus on the immune system, genetics and investment in advanced technologies.

A doctor with ties to California’s tech hub, Barron is moving to reshape Glaxo’s hunt for medicines in areas such as cancer. He’s a key part of Chief Executive Officer Emma Walmsley’s plan to strengthen the British drugmaker’s pharma business by narrowing its focus on the best prospects.

Glaxo is addressing “a major issue for the pharma industry, which is the fact that there’s this incredibly low probability for success” among potential drugs, Walmsley said in a press conference. The 23andMe deal could be “transformational” in making the process more efficient, she said.

As costs of finding and testing drugs increase and successes become harder to achieve, more drugmakers are streamlining their research and development. Novartis CEO Vas Narasimhan has set a course to cut the failure rate for new products and boost efficiency with projects such as an operations center to predict enrollment and evaluate costs of clinical trials in real time.

AstraZeneca has said that overhauling its research strategy improved productivity fourfold from 2012 through 2016. Like Glaxo, Roche Holding has also tapped into the promise that the Human Genome Project made possible 15 years ago with the first human DNA sequence, buying Foundation Medicine and its technology for testing cancers to find ways to treat them.

Glaxo also announced a restructuring program that will cost about 1.7 billion pounds ($2.2 billion) over the period to 2021. It’s expected to deliver annual savings of 400 million pounds during that time, which will be reinvested in R&D and for commercial support of new products.

Glaxo last year ranked No. 11 among 13 big pharma companies in a Bloomberg Intelligence analysis measuring research-and-development returns, and investors have expressed concern about the company’s ability to boost productivity while also funding its dividend.

To rev up the hunt for new drugs, Walmsley lured Barron, who spent 17 years at Genentech and parent Roche, leading the development of a string of blockbuster treatments like Avastin for cancer. She also brought in Luke Miels from Glaxo’s closest rival, AstraZeneca, as the new pharma head. After tumbling 15% in 2017, Glaxo shares have climbed 18% this year. The stock rose as much as 2.6% in London.

Glaxo will seek collaboration opportunities around new technologies, while also focusing on machine learning and analytics, Barron, the new research president, said in an interview. The company is bringing in Sabine Luik from Germany’s Boehringer Ingelheim to lead regulatory affairs, in addition to key other R&D hires like Kevin Sin, who was previously known for overseeing oncology deals at Genentech, according to Barron.

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