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29 LIFESCIENCELEADER.COM NOVEMBER 2014 applications to much more common dis- eases. That's exactly the question going on at the moment in oncology, and it places an emphasis on epigenetics — whether immunotherapies will also become frag- mented as we realize that patient popula- tions respond very differently depending on their epigenetic profile." If by some circumstance the Novartis deal does not play out as planned, GSK's intentions in oncology will be nonethe- less revealed. It will, by one measure or another, pivot its R&D; focus from older cancer drugs and MOAs to the cutting edge of cancer therapy, based on the solid, but always shifting, ground of scientific understanding. DISTRIBUTING RESEARCH One aspect of R&D; the Novartis deal does not change, at least in direction, is GSK's externalization strategy. To the extent that the pharma R&D; organization feeds the Rx-to-OTC pipeline, it will gain global scale and strength from the ex-Novar- tis consumer business. But the deal will not impede the growth of GSK's world- wide collaborations with companies and academics. Other initiatives, such as the Oncology Clinical and Translational Consortium (OCTC), an international, col- laborative research network of six major cancer centers, will also continue unabat- ed. (See "Lynn Marks: Accelerating GSK's R&D; Innovation" on page 27.) Summed up, the combination of entre- preneurial internal teams and external partners builds on a distributed research model. " What we won't do is build more brick-and-mortar innovation cen- ters across the globe. But we are forg- ing strong alliances with biotech and, all importantly, with academia worldwide. We have some interesting ways of attract- ing academics leading research in our areas of interest." Discovery Partnerships in Academia (DPAc) is a global program that builds virtual companies around selected ideas submitted by academic scientists or labs based on preclinical or early clinical results. "We place a senior drug discov- erer from GSK with the academic, agree that together we will make a medicine, and the whole thing is milestone-driven. They get the keys to GSK, they get a top- class team on their project, and they can publish everything." If a project must end because of technical roadblocks, the aca- demic partners can keep the data and continue to work on the idea with another academic or company partner. "The DPAc program has formed a series of virtual biotechs across the globe, the most advanced of which is now in Phase 3, and it has worked really well as a system," Vallance attests. "We now have an office in San Diego where we're forming more such alliances. We've done partnerships with groups like Avalon Ventures to create new venture partnerships with academics, and we have opened a new space in Boston. The program is about making links with academics rather than putting up big new laboratories. In fact, we believe that the brick-and-mortar facilities tend to end up being fortresses rather than places where true collaborations occur." LONG ROAD, STEADY CLIMB GSK has now traveled quite a distance in reforming the R&D; organization — far enough, in fact, to have tracked and measured the payoff in improved perfor- mance. Every year, the group publishes its internal rate of return, comparing it to a target rate of 14 percent. The rate has climbed about one percentage point per year since 2010 to reach 13 percent in 2013. The period fairly well conforms to the time when most of the reforms took effect while sales fell, so, objectively, the evidence suggests the reorganization is working. The company appears to be alone in revealing its return on R&D.; In an industry dominated these days by real-time stock trading, the multiyear measurement alone may set GSK apart from its market-jittery peers. "One of the principles that is critical for R&D; is to stay true to an approach long term," says Vallance. "The tendency to change bets every couple of years in a business where it takes 10 years or 15 years to develop a drug is terribly counter- productive, so we are very happy with the overall structure we have built and with the way the returns are going, looking long term. I believe we'll stay with that strategic approach." Many years ago, a young writer/edi- tor waited for hours in a hot room out- side the chairman's London office. The company was Wellcome; the chairman, Sir Alfred Shepperd. On another day, the same journalist sat in SmithKline Beecham's London-suburb headquarters speaking with CEO Jan Leschly, and on another, in North Carolina's Research Triangle Park with Ernst Mario, CEO of Glaxo. All of those companies and more became the components melded into GlaxoSmithKline over a long journey of many steps. GSK faces another long road ahead as it continues to tweak and put its new R&D; structure to the test. Execution will prove more important than theory. At every level of implementation, from the DPUs to the partners and suppli- ers, the returns will rise or fall on the choices the company and its leaders make with every step. L Medicines can fail at any stage, so we didn't want to give big rewards at the end of Phase 2a; we wanted to signal there was a big reward to be given at that point, which would come when the medicine becomes a medicine. D R . P A T R I C K V A L L A N C E President of Pharmaceuticals R&D; GlaxoSmithKline