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GlaxoSmithKline - The Biggest R&D Spenders In Biopharma

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Company: GlaxoSmithKline
2011 spending: $6.29 billion
2010 spending: $6.37 billion
Change: -1.4%
Percentage of revenue: 14.2%

Note: Overall GSK counted £3.91 billion in pre-restructuring expenses for the R&D division in 2011, compared with £3.96 in 2010. Pharma R&D alone cost about £3.2 billion in 2011, down slightly from £3.3 billion in 2010, with £599 million spent on vaccines and £153 million on consumer health.

This past year, GlaxoSmithKline ($GSK) made the case that it had turned the corner on a three-year effort to turn around the R&D division. A leader among pharma CEOs who are fed up with lousy returns from the research division, Andrew Witty has been caustic about past failures and effusive about the prospects of future productivity.

By the end of 2011, GSK was pointing to three new approvals and the prospects for 6 more, including Relovair (asthma), LABA/LAMA, albiglutide, BRAF, dolutegravir and Mosquirix. But the new approvals on its list included Horizant, a restless leg therapy partnered with Xenoport that has experienced such a soft launch the two companies have continued their partnerships through lawsuits. Benlysta, a breakthrough treatment for lupus co-developed with longtime partner Human Genome Sciences, has managed to eke out only modest earnings. And Relovair has been plagued with questions about its ultimate fate after a prospective approval.

GSK's recent $2.6 billion buyout offer for HGS indicates considerable respect for the biotech's pipeline of drugs, as well as an appreciation for just what a bargain the company had become. If it eventually persuades HGS shareholders to take the deal, it will have no problem absorbing the partner into its global operations.

To break out of its old rut, GSK has been putting its hopes in the DPUs, small biotech-like units intended to drive the development of future products. Toward the end of last year, the top brass sat down with the DPUs to assess their success--or lack thereof. And in the reshuffle, GSK dropped some ventures and added others, a recalibration that included a new embrace of traditional Chinese remedies.

In the future, GSK R&D chief Moncef Slaoui told FierceBiotech recently, you can expect the DPUs to adapt as events dictate. "A synchronized review of the whole pipeline at once is more disruptive as need be," Slaoui noted. "Now we have defined milestones for new reviews," which can be 18 months out, or 56 months or whatever is right. Says Slaoui: "Spreading through time, that's a big learning."

Thirty programs are now slated for late-stage development. The goal, says GSK, is to be able to keep feeding a steady stream of new drug applications to regulators without increasing costs.

GlaxoSmithKline seems comfortable with an R&D expense of around $6 billion.  The goal now is to make it look like a great deal for investors.