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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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July 1, 2010

GSK's Biotechy World

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Posted by Derek

The Wall Street Journal is out today with a big story on GlaxoSmithKline's current research structure. The diagnosis seems pretty accurate:

Glaxo's experiment is a response to one of the industry's most pressing problems: the failure of gigantic research staffs, formed through a series of mega mergers, to discover new drugs. The mergers helped companies amass potent sales-and-marketing arms, but saddled their R&D with innovation-stifling bureaucracy. . .

The company's current strategy is to break things down into even smaller teams (often with their own names and logos) and to try to apply small-company incentives to them. That goes for both the positive and negative incentives:

The scientists in Glaxo's new biotech-esque groups know the clock is ticking. Called discovery performance units, or DPUs, the groups are about halfway through the three-year budgets they were given in 2008. Glaxo has made it clear that if the team members don't produce, they could get laid off. . .(the company also) says it's trying to get closer to the financial rewards of biotech. In some cases, it is setting aside "a pool of money" for scientists involved in a certain project. . .each time their experimental drug clears a certain hurdle, they get part of the money. . .

Of course, as the article also makes clear, the company has been through supposed newer-and-better re-orgs before. And that included schemes to break the company's research into more independent units. Those "Centers of Excellence in Drug Discovery" were supposed to be the last word eight or ten years ago, but apparently that didn't quite work out. The current philosophy seems to be that the idea didn't go far enough.

True or not? History doesn't give a person much reason for optimism when a large company says that it's going to get more nimble and less bureaucratic. You can make a very good living printing up the posters and running the training seminars about that stuff, but actually getting it to work has been. . .well, has anyone gotten it to work? Andrew Witty, the company's CEO says in the article that he doesn't see any contradiction in having "hugely successful entrepreneurial innovation" inside a big company, but real examples of that are thin on the ground - especially compared to the number of examples of such innovation being fought to the ground when it attempts to spring up.

That's not to say that this approach can't improve things at GSK. I think it's bound to be a good thing to turn people loose to make more of their own decisions, without feeling as if there's someone hovering over their shoulder all the time. But I don't know if it's going to be the revolution that they're hoping for (or the one that they might need).

Comments (62) + TrackBacks (0) | Category: Business and Markets | Drug Industry History | Who Discovers and Why


COMMENTS

1. RandDChemist on July 1, 2010 10:40 AM writes...

Produce or you're fired? Yeah, that would motivate me, to find another job!

Risk-taking needs to be rewarded. Punishing failure does not work, unless your goal is to create fear.

Sometimes things simply do not work. Working under a cloud of fear will cripple innovation and creativity. Just ask Pfired.

Saw an article where they mention the increased failed rate at phase three, and it was up quite dramatically. Sorry, if there is a failure at Phase III, you've made some serious and very costly mistakes.

It is not a numbers game. It is not simply a check box.

This approach will favor people entering into silos and saying that they did their job and if a drug fails, it is someone else's fault since they did their job.

Yet another myopic idea sure to become a trend.

Permalink to Comment

2. RandDChemist on July 1, 2010 10:44 AM writes...

As far as a big company being nimble, a recent profile on Nestle in Fortune says that they are locally focused. Not a pharma company, but it does seem demonstrate that a major corporation can do it, if they have a well thought out plan. After all, they grew during the recession.

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3. Petros on July 1, 2010 10:49 AM writes...

"If we fail, there must be consequences that may go all the way to termination," says Moncef Slaoui, Glaxo's head of R&D.

Encouraging managment style ! (and almost certainly illegal in Europe)

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4. Anonymous on July 1, 2010 11:06 AM writes...

""If we fail, there must be consequences that may go all the way to termination," says Moncef Slaoui, Glaxo's head of R&D"

Obnoxious... obviously cannon fodder will pay, and the head of R&D will get a bonus.
So here we are, the name of the game is CEDD 3.0. IMHO it's just another beta release. In the meantime the former Verona, Italy CEDD has been sold to Aptuit apparently without cuts. Aptuit will be able to manage such a research structure?

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5. expharma on July 1, 2010 11:09 AM writes...

sounds like what Dennis Loh did in the 90s at Roche the Tsunami overtook him

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6. DevicesRUs on July 1, 2010 11:26 AM writes...

I am not sure this is punishment. In one sense if Glaxo can create a virtual startup funded by Glaxo rather than a typical VC and if you are not forced to go work for one, it should be highly motivational. In the real world of startups if you don't make your program work and run out of money you don't get terminated but the company goes away. So, I am not sure this is such a bad idea IF GSK can work it so you get to pick what you work on.

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7. pete on July 1, 2010 11:33 AM writes...

Actually, the "produce or die" mentality is not so far from Biotech of years past .. anyone remember the "clone or die" mantra from Genentech ?

But in older Biotech culture the sense was that if things failed, then the whole ship would go down. Contrast that with today's Pharma scientist who has been shown so many times that when things don't work out as planned, basic research gets tossed overboard and the ship sails away.

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8. processchemist on July 1, 2010 11:34 AM writes...

@6

as @4 say, CEDD 3.0 . Probably some friends of mine in GSK would comment "been there, done that". Over all, the company has a wonderful record in incentivating productivity (see the group that developed tykerb).

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9. DLIB on July 1, 2010 11:42 AM writes...

@DevicesRUs

Of course the early employees of a VC funded company that turns out to be successful can be handsomely rewarded...( I'm sure the early employees of SIRTIS were well compensated in the buyout - they have the option to get bought out even before any approved drugs ). Having only the stick portion of that model isn't wise.

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10. Vince on July 1, 2010 11:49 AM writes...

It's a nice concept for the reasons a few have outlined, but, as usual, the devil is in the details of implementation.

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11. alig on July 1, 2010 11:56 AM writes...

@8 for all you who don't know, GSK fired all the people involved with the discovery of Tykerb and Votrient.
If Moncef truly wanted to hold people accountable for their failures, he would have been gone 2 years ago.

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12. RandDChemist on July 1, 2010 12:03 PM writes...

Ok, high risk, high rewardthen ! What the bonus? Stock grants? Huge monetary rewards? Are the rewards at least equal to the chance for getting fired? All we've seen so far is the threat of being fired. The first thing mentioned should be the benefits.

On first pass, this seems like a case of perverse incentives. The behavior being encouraged will be cut-throat.

People will compete against each other, and it will not be pretty.

If there are strengths for a big organization, then it should be the resources and combined knowledge, experience. Failure to use these will lead to failure.

Seems like yet another fad that sounds good on paper, but it ends there if you think about it...at all.

Big pharma keeps says the same things, we are going to do this, that and the other thing. Perhaps they use different words, but the ideas are the same. The copy each other. They then expect success.

The executives spout these "productivity enhancements" to provide the illusion that they are doing their jobs. Then it is the fault of the small people. After all, their "idea" cannot possibly be at fault. Of course, that means they stick around to see the failure.

They need to be reminded of the definition of insanity.

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13. Mark on July 1, 2010 12:21 PM writes...

The key here will be autonomy. It's not going to work if the DPUs still have a dozen reporting relationships to the rest of the company.

I have to agree with the incentives as well. Two of the major incentives at small biotechs are:

1. If the project fails, you're out of a job and SOL.

2. If the project succeeds, you get a handsome payout.

Telling someone you'll fire them if they don't perform isn't the same as #1. There needs to be a "we're all in this together" mentality. I need to know that the guy next to me (and above me) has just as much incentive to work hard.

I don't see this working out well for GSK.

Mark

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14. Hap on July 1, 2010 1:15 PM writes...

If you're only held responsible for failures and not rewarded for success (as in the long lists of people who worked on successful products on get nothing but layoffs), while the people who make the bad decisions are given nearly endless job security and rewards, I don't see how this is going to work out well for your company. In biotechs/small pharma, management appears to be more likely to have the same incentives (though see comment by FlyingDutchmanofBiotech for a counterexample) as their employees, while GSK has a history of rewarding bad management and punishing their employees.

If I'm being really cynical, I would guess that changing tactics is an attempt to make it impossible to tie failed practices to the people who led them.

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15. Trapper John on July 1, 2010 1:22 PM writes...

My feeling is that ultimately, this approach is ill-suited for Big Pharma. There is a self-selection involved for persons at GSK (and most other large companies) that leads to a certain employee profile (warning, generalization to follow--note that there are exceptions). These persons trade off upside and excitement of a biotech environment for the stability of the larger company. Employees who choose to work with a biotech self-select for the opposite: more accountability/control over outcome (relatively), less bureaucracy, and more financial upside. GSK is trying to graft these characteristics onto people who don't want them in the first place. They don't want the risk, and any reduction in red tape (again, I'm skeptical) will not make up for that. I would say this will result in mass exodus, but where will they go?

Permalink to Comment

16. Skeptic on July 1, 2010 1:46 PM writes...

The HGP killed the status of medicinal chemists because it revealed that structure does not equal function and the assumption of linear pathways turned out to be naive. Medicinal chemists are like a craftsman behind an old manual lathe. The human brain cannot understand mechanism through naive experimental design. Mechanism must be inferred through computational methods + improved automated instrumentation. Physics + mathematics is now driving drug discovery. Look at the new microarray driven biomarkers!

Permalink to Comment

17. DN on July 1, 2010 2:03 PM writes...

"Of course the early employees of a VC funded company that turns out to be successful can be handsomely rewarded."

Adjusted for the work intensity and risk of failure, start-up stock compensation has modest or even negative value. I say this as an early-stage employee at a tech start-up who got a nice reward from special low-tax stock options. An uncertain reward 10 years in the future just doesn't motivate much.

Even immediate compensation has limited effect on productivity. If you take a $100k/year creative person and pay them $500k/year, they won't invent five times as much. They might even get distracted by all the shinies that money buys.

The benefit of a fixed drop dead date is that focuses everyone on short-term thinking, which pharma desperately needs. The biggest problem I see in big pharma (as an outsider) is that too many people are focused on long-term thinking. "How do I protect my department's head count for the next three years?" "Will it help my career if I brown nose that VP?" "Should I abandon this wacky approach so my career flies under the senior scientist's radar?" "How do I trick the under divisions into putting their feet in their mouths?"

All that goes out the window if the organization is going to be dismantled in two years. The few people who try to play politics will be treated as traitors by the others, whose only long-term benefit comes from technical success. And the long-term benefit is small enough and uncertain enough that they don't get blinded by the stars in their eyes. Most of the motivation is to have technical and scientific fun on somebody else's dime. Silicon Valley has shown that this tends to result in massive technical productivity, and attracts a lot of the best people.

"Having only the stick portion of that model isn't wise."

The stick portion is that the VC watches for political derailment, empire building, and general lack of appropriate effort. If that happens, they pull the money and the project ends early. In tech start-ups at least, that is a severely career limiting event for the people who ran the project. The stick is not having the project end -- the expectation is that virtually everyone will have moved on within a few years. The stick is the black mark of being cut off early.

Permalink to Comment

18. Skeptic on July 1, 2010 2:08 PM writes...

The financial sector has been moving from accounting to risk management. Employees, may as well try to understand what that implies. The problem with medicinal chemistry is their obsession with atomism. A complementary scientific programme is required to establish a science of context. The credit boom that allowed chemistry Phd's to overpopulate is over. Blame the universities for being paper factories.

Permalink to Comment

19. Chris D on July 1, 2010 2:08 PM writes...

"History doesn't give a person much reason for optimism when a large company says that it's going to get more nimble and less bureaucratic. You can make a very good living printing up the posters and running the training seminars about that stuff, but actually getting it to work has been. . .well, has anyone gotten it to work?"

Well, GM managed to spin off Saturn, which for a reasonable stretch of time made higher-quality, more interesting cars than GM did (and was internally disliked for it).

I wouldn't lay my money on any given company being able to do anything similar, though.

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20. The Blue Maharaja on July 1, 2010 2:46 PM writes...

Anyone think of what GSK should try next...? (Genuine Question).

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21. LeeH on July 1, 2010 3:05 PM writes...

The risk and uncertainty of biotech combined with the Dilbertesque processes of large pharma. Who wouldn't sign up for that!

Permalink to Comment

22. anon the II on July 1, 2010 3:08 PM writes...

I've been busy writing and it's time for a break so I'll make two comments.

1. I have not idea what Skeptic is saying.

2. I think DN hit the nail on the head.

"Most of the motivation is to have technical and scientific fun on somebody else's dime."

That's why I went into chemistry. And I have clearly been most productive when I was having the most fun. This "manage by misery" crap won't cut it.

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23. Skeptic on July 1, 2010 3:27 PM writes...

"This "manage by misery" crap won't cut it"

Then you obviously don't understand how a debt based monetary system works. What do you think enabled your fun environment in the first place? Please don't say "The Taxpayer". The credit bubble is over. Oncology efforts that enable the patient to live 2.5 months longer for a mere $100,000 backed by "insurance" is another fantasy about to end. Either you move the productivity bar or you will be ousted. Its clear med chems cannot so they are being marginalized and outsourced.

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24. Morten G on July 1, 2010 8:49 PM writes...

Will managers be fired? And don't the bonuses sound like they are tied to the same old stupid milestones (if you get three lead scaffolds by this date you get this much money, if you get into phase 1 you get this much money)? Doesn't sound like a good idea.

Hmm, maybe moving people to new labs/positions/functions if they aren't working out would be superior to straight up firing them. I dunno. That's at least an option they have in GSK that small biotech doesn't.

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25. B on July 1, 2010 10:02 PM writes...

Incentivizing for milestones is inherently flawed. Need a promotion/bonus? Just push your lackluster compound into the clinic. It's the clinical failures that cost the most, thus killing a bad project can be a money-saver, but who is going to do that if it costs your job?

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26. anon on July 1, 2010 10:08 PM writes...

Maybe they should tell the Management (including the HR goons) that they also must produce results with all these dim witted schemes or they are out. No golden parachute, no stock options, no severance. Just a cardboard box and an escort to the gate like the rest of us.

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27. MoD on July 1, 2010 11:17 PM writes...

It's clear (at least to me) that the business/economic pundits still just don't get it. Listen to me - "MEDICINAL CHEMISTRY IS NOT A COMMODITY"

All chemists out there, whether struggling to find a job, or "secure" in a position - hang in there and don't give in to the bureaucratic and political BS that persists in drug discovery.

Eventually the smoke will clear and and the brilliant business minds will be left scratching their heads wondering why the outsourcing, re-organizing, merging, in-licensing, takeovers, and biotech purchases did not deliver or meet expectations.

Successful drug discovery will return when it is de-industrialized and not subjected to absurd metrics, check boxes and balance sheets.

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28. anon on July 1, 2010 11:21 PM writes...

Anyone think of what GSK should try next...? (Genuine Question).

Eliminate their licensing group (heresy!). You know, the ones that brought in Sirtris and that dumb Synta compound. Commit-- really commit to programs too complex for biotechs to handle.

"RandDChemist" is dead on; 19th century "all stick" management is the wrong way to go. You get "do or die" in VC-funded biotech because of the structure of the venture capitol system; not because it is desirable. Big Pharma-- though less profitable than of old due to the FDA's grotesque excesses--is still highly profitable. The management does not have be a**holes. They could support research much better by simply not stuffing truckloads of cash into executive compensation.

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29. Anonymous on July 2, 2010 3:11 AM writes...

Well, if you haven't heard yet- AstraZeneca is doing the same. Molndal, Sweden site has been selected for a new center in innovative medicines. Now that is called as re-re-re-re-structuring for the benefit of patients and unmet medical blah blah....blah!

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30. DrSnowboard on July 2, 2010 3:26 AM writes...

Whilst I understand GSK's urge to get biotech innovation into their system, how does it work when the guys who were responsible for the portfolio management in the old systems are still in charge of 'picking the winners'? Cynically, the 'investment board' has put a strategic firebreak between itself and all those dicovery projects that in the past they would have at least had to put some support to, even the ones that ended up being dogs. iNOS anyone? PDEV anyone? Will they only get paid if their picks make it to market? I doubt it.

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31. anonymaus on July 2, 2010 3:50 AM writes...

@1 Produce or get fired?

If only that much were even true! At GSK it is produce AND get fired, just ask the team who discovered Tykerb, Altabax and others, or the Harlow people who were hitting their targets and were only halfway through the 3 year funding cycle.

Success in your job has no relation to continued employment at GSK.

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32. Anonymous on July 2, 2010 4:10 AM writes...

What is more reliable/enjoyable:

(1) Running your own innovative camping center in the woods (including rental canoes).

OR

(2) Working as a staff scientist for the great GSK.

Permalink to Comment

33. K on July 2, 2010 5:01 AM writes...

The bureaucracy at GSK R&D is utterly crippling. The middle-management are, pretty much to a person, clueless yes-men. The endless procession of new 'initiatives' (which generally disappear without trace within a couple of years) are disorganised, poorly managed and some are actually quite amusing.

The above 3 points combine beautifully during times of 'reorganisation' (ie every year). The clueless yes-men are shuffled around to 'manage' the latest bureaucratic initiative. Jobs and pensions safe for another few years - well done boys! And so the cycle continues, much like waste water circling the drain

The whole system STINKS.

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34. Anonymous on July 2, 2010 6:04 AM writes...

As a former GSK-er the idea is nice BUT

If you make the DPU head from large pharma you just end up with all the beurocracy but less resource than before.....worst of both worlds.

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35. RatCatcher on July 2, 2010 6:27 AM writes...

Comment #33 by K rings very true. Moving the furniture around fools nobody, these guys, Vallance & Slaoui, are fast running out of road and excuses; just look at the share price performance over the last five years! The company is weighed down by the dead hand of a self-serving, self-sustaining, layer of middle management. The guys they routinely parachute in from academia as VPs and SVPs, Vallance being the main case in point, are easily duped by these insider pros who know how to survive in the Byzantine setting that is GSK!

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36. Anonymous on July 2, 2010 6:37 AM writes...

SEE:
http://en.wikipedia.org/wiki/Andrew_Witty

The CEO of GSK, Mr. Witty must be having a few millions in his bank account in a small village in Switzerland. Now, with just the interest on this much money (million, i mean), you can get far more than a scientist would ever save from his paycheck. So Mr. Witty is in a convinient position to take "innovative steps" (sorry Mr. Rabbit Scientist, its at your cost).

The same calculation goes for Mr./Mrs. 'Other Members of Senior Exec. Team' in their big bellies and expensive suits with such a confident manner and speech (as they will revolutionize the whole business of saving the mortals).


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37. RatCatcher on July 2, 2010 7:08 AM writes...

Oh yes I forgot to mention DPU = Disruptive, Pointless, Unnecessary

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38. Jackdaw on July 2, 2010 7:13 AM writes...

In quality management: DPU = Defects per Unit!
Nice choice of acronym, Patrick!

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39. StarkChoice on July 2, 2010 7:33 AM writes...

A lot of hostile comment from former GSK guys is to be expected but its merit, veracity and validity should be considered in just that context. Andrew, Moncef and Patrick inherited a company headed towards the Perfect Storm created by patent expiry, a more risk-averse regulatory environment, rising R&D costs etc and were tasked with nothing less than re-engineering the entire company. They have had to make some tough, unpopular decisions to maintain the health of the organization. They have been able to deal with the new challenges while also exploiting new opportunities in emerging markets. We're now witnessing the payback from their brave and wise leadership. The "Who Moved My Cheese" mentality is thankfully diminishing, ivory tower research and over-hyped technologies have been eliminated, and there is a renewed focus on delivering drugs to patients!

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40. LeeH on July 2, 2010 7:57 AM writes...

StarkChoice

Your future is secure. With language like "brave and wise leadership" and "renewed focus on delivering drugs to patients" you will be a great success working in marketing.

Please pass the KoolAid.

(Not that I necessarily disagree with all your points. It's just that most people on this board don't sound like they're making slogans for the company meeting T-shirts.)

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41. Anonymous on July 2, 2010 8:10 AM writes...

Quoting@39.StarkChoice :[Andrew, Moncef and Patrick inherited a company headed towards the Perfect Storm created by patent expiry....]

Of course the ship was headed to "Perfect Storm" doesn't necessarily mean that the rescue lies in "competing all the sailors within the ship, in smaller sailor units" to come up with ideas on how to steer.

Just imagine, how STUPID; GSK or AstraZeneca or thebigpharma management is, coming up with such EDIOTIC plans.

Why don't these senior managers with their big bellies realize that attacking people's motivation is not a very creative way of getting the best out of them.

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42. Jackdaw on July 2, 2010 8:14 AM writes...

StarkChoice,
"Life has improved, comrades. Life has become more joyous." Josef Stalin, 1935!

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43. What? on July 2, 2010 8:21 AM writes...

Imagine a CEDD with 200 people (chemistry, biology, DMPK), split into 4 DPU's of 50 people....still working in the same building and same labs together, still sharing the same resources, still with the same leadership/management... Umm, what has changed in theis new DPU model?

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44. Anonymous on July 2, 2010 8:28 AM writes...

@What?: What has changed in the new DPU model?

What has changed is:

(1) Competing with your colleagues = Getting nothing.

(2) Forget about the word they used to ask you to cite examples of in pharma job interviews : C R O S S - F U N C T I O N A L!

(3) Perform under Pressure (I can only POO under Pressure).

Permalink to Comment

45. processchemist on July 2, 2010 8:42 AM writes...

@Starkchoice

"The "Who Moved My Cheese" mentality is thankfully diminishing, ivory tower research and over-hyped technologies have been eliminated, and there is a renewed focus on delivering drugs to patients"

Wow, my buzzword detector is flashing like hell.
I'm not in gsk or from gsk. My shop got involved (as outsourcing partner) in some gsk projects, and I never liked them too much (the associated budgets neither). From the outside, I saw noelimination of overhyped technologies, au contraire. Moncef virtual CEDD delivered the absolute nothing, and the Shangai operation will do the same. Currently the obvious plan is to mantain high profits cutting cost (people) every four month. And this is not a pharma specific model, but the method to obtain a jobless economical growth.

Permalink to Comment

46. Anonymous on July 2, 2010 8:45 AM writes...

The most inherently obvious dichotomy between GSK's DPUs and biotech is that a biotech can peddle their wares to any bidder whereas the DPU can only peddle their drug candidate to one bidder: Moncef Slaoui.

Small biotechs do not have high level managers with no understanding of the fundamental science or therapeutic expertise arbitrarily dictating where their staff are allowed to work within those areas. Small biotech can sell a compound, sell a series of compounds, set up a collaboration or sell their company. The DPUs can only hope that Moncef likes their compound and allows them to keep working. There's no pot of gold at the end of that rainbow. At small companies, all the employees get stock options. Only managers at GSK get options so only a few will receive any rewards for success. (They will also be rewarded for failure.)

So the DPU model at GSK is as similar to biotech as McDonalds is to a farmer's market.

And let's be honest here for a change. GSK set up the DPUs as a staging ground for mass layoffs and future culling, not to improve R&D productivity. And, research staff at biotechs are often layed off to save money for early development costs and therefore scientists at biotechs often never collect the fruits of their labors unless they were at the top.

No matter where you work, you're screwed if you work in research.

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47. anon on July 2, 2010 8:48 AM writes...

DPUs = Disposable Personnel Units

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48. Jackdaw on July 2, 2010 8:54 AM writes...

Nice one anon #47, will remember that one!

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49. Anonymous on July 2, 2010 9:19 AM writes...

@Starkchoice

I've worked with several ex-GSK staff, all really pleasant people and pretty competent. Their key skill however was to regurgitate and repeat back messages from senior management in a slightly altered form, so that their bosses would always like what they were hearing. In that way they would secure their own jobs. Based on your performance here I'm pretty sure you're safe.

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50. RandDChemist on July 2, 2010 9:31 AM writes...

#17 Agreed that compensation has limited impact, after a certain point. The recognition, being valued and challenged are important for those who really want to do this stuff.

Short term thinking, as you've described it is not desperately needed. Urgency, yes. Follow the data. Hard dates are often artificial constructs (targets are better). Proof of concept is more important. Timelines have a place, but adaptability is als