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How are you adapting your business model to succeed in the current healthcare environment?
Summary
Our markets are changing and we are evolving rapidly to reflect the new environment. We are well-positioned relative to our peers.
- A broad-based, geographically-diverse and well-balanced business.
- Improved pipeline productivity.
- Innovative programmes to reduce expenditure and work more closely with customers.
- Positioned to take advantage of opportunities in the growing healthcare economies
Diversity and balance
We operate in a fast-changing market from both a regulatory and payer perspective. Regulators are becoming increasingly risk conscious and payers more cost conscious. It is imperative that pharmaceutical companies, including GSK, modernise and evolve to reflect these market changes.
As we move forward into this changing environment, we are well-positioned, relative to our peers. Why? Because we are a broad-based, geographically-diverse and well-balanced company encompassing Pharmaceuticals, vaccines and Consumer Healthcare.
Through the intellectual property system, we have a relatively short patent exclusivity for traditional small molecule chemical pharmaceuticals. However, Biological Medicines, vaccines and Consumer Healthcare products generally have a significantly longer product life cycle. Our presence in all these sectors will continue to grow and enables us to better balance risk and sustain growth.
Growing the pipeline
In recent years, our pipeline has expanded and flowed more quickly than ever before. Seven years ago we had relatively few products in our late-stage pipeline. Today we have 157 projects in clinical development, of which 118 are NCEs or new vaccines; this includes 34 key assets in late stage development.
This is a significant transformation, driven largely by changes we have made to both our research and development (R&D) 'hardware' and 'software'. We have radically changed the R&D infrastructure, breaking down the traditional big bureaucratic pharma model into R&D Centres of Excellence for Drug Discovery (CEDDs). At the same time, we are evolving and adapting our culture, helping our talented people to improve the quality of our science and management.
We will continue to ensure that we are creating new medicines targeted at unmet medical need, and we will focus on developing these medicines in a way that allows regulators to make a clear assessment about the relative risks and benefits.
Reducing expenditure
Cost remains a major issue for our customers because the demand for healthcare continues to increase, driven by ageing populations and rising expectations. We are committed to working with governments to reduce total healthcare costs and to lowering our own expenditure so that we operate more efficiently and profitably in a lower priced environment - enabling us to continue our investment in R&D.
At the same time, we are adopting a more flexible and creative approach to product pricing. We are alert to opportunities to share risk with customers as a means of demonstrating that we have great belief in our medicines - and that we only expect to be rewarded when our medicines deliver the anticipated benefits.
Our Operational Excellence programmes, which are an important part of our strategy, mean we are improving efficiency year-on-year. We are also working hard to lower the cost of developing products and have already outsourced some areas of our business to lower-cost countries. We will continue to assess and capture other opportunities to reduce costs.
Seizing global opportunities
Globalisation is an increasingly important factor in the business landscape. In the past, we have derived most of our growth from the established economies of the US, Europe and Japan. Countries such as Brazil, Russia, India and China - often known as the BRIC markets - have large populations. They are increasingly able to afford good quality healthcare, opening up significant new markets which will be important future growth areas for GSK.
Investing in our people
We will only reach our potential through the support and talent of highly motivated people. Our ambition is to be the place where great people apply their energy and passion to make a difference in the world. Their skills and intellect are key components in the successful implementation of our strategy. During 2007 we continued to invest in recruiting and training the best scientists and other professionals.
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A personal perspective from
"Within the European pharmaceutical business, we've already dramatically changed the way we work over the last three years to improve efficiency and increase customer focus, particularly on payers.
We've seen a major evolution of our customer base, with payers now sharing equal importance with clinicians. Payers have different questions and we need to make sure we offer the right answers. That's required a significant change to the way we work, including the transformation of the commercial team to meet the needs of both groups.
Furthermore, marketing campaign decisions that were previously devolved to each of the 44 European countries are now led by therapeutic Commercial Centres of Excellence. Where in the past we would have had 44 different Seretide campaigns, we now have one across the whole of Europe.
We've also been able to make cost savings by eliminating duplications that didn't add value. For example, by moving to common IT systems we've saved over £20 million a year and the introduction of multi-lingual packs is reducing stock by around half on some of our products."