This session was part of the Corporate Program's CEO Speaker series.
VIJAY VAITHEESWARAN: Ladies and gentlemen, if we can please take our seats. Thank you very much.
My name is Vijay Vaitheeswaran, of The Economist. It's my great pleasure this morning to welcome you to our talk with Andrew Witty, chief executive of GlaxoSmithKline, entitled "Open Labs, Open Minds," perhaps one of the most important topics in the world, but one that rarely gets enough attention on fresh thinking about the world's neglected diseases that afflict so many of the unfortunates in the world.
Andrew Witty -- his full bio is with you, so I'll highlight just a couple of interesting things. In addition to being a relatively new chief executive, Andrew has a couple of distinctions. He's one of the only economists running a major pharmaceutical company, which I happen to think that prepares a man very well to do anything in life, but I might be biased in that. But in addition to that, though, he comes at a very interesting time, when the industry is at a crossroads.
I think it's well-known, from the business perspectives, the pharmaceutical business model is challenged. We know the drugs pipeline at many large companies is not as productive as it had been, even at the same that there's a patent cliff -- a looming patent cliff for many companies, where there are quite aggressive generic challengers. This creates a question about the incentives for investing in future innovation and what might be the business model.
The promise of personalized medicine and genomics has not yet quite arrived. It seems always just around the corner. It has been for 20 years. And so the economics haven't quite materialized. So this raises a tremendous question of what -- can companies go beyond the blockbuster to a new kind of business model?
And at the same time as this commercial constraint, we're also living at a time of tremendous challenges in global health, not only HIV, TB, malaria -- which are, of course, terrible killers, but the neglected diseases which often, in the aggregate, kill more people but get less press; and, of course, tragedies like the one in Haiti which speak to disaster preparedness and what fresh thinking we can bring to that. So this is a time of tremendous challenges.
The question becomes, What does an industry that is endowed with many riches -- in terms of human talent, in terms of intellectual property rights and the right to commercialize them, but at the same time facing a commercial crunch -- what is the capacity, and what is the responsibility of a global pharmaceutical company to help be a good corporate citizen when thinking about global health issues; and how do you go beyond that?
And what I'm pleased to say is -- as he has in the last couple of years at Glaxo, Andrew Witty has put forward some fresh thinking on this topic. And so today we're going to hear his latest proposal on "Open Labs, Open Minds." Please welcome Andrew Witty. (Applause.)
ANDREW WITTY: Vijay, thank you very much for that introduction.
You know, oftentimes people ask me why I went into the pharmaceutical industry, and just reflecting on your acknowledgment of my training as an economist, having spent my academic life learning the (dismal science, ?) I thought it was important to go into a more uplifting area of science. (Laughter.) And that's really the explanation.
Let me first of all thank Richard and the staff of the Council, and the Council in general, for allowing me to come and give this speech this morning -- I much appreciate it, and I think an ideal venue and opportunity to make some updates to some of our previous comments in this field.
A year ago I was at Harvard Medical School and set out a new vision for GSK building on the important work we were doing, but really setting out an agenda to try and go further. And in that speech I basically laid out how we're trying to change GlaxoSmithKline -- making the company more responsive, more flexible and more open, a company actively seeking for new ways of working, new partners; a company willing to take risks, committed to do all it can to address neglected tropical diseases; a company driven by values of integrity, transparency and respect for people; and a company constantly earning the trust of society, not just by meeting society's expectation, but by striving to exceed them, because if you don't have that trust of society -- the society in which we all operate and the societies we strive to serve, then you really, in my view, don't have a long-term, sustainable business model.
To earn that trust you have to be able to change. You have to be flexible, you have to be engaged, and you have to be willing to listen and learn. It's partly why, in the last few months, we've created a new volunteering program. We call it "PULSE." Under this program, we'll send up to 100 people per year -- key talent, not people who are about to retire, but people who we truly believe are going to be future leaders of GSK -- key talent to work NGOs in poor communities and societies, whether it's in their country, and others. These individuals would come back with -- we hope, with new ideas, energized and motivated, all of which we think will help us be a better, more effective organization, and, in a sense -- as somebody said to me last night, perhaps create within GSK a "Peace Corps" which, over time, builds up and truly changes the culture of the organization.
But let's be clear. It's only by delivering sustainable financial growth overall that allows us to be an open and generous company -- the two things fit hand-in-hand, one in which we can sustainably address the enormous challenges associated with neglected tropical disease. Now, let me focus a little bit on some of those particular points.
Last year we committed to reinvest 20 percent of our profits, from our least developed countries, back into those same countries. I (set ?) that out in a Harvard speech. That's an example of sustainability: We generate the business; the business generates profits; and a proportion of those profits we commit to reinvest into an area of infrastructure that we all acknowledge is a big gap in the least-developed economies. It gives us the motive to grow our business, and it gives communities the assurance of a long-term funding commitment -- not just funding for next year, not just funding for while an agency happens to be there, but year after year it's truly a win-win situation both for ourselves and, of course, more importantly, the community. That profit is being invested in projects to improve health care for people living with neglected diseases, such as malaria. Just today, this morning, we announced four new projects under our Africa Malaria Partnership, working with NGOs in communities in Tanzania, Ghana, Nigeria and Kenya to reduce malaria at the community level.
It would be easy to say that the challenges of the LDCs are too difficult to tackle. But that's exactly not the kind of reaction I expect to see from people at GlaxoSmithKline, nor is it the sort of company that my employees want to be a part of. I've worked for the company for over 25 years, and during that time I've had long periods of time to live and work in many parts of Africa and Asia.
And maybe unusually among my peers, as well as being an economist, I'm a CEO who's had maybe a substantial minority, or even a majority of my work experience working in the emerging and least developed parts of the world, rather than the developed industrialized economies. And I've really seen first-hand the difference that, where we get it right, we can -- (inaudible). Where we get it right -- we get the right medicines to the right people, the transformation that can have on individuals and, ultimately, hundreds of thousands and millions of people's lives.
But I truly believe we can do more, and as a CEO it's my responsibility to push my organization to do everything it possibly can. Given the scale of the problem, it can only be done in partnership. So let me give you a flavor of how we are continuing to try and change and challenge what we're doing by adopting a more open innovation agenda. GlaxoSmithKline is a adapting its business model to find new solutions to neglected tropical disease.
The most urgent need in the fight against neglected tropical disease is in even newer and better medicines and vaccines. And for that we need to think differently about how we do R&D. Given the scale of the task we all face, that means finding new ways of industry, academia, NGOs and governments working together. We call this the "open innovation agenda," and it has three parts: The first is greater flexibility around intellectual property; the second is creating new, broad-based partnerships where researchers have access to our industrial-scale expertise, processes, facilities and infrastructure, not just our know-how or IT; and third, and perhaps most interesting, is access to new compounds.
Let me just go into a little bit more detail on each of those:
First, to be more flexible around intellectual property. Last year we announced that we would grant access to 800 patents and patents applications, commonly known as a "patent pool," for researchers working in the field of neglected tropical diseases in the least-developed countries in the world. This was never meant to be a GSK pool. So I'm delighted to say that BIO Ventures for Global Health has agreed to take over the administration of the pool.
When we announced our commitment we should have called it, really, a "knowledge pool," because so much more than just patents are included -- because we also said we would give access to our general know-how. And, in fact, that's where much of the interest lies -- what do we know, whether it's a patent or not, which could help somebody else make progress? In fact, this fast access to know-how looks like (it's) been the most interesting dimension of the whole initiative from last year.
Last July, we were excited to announce that Alnylam --biotech company from Boston, was the first company to join us in adding their IP to the pool. And just last week we signed two new MOUs, one with Emory University Institute for Drug Discovery, and another with the iThemba Pharmaceuticals, a company based in South Africa working in TB, which is supported by the South African government, both of which give those organizations access to our know-how -- a good example of how the ideas of last year are now beginning to get traction, and I believe, I hope, will continue to attract further engagement from both industry and potential research collaborators.
Sometimes, though, there's a need for a deeper, more -- a more broad-based partnership where access to our industrial-scale expertise, processes, infrastructure could really make a substantial difference. That's why the second element of our "open innovation strategy" is the creation of a new concept called "Open Lab," which will be part of our dedicated Diseases of the Developing World Research Institute in Tres Cantos in Spain. Tres Cantos is just outside of Madrid. It's an institute we've been running as a dedicated center for diseases of the developing world for the last several years.
And in the Open Lab we will create capacity for up to 60 independent researchers to come and pursue their own projects -- not our projects, their projects, as part of a drug discovery team, allowing them to tap into our expertise, facilities, knowledge and, importantly, industrial-scale infrastructure. So, in a sense, imagine a GSK facility within which outside researchers, academics, or maybe small biotechs can come and co-locate, work with our people, access our technologies.
In addition to the resources and benefits-in-kind we are putting into this project, we'll also set up a not-for-profit foundation with seed funding from GSK of $8 million initially to help fund these research projects. So, essentially, people will have access to our knowledge; they'll have access to our facilities; and we'll create a funding platform to make it easy for them to make the journey, if you will, to actually start that research.
The important point here is that we are not generating the ideas of the projects that they're going to work on. Rather, we're letting universities, not-for-profit partnerships, research institutes come to us with their ideas and letting them set out what they think they want to do and how we can help them. We'll soon announce the first two organizations which will come to the Open Lab.
The process of drug discovery is one that involves small scientific understandings to build-up a story of how an enzyme might be critical to a disease developing, or why one chemical might prevent that from happening. What anyone in the field of neglected tropical disease will tell you is that we need more of these small scientific steps to make progress. And that's exactly what we're trying to achieve.
What we really need is more leads on which those discoveries can be built. And that is why the third element of our "open innovation strategy" is perhaps the most interesting. This element involves opening up access to our compounds at GSK. Malaria remains a huge challenge, and it's a disease area where, at GSK, we have very extensive expertise. So over the last 12 months we've screened all 2 million chemical structures that GSK own in our compound library for reactions to the malaria parasite, P. falciparum, the deadliest form of malaria found primarily in Sub-Saharan Africa.
This exercise has yielded more than 13,500 hits that inhibit the parasite. It took five people, working in a special biohazard unit, a year to screen the 2 million compounds because it had to be done by hand, given the dangers involved in dealing with the parasite. Normally, this kind of screening could take about eight to 10 weeks using industrial technology, but on this occasion it's a completely different scale of challenge because of the biohazard dimension of malaria.
Today I am very pleased to announce that we are committing to make all 13,500 compounds, their chemical structures and associated assay data freely available to the public on leading scientific websites. We hope that this will further encourage research by the scientific community on the compounds and bring more brilliant minds to bear on what is obviously an incredibly challenging problem. We believe that we're the first company to make such comprehensive data available. But, taken together with the other things I'm talking about -- making compounds available, granting access to our patents and know-how, and creating the Open Lab, our aim is to truly encourage new discoveries and encourage others to work with us in the same spirit of open innovation.
Let me move on now to a related but different topic, the world's first malaria vaccine. Let me conclude on this important, I think, note: Vaccines are clearly of critical importance if we're going to win the war against infectious disease. And GSK is one of the world's largest suppliers of vaccines. In fact, you may be surprised to know that 80 percent of all the vaccine we manufacture goes to developing countries. 40 percent of all the vaccine we produce is supplied to GAVI, and over the past year we became the first company to have a WHO prequalified vaccine for pneumococcal disease, rotavirus and H1N1 pandemic influenza.
Pneumococcal disease is a great example of partnership. GSK is likely to be the first company to supply the $1.5 billion Advanced Market Commitment(s), and the AMC is the largest funding mechanism ever designed for a single vaccine, and will dramatically increase sustainable access to pneumococcal vaccine with prices at a fraction of the cost paid by industrial nations.
We're also, importantly, on the cusp of completing the world's first malaria vaccine, which is now in late-stage trials in seven African countries. Of course, we don't actually have a registered vaccine yet, and we can't take anything for granted. But it doesn't mean that we shouldn't be thinking about how we ensure that new vaccine, should we make it, get to all of those without could benefit from it.
Each time we have a new vaccine we try to ensure the widest possible access by using tiered pricing, where the poorest countries pay the least. As a result, vaccines in the world's poorest countries are typically a fifth or less of the price of our industrial prices. So far, GSK has invested $300 million U.S. dollars in R&D for this malaria vaccine. Our partner, PATH MVI, along with Bill Gates and the Gates Foundation, have invested a further $200 million.
The dilemma we face is this: Unlike virtually every other vaccine, there really is no rich market for our potential malaria vaccine. Tiered pricing simply won't work, so we cannot apply our normal model. It's a unique problem and requires a unique solution, one that's sustainable and incorporates responsibility. Let me describe the principles of how we do plan to price this vaccine if we are successful to complete development:
First, it must be sustainable -- to allow for continued investment in high-quality manufacturing following R&D. Second, we must also ensure that we do nothing which would discourage other companies from entering into this field. If, for example, we set a precedent of not-for-profit, we could inadvertently discourage others from doing research into malaria or other neglected tropical disease.
We want to avoid that. But we want to be responsible too. That's why what we will do is set a price which covers our cost of manufacture and generate a small additional return. And when I say "small," I mean 5 percent -- a small return, all of which will be plowed back into R&D for next-generation malaria vaccines and against other neglected diseases. In addition to this price commitment, we're also committed to donating at least 12.5 million doses of the vaccine to PATH.
Whatever the price, what we need, truly, is a partnership with donors and recipient countries to ensure access to all those who could benefit. We should be looking now to build on the fine example of the AMC for pneumococcal vaccines, for malaria. And what I'm aiming to do today is send the signal that nobody should worry about price getting in the way. We should put price off the table and we should now start to focus on how we create the funding model for countries to access this vaccine if we are successful.
GSK is ready and willing to play its part in tackling global public health problems. Whether we're sharing our compound library or making the world's first malaria vaccine accessible, our goal is the same: to find tailor-made, targeted solutions to specific problems. One size really does not fit all. My goal is to move from a singular approach in a business model to an innovative pluralistic approach in a business model which allows us to deliver customized solutions.
We are evolving, we are becoming more open, and we are finding new ways of working with others. This is what our "open innovation" agenda is all about, and I think -- and I thank you all very much for your attention this morning. Thank you. (Applause.)
VAITHEESWARAN: Thank you very much, Andrew.
I should say I was remiss in not declaring at the beginning this meeting is, of course, part of our CEO series and it's on the record, for all those here. A reminder to members: please keep your BlackBerries turned off.
So Andrew, "open minds," "open innovation." I think those who are concerned about barriers to discovery in the area of research and development for neglected diseases will welcome access to your database. But the incentive question that you really talked about towards the end of your talk, with how and why you're doing your pricing for your proposed vaccine, should it come to be approved, is really one I wanted to drill into a little bit before we turn to the audience in a few minutes.
When we look at the markets for neglected diseases there really is no commercial payback, in any meaningful sense. Is this something that pharmaceutical companies must see as part of their license to operate? That is, in return for having riches in the developed world, where there are pricing pressures -- of course, as we know in all developed countries, and possibly even in the U.S. shortly, is this something that you need to do as philanthropy and not look for the rewards that you talked about?
Even your cost-plus model, people will ask, what are your true costs?
VAITHEESWARAN: We've heard lots of interesting economics around how much it costs to bring a new drug to market, and so there's lots of ways to play that game. Why not see this as a philanthropic endeavor? Why are you emphasizing this cost-plus incentive model?
WITTY: I think it's a great question. And the reality is it's critical -- particularly if you're embarking on something like a vaccine delivery, to a society that they can be reassured of a sustainable supply. The problem with true philanthropic donation is there is no guarantee that it's going to be reproducible.
And so if you think about something like a malaria vaccine, a society is going to be looking for: Can we be sure this is here for the next 20, 30 years? Is this really sustainable? Are these factories going to keep running at this level?
That's why I think you have to -- you have to see a way to at least cover your costs. Now, let me just be clear: When we talk about costs, I'm talking about the cost of manufacture. We have no intention of trying to recover our historic R&D costs. We're talking about the costs of the materials, the labor and the depreciation of the facility in which the thing is manufactured.
VAITHEESWARAN: You're not looking at opportunity costs, or the cost of --
VAITHEESWARAN: -- failed attempts?
WITTY: No. No.
VAITHEESWARAN: Some of these things that are --
WITTY: Absolutely not.
WITTY: (Inaudible) -- because the reality here is, no point developing the first malaria vaccine and then pricing it at a level where nobody in Africa gets it. The whole point of this is we have to strive to get this price as low as possible while allowing us to be sustainable.
I think if you said to me, Andrew, would your shareholders accept what I've just presented? I'd say, yes, because they understand this is part of striking a coherent balance around what the company does, and is able to do on a global stage. And, clearly, we have different opportunities to generate returns in different places.
If you said to me, Well, actually, Andrew, you should give this vaccine away and lose x-dollars per dose for the next 30 years. I'd say that becomes, self-evidently, a much more difficult conversation for people to accept, as a shareholder. And all of this is about trying to strike balances between shareholders and society. So for me, at GSK, cost is literally the cost of manufacture. And when we get to that point, I'm more than happy for people to come in and audit that, and we'd be more than happy to be open about what that is.
The reason why I then talk about the small return -- because actually, you could say, well GSK (don't ?) really need a small return. And actually, of course, we're one of the companies where, fortunately, we probably don't need a small return. But I do think this is a moment where we have to think about other companies -- for example, biotech companies, maybe startups, maybe smaller pharma companies who are not necessarily in the position we're in, where they do need a return to be persuaded to stay in the space.
So what we're trying to signal is, we think it's reasonable that people expect a return. We don't think it should be huge. In our case, right up front, we're making the commitment that that return, whatever it is-- a small amount, will go back into research. So we're not looking to take profit, if you will. But by saying that we think it's reasonable there is a return, I think that leaves the incentive, the opportunity for many others to look at this and say, 'Well, actually, okay, well, if I went to GSK, used their facilities, have a great idea, come up with a drug, and in 10 years we have something,' then actually there is a precedent set; it's okay for me to make a small return. And in my case, I might take it as profit.
And I think that's a reasonable set of incentives to start to think about. In our case, it's going to go back into R&D.
VAITHEESWARAN: Tell me about HIV, which is often a much more contentious issue. You had talked about your Harvard speech last year; you've done some interesting things with HIV -- the patents, and a joint venture with Pfizer, I believe. But for many in global health, you haven't gone far enough.
And some people say, in some sense, you're making a big push into emerging markets, with strategies on branded generics and other sorts of interesting commercial strategies. You want to do it on your terms, so this is to co-opt as many people as possible. How do you respond to those who say you haven't gone far enough?
WITTY: Well, first of all, what we aimed to do initially was to focus on the 16 neglected tropical diseases, as defined by FDA, within the LDCs. Why did we do that? Because 70 percent of the world's health burden is in, essentially, Africa, and Africa benefits from about 3 percent of the world health-care dollar. So we're trying to actually focus where we think a huge problem is.
Neglected tropical disease, as a group, represent enormous health burden, but actually have been the beneficiary of remarkably little innovation over 50 years. Why? Because there isn't enough discovery work going on. Why? There is no commission market to stimulate it.
So, for me, the initial thought process was, in the absence of a market, what more can we do to stimulate discovery? And that was why we felt that by changing our stance on IP, by making it a more open environment, it reduces the threshold for maybe an academic investigator, or for a entrepreneur to come forward. That's really the logic of why we started there.
As far as HIV is concerned, first of all, obviously it's not a neglected tropical disease. It is the beneficiary of enormous drug discovery, stimulated by industrialized market demand. And the real issue, as we all know, over the last 15 years has been access to technologies which have been discovered already.
In terms of how we are thoughtful about going forward -- and obviously things like the UNITAID patent pool are clearly something which is very much on the agenda today.
VAITHEESWARAN: Just to clarify, of course, UNITAID is an agency housed at the WHO, but which at the moment imposes an airline tax in several countries. They're about to launch a voluntary airline fee. A $2 pop-up window will come up on your Expedia purchase -- in a few weeks, actually, Expedia, Orbitz, et cetera, that would go towards global health issues.
WITTY: Right. So, as far as UNITAID is concerned, actually we're engaged with them. In fact, we had meetings just -- the last meeting was yesterday, with them to try and work through the details of how their pool could operate. We have no argument with the goal of what UNITAID is trying to achieve.
Actually, if you look at what GSK does, stand alone, we already have royalty-free, voluntary licenses on all of our key products. That covers 44 countries. We have eight of those licenses. The licensors last year sold four times more product than we did in the LDCs. So, a) we have them; b) they work. And we also give those licensors permission to create combination products where they need to, which actually very aligned with the goal of UNITAID.
So where I'm at is, first of all, we've gone on and executed what we believe we can do -- it's great. We're engaged, I think, in a very constructive conversation with UNITAID about how to try and make their idea work at the detail level. And I hope that we'll be able to get to a point where that works for everybody.
So, I don't -- for me, there is no controversy here. There is no misalignment of goal. I think there is a not-unreasonable need for detail to be hammered out before commitments are made. I think most people would anticipate that to be a kind of -- a reasonable request, actually -- (inaudible) --
VAITHEESWARAN: So we may well see some news on this front?
WITTY: You may well. But it requires us to make sure the details are consistent with the aspiration.
VAITHEESWARAN: One other topic I want to touch on before we turn to questions from our members: the H1N1 pandemic, which is, of course, currently under way globally.
There were enormous concerns that this would be a repeat of the Spanish flu perhaps, or at least something much more tragic than it has turned out to be thus far. It has been very profitable for your company. Just looking at the numbers on the balance sheet -- because you produce relevant medications, did we get it wrong? Did the WHO overreact? Or is this what it means to make decisions in uncertainty? Are there lessons we should learn so that we're better prepared and make the right decisions next time?
WITTY: First of all, I still feel that this situation is not concluded. And there have been previous examples where health threats have appeared receded, and returned. And so I think it may even -- who knows, in a year we may sit down and say it was premature to have even this conversation. But I think it's actually extraordinarily good news that this virus has not so far produced some of the very bad results that were initially thought possible.
It's very hard -- from where I sat and watched people make decisions, to sit here and criticize those decisions that have been made, I have to say. I think if you think that -- if you just put yourself in the seats of the people who had to make those calls, they were working -- just in the last seven or eight years, they saw a virus like SARS, a highly dangerous virus that didn't transmit very much, very far; they saw H5N1, a highly lethal virus that didn't transmit but was a very --
WITTY: -- not very transmissible; and then suddenly a new one, H1N1 came up -- which, remember, in Mexico initially was highly, appeared to be highly dangerous, and was, in fact, very transmissible.
And so if you think about the evolution of that set of data, the notion that folks who were charged with protecting public health would take a cautious insurance-policy type approach, rather than a complacent, hope-for-the-best approach, I think -- I can't criticize that. And I think that they made the right calls. I think it's very easy -- I mean, it's a little bit like household insurance. You insure your house, (and) if your house burns down, it was the best investment you made ever; --
WITTY: -- your house doesn't burn down, we all complain about the cost of insurance. And I think that that, in some ways -- I truly believe that thoughtful, up-front planning around how to mitigate health risks is exactly what we expect of health authorities --
VAITHEESWARAN: How do we push that argument to next level, saying, to be better prepared for the next time, knowing the imponderables -- for example, should we have better global stockpiles? Should we have, particularly for vulnerable countries that we know are at the front lines -- be it in Asia or in parts of Africa, either because of a lack of health system capacity, or because that's where these zoonoses -- (inaudible) -- the viruses that transmit from animals to humans tend to originate. Is there something we should be doing better with surveillance?
WITTY: Well, I'm -- listen, first of all, I'm sure there will be plenty of better informed people than me who will get into a lessons-learned. And I think it's absolutely right, there should be a lessons-learned exercise on anything like this.
But there's no doubt, you know, clearly things like stockpiling are potentially very important. The real question is, can we stockpile materials -- let's depersonalize it from drugs, but can we stockpile materials which have a utility which is not focused on one virus? The problem with flu is each virus is different. So the question is, can we come up with solutions which are more generic in their applicability? That would help a lot.
Though I'm sure there'd be many other examples. I mean, just to bridge to another great trauma which has happened, the earthquake in Haiti is, you know, a dreadful, just dreadful humanitarian situation. And it's been interesting, if I look at how GSK is responding to that.
So we learned a lot of lessons from the tsunami, where we were -- where we tried our best. But actually, often being generous early on, and trying your best, actually isn't very efficient. It doesn't necessarily help. And so what we learned from there is that we built up big stockpiles of AID program in the aid agencies.
So, actually, within the first hours of the earthquake, the first million-and-a-half dollars worth of GSK drug had already gone to Haiti, because it was already in America's warehouses, and others. Nobody had to come to GSK --
VAITHEESWARAN: They donated the right --
WITTY: -- so we hold "a header tank," if you will --
VAITHEESWARAN: I see.
WITTY: -- of general -- (inaudible) -- the things that you would absolutely predict might be needed are held in a header tank at the aid agencies, who typically are first onto the ground. Now, what then -- that happens a week or two later. Right now we're getting very specific requests from Haiti saying, 'Actually, what we really need is this. Can you' -- and then we help in response directly.
And I think that notion of learning lessons from previous experience is incredibly important. And for sure, creating this kind of stockpile capacity of relatively broad-based material --
WITTY: -- has really changed our ability to react.
VAITHEESWARAN: But the WHO, for example, doesn't have this capacity to even accept the donations you had generously made. Is that something you would support being done, for example?
WITTY: Yeah, again, I think this is something which should be taught, but in the kind of cold light of day, after all this is over. But there's no doubt, the world has the capacity to deal with stockpiles. Whether or not one agency has it, or another agency, we have enough agencies, we have enough capacity to do this.
WITTY: It's just a question of getting them to work together and actually have a clarity about 'if an event happens, this is how the agencies click into gear.' And I think that's an area which I'm sure people would be very open to talk about, and we would obviously be happy to contribute, if we can, to that conversation.
But I think it's really not -- I mean, for us, we're a supplier in this process. I think it's for the governments to really, to reflect on what's happened and how we can better make use of the various agencies we have in the event there is another health care -- (inaudible) -- whether it's flu or something else, but how we think about being better prepared next time. And I think that's a reasonable expectation.
VAITHEESWARAN: All right. Let me turn to questions.
I see an eager hand in the front row here. Let's get a microphone.
I'll just remind our members that, of course, please, wait for the microphone and identify yourself and your affiliation.
QUESTIONER: Seth Berkley, CEO of the International AIDS Vaccine Initiative. A quick comment, and then two quick questions.
The PULSE program -- fabulous. We're the larger users of Pfizer fellows, and it turns out, as you said, to be a fabulous thing for us to get highly technical people in the field, and they come back energized. So (I) compliment you on that.
As an economist, the best way to think about pricing is Ramsey pricing. And the battleground for that is not in the poorest countries, which you've talked about, but is in the middle-income countries. And they are accepting these pricing, particularly when the costs are high and, therefore, it's going to be a burden for them. So I'm interested in how you're dealing with that, not just at the lowest -- which I think the world has moved on, but those middle-income countries that are going to be critical for the future.
The second question: In your putting out these compounds, does that mean that GSK is moving out of the market for making medicine drugs now that you've made them available, or are you going to continue to have a large pipeline of your own drugs and making sure that they're moving --
So on the last one, absolutely no intention to move out of the space. We'll continue to prosecute this, just as we hope others will come in. This is really just a case of saying, "Here's 13,500 potential leads. We have a capacity to chase down a certain number, but why don't we (do also" ?) -- it might take us, I don't know, 10 years to do that. Well, why don't we all try and do it in a year, and figure out whether there's something in there or not? So it's more about bringing -- accelerating the potential time frame.
In terms of middle-income pricing, I'm completely with you. Where I'm at on that -- and if you look at what we're doing at GSK, is we are quite rapidly changing our pricing position in the middle income. So reducing prices of established products, introducing newer products at lower price levels.
What I firmly -- and this is, you know, enormously informed by having worked in most of these countries, you can't come up with a single solution for middle income, so that China is different to India; India is different from Brazil; Brazil is different to Turkey. I mean, there is just -- and so, for me, this has to be a -- whereas LDCs, and I don't mean this to come across, in any way, in a patronizing way, it is easier to think about, as a group, almost because it's so low --
VAITHEESWARAN: Almost no one has the ability to pay.
WITTY: Well, exactly --
VAITHEESWARAN: Or don't have islands of prosperity --
WITTY: Correct --
VAITHEESWARAN: -- (kind of ?) like India and China
WITTY: So for me, then, this all becomes about, essentially, bilateral conversations with governments, either for the country or even, as you say, Vijay, within a country you can have potentially different approaches for, let's say, the wealthy private sector, all the way through to the -- let's imagine, "the low-cost essential drug list for the rural community in country-x." And that's exactly where we're trying to get to.
And if you look at what we're doing, we're cutting prices in a number of these countries. In the Philippines last year we cut prices between 30 and 60 percent, and we continue to roll that approach out, where appropriate, in different markets.
So absolutely we're in the business of making that change. It's just that we don't see it as a -- I don't think there's any utility to a single approach. It's a philosophy, but how it's deployed needs to be customized to individual countries.
VAITHEESWARAN: In addition to differences in, say, demography or economics, how do you handle the fact that a number of middle-income countries have quite strong views about intellectual property rights? Take Brazil, take India, where they may not be compatible with your vision of what you'd like to protect.
WITTY: Well, I think even that -- (inaudible) -- so much. I mean, one of the things that, you know, sometimes I reflect on is a lot of perception is rooted in events of 10 or 15 years ago. The reality is somewhat different. So actually you're seeing countries who historically might have been on one side of a debate on intellectual property, now actually seeing their own industries evolve, seeing -- they're starting to see, actually, value in intellectual property in many cases.
So I think these debates are much more -- are much more balanced than they were, actually. And I think there are ways in which you can be very thoughtful in striking the balance -- (inaudible) -- Let me give you a real example: Brazil. So Brazil has for a long time been a voice on one side of this debate. In the last few months, we've announced very substantial technology transfer relationships with Brazil, particularly in the area of vaccines -- so rotavirus vaccine, strep pneumoniae vaccine, Synflorix vaccine, we're working with the Brazilian government to build facilities in Brazil. And it's just a different way to tackle the issue.
Now, what that's achieved is there is a period of time where we believe that we are going to get -- we're "incented," if you will, to work with Brazil. There's a certainty for Brazil that they have visibility on prices which are reasonable, and at the end of it all they get the technology. And so it's another example of how we can move on from the slightly black/white arguments, which were being had 15 years ago, into something a little bit more thoughtful and customized.
Now, can you do that in every middle income? Of course you can't. You can't have tech transfer in 100 countries. But you can do it some places, and you can do other things in other places. And so I just think this whole conversation is becoming more thoughtful, more balanced, and within it there are -- there are options to strike a new balance.
And it's exactly the message I'm trying to communicate, which is, you know, we're at -- we are absolutely open to a pluralistic approach to how we operate the business, recognizing that we have to be able to defend approach-A against approach-B when people in B want A. And that becomes the kind of intellectual challenge we have. How do you defend, at the margin, the differences between these two approaches?
VAITHEESWARAN: I saw a hand here in the front row. I'm going to go towards the back for the next question -- if people can get them ready. Let's have the microphone here. Again, please identify yourself.
QUESTIONER: Thank you. Maria Freire, from the Lasker Foundation.
Very interesting, and (I) congratulate you for taking these steps. I'm with Seth that the middle-income countries are going to be --
QUESTIONER: -- a little bit more challenging.
Tuberculosis is not one of the FDA-defined diseases, and yet you have a strong position --
WITTY: We do.
QUESTIONER: -- so my question, specifically, is in tuberculosis.
And then, have you had this kind of conversation with your colleagues at other pharmas; and do you see that as a potential move forward?
WITTY: So TB certainly remains a major area of focus for us. And as you might know, in Tres Cantos, the DDW center I was talking about, I would guess about half of the resources at Tres Cantos goes to TB. And I don't see that changing.
We're just in the process, as I think you probably know, of bringing new leadership into that organization, really reenergizing it. And so TB absolutely remains a key focus for us in this field -- or in this general field of diseases of the developing world.
In terms of talking to other companies, it just gets tricky to do that because what we're talking about here -- there are policy issues here, but there are clearly pricing issues here as well. And as a result, actually, these sorts of conversations aren't conversations you can have, actually, particularly not before we make an announcement like we've made today.
Now, hopefully people will look at this and say, 'Well, actually, maybe we can contribute to malaria program;' or 'maybe we can contribute to the patent pool or the knowledge pool, but we are -- like all companies, we're very thoughtful about not crossing lines which you can't cross.' And so, as this discussion gets more into downstream consequences of the -- even if you argue the marketplace isn't, doesn't exist, doesn't stop people taking a view of whether you should or shouldn't be having those sorts of conversations.
So I think the reality is: very hard to have these things up front. I think once you set your -- (inaudible) -- that does stimulate others to react and to think. And then I think there will be -- my expectation, there'll be points of bilateral agreement where somebody will look at what we've said (is actually ?), either we're in the same place or we -- actually we could do something here together, and then we'll, then we'll stop.
And that's exactly how it works in, if you will, the traditional developed business. I think that's what we should anticipate here. But whether you -- whether you like or not, the safety-first philosophy of companies like ours prevents a lot of up-front -- or really any up-front discussion on this kind of thing.
VAITHEESWARAN: I see a gentleman in towards the back there.
QUESTIONER: Good morning. James (Kunkey ?) I appreciate your comments today. Thank you.
I'm trying to understand what this 5 percent announcement really means for small biotech companies who have different access to capital, different costs of capital, and different incentive structures when it comes to how they're going to promote their pricing. It seems to me that this is -- might limit their willingness to invest in these types of projects that affect the third world.
So my question is, how does it not? And what's your approach to investment in biotech? Thank you.
WITTY: Great question. And it think that there are two -- what I'd encourage you to think about are both parts of the statement: One is that we believe there should be a small return, and in our case we think that's going to be about 5 percent. Two separate comments.
I'm not making the statement that -- it's not up to me to make the statement about what is an acceptable return for anybody. What I'm saying is I think it's reasonable to expect people to be incented -- if you want sustainable, long-term investment and commitment, whether it's a biotech or not, it's reasonable to expect those people to be able to generate a return statement.
Whether somebody else would say that they ought to be 10 percent or 15 percent, that's for them to decide and to make the case. I'm not making that case. What I'm then trying to strike -- I mean, it's exactly to the question you raised: "Well, it's all very well, Andrew, you said 'low cost,' but what if you include all these other things, really your low cost is a high cost," right.
WITTY: If I had said "small return," and didn't qualify -- in my eyes, in this situation, people would walk from here and say, 'Well, that was very interesting. He really meant 35,' and we'd have missed -- the whole point would be missed.
So there are two clearly different points to be made. One is, I'm trying to make the argument that it's reasonable to generate a small return. In our case, in this situation, it will be 5 percent, and we'll reinvest. I'm not trying to assert that that second set of decisions should be taken by other people -- at all.
VAITHEESWARAN: The other point, of course, is the cost. It could be argued that a small biotech may have lower costs than the fancy, posh offices, and, you know, keeping you -- (laughter) -- in pearls, (and ermine might cost you -- (inaudible) -- shareholders.
WITTY: It could be argued -- (laughter) --
WITTY: -- but not necessarily certainly true -- exactly. (Laughter.)
VAITHEESWARAN: Let's take another question. I see another hand up here, and then we'll go to the center next.
QUESTIONER: I'm Charles MacCormack, the chief executive officer at Save the Children, and we're working with GlaxoSmithKline on your PULSE program, which has been really, really more than positive for us. We have nine of your professionals on a year basis, and they are able to bring supply-chain management, and knowledge-management, and IT expertise we could never invest in ourselves.
But I'm interested, when you talk about incentives, what, from GSK's point of view, are the incentives for you as a company? What would you like these people to do when they return? What do you see them bringing to your company, to your mission, and to the profession?
WITTY: Great. Great question.
Well, let me give you -- I'll give you maybe some slightly surprising comment to that, actually, and I'll cover it in two or three different ways, if you don't mind.
Firstly, the reason I really was excited about this -- so I've worked for the company for 25 years, and after five years -- had a great career at GSK, after five years I kind of just had that "grass must be greener somewhere else" sensation and I quit to go work for a biotech company. And I often say, two great decisions in my career: One was to leave, the second was to come back, right. But just to go out and so something different was incredibly energizing.
I love the fact that we have a lot of young employees who will have had most of their career at GSK, and want to have most of their career at GSK. But I know that they will come to a point where they want to know what life's like on the outside. So at a very personal level, I think it's very positive for people's career development to have the chance for change -- firstly. Whether it's into an NGO or not, change is good.
Now, secondly, by asking people -- and we've made a specific focus that we will not send anybody out who we don't think is "key talent." So this is all about people we really think are good, we think have got long-term potential, add real value to the company. What we then believe is that this can be a broadening-of-the-mind type of opportunity, and that what we require of those people when they come back -- just to emphasize that point, we require them when they come back to essentially give talks, do roundtables, and talk and actually share what they've gained, what they've seen from the outside.
Now, what that might look like is a perception of community -- in the developing world, for example; a perception, or maybe a dispel -- a capacity to dispel prejudice or misunderstanding; a capacity to identify where the real needs are in NGOs; and, more importantly, to come back and be a challenger of the GSK agenda.
So what I hope is that gradually -- you know, 100 this year, 100 next year, you know, pretty soon five, six, seven hundred people who have had this opportunity -- that's going to become the way the company thinks. And I think that will make us a different company.
And so there is a, kind of, very personal thing. There is a slightly selfish issue around -- I think it's a way for me to keep great people for longer in my company, to be blunt. But I also think there is a much more subtle opportunity to fundamentally change the culture of the company and to try and ensure that the company evolves in step with its society that it operates in.
So I'm not the oldest CEO you're ever going to meet, but there are people who work for me who have grown up in an era of communications and technology which I really missed. And we need to ensure that we're developing a culture which speaks to those people as much as people of my generation or the generation older than me. And that's really what I'm trying to get to. And those people have different views of the world, and we need to make sure that we're modernizing our culture to accept that, and I think this is a really practical way to do that.
VAITHEESWARAN: This idea of bringing in cultural change agents or influencers begs the question of, Where do you want it to go? I think the first time I interviewed Andrew a couple of years ago you said -- admittedly tongue-in-cheek, that the culture had been that of something like a police state -- (laughter) -- over the years at Glaxo.
If that is the unfortunate analogy for the past, what's the goal? Where do you want to take it?
WITTY: Well, what we're -- (laughs) -- (laughter) --
VAITHEESWARAN: Yeah, it's just --
WITTY: That's why sometimes I have to read a script, because if I go off it -- (laughter.)
So if I think about what I'm trying to achieve in the organization, I'm looking for a truly empowered organization. So I want -- I have great skills and people, I want them to feel empowered, to understand what the framework of values and ethics are of this company, but, within that, to feel empowered to make a difference.
So an empowered organization, people who are absolutely passionate about the potential of this business; and potential of what we're able to do not just to generate returns in the industrialized world, or the middle-income or anywhere else, but actually what you can do, at its core, with the technologies of this company, the capacity for what we can do to change lives and societies.
And you think about -- you know, you think about the villages in Africa who are dominated by malaria. And if you -- when you go into those makeshift clinics -- sometimes not just makeshift clinics, but where every bed has a woman and/or a child in it who's febrile, or who's dying of malaria, just think what that's doing to that society. You know, how did those people get the five kilometers to the clinic? What's happening back in the village? Who's looking after the rest of the kids? What happening to productivity? And you actually think about how we can change that.
So I'm looking people -- I'm looking for a culture which is empowered, passionate, ambitious for society; recognizing that for us to be allowed to continue we need to generate returns for our shareholders; cognizant of the need to create balance -- it can't be out of -- it has to be in balance; and my favorite word, I think, is a culture which is "restless" -- never, ever sits back and is complacent, never said, 'Well, we did this, and we can kind of park that agenda for five years,' is restless about challenging the way we operate.
And I think that as you look at the different generations of people who are now coming into business, they've got a different view of the world. I mean, the way people behaved when I came into industry in the early '80s, completely different to the way people think today. And we need a culture which accepts that and actually evolves with it. And that's very much what I'm trying to -- trying to generate.
And that, I hope, creates a more verbal organization, a less rigid -- and, you know, I think I'm famous for banning PowerPoints. I hate PowerPoint presentations because it stifles discussion. You know, all of those things are all part of trying to create a more fluid, spontaneous, open environment. Listen, we're in the foothills of achieving that, but we are definitely on a pathway to try and change the culture of the company.
VAITHEESWARAN: Well, just for banning PowerPoints you have my vote. (Laughter.)
There's a gentlemen who's been very patient here at the central table right in front of me. This might be our last question, so I ask you to please keep it brief.
QUESTIONER: Sir, it's not really a question. Tim Wells, from MMV. It's just some statements to feedback some of the things that you said. So, first of all, if I may take time to congratulate GSK and you, personally, on driving this. We've been behind the screening programs now for several years.
Just to give some people an idea, I've been in neglected disease, public health for five years, on and off, with different jobs. When I first got into this -- (inaudible) -- compounds with this sort of potency was a major breakthrough, because you just jump up and down about it. Now you have 13,000, so everybody says, well, that's four orders of magnitude in one leap.
I think what's more interesting is the way that that will change the way that companies interact with each other, which is one of the things you touched on. So what we see is that now you have a map where all the hits are. The other companies we work with -- and we work with all of the major pharma, now can peg their data to that if they choose to.
And you may say that that's a pipe dream, but I was smiling because we had a project meeting on Monday and you said the sea change that you driven with this process means we could have a project meeting where we took one academic project, one biotech project from -- (inaudible) -- and a GSK project, put them all in the same room and said, right, how do we get the best out of all these projects? And I think every a year ago that would have been unthinkable.
So just to say that the -- making this statement, stepping forward, is a major achievement that I'm not sure that everybody in the room appreciates just how much of a sea change it is. Also --
VAITHEESWARAN: I think I'm going to stop you there, sir, if you don't mind. So --
QUESTIONER: Thank you.
VAITHEESWARAN: -- a vote of affirmation from the audience.
QUESTIONER: Thank you.
VAITHEESWARAN: Shall we go to a last quick question, or did you want to follow up on that?
WITTY: No, no --
Is there something that's -- a question please, not a declaration or anecdote. Please wait for the microphone.
QUESTIONER: I just would like a brief --
VAITHEESWARAN: Identify yourself, please.
QUESTIONER: I'm Carmen Barroso, from International Planned Parenthood Federation.
I would like a brief update on where you are regarding the HPV vaccine, and your views on the future of it.
WITTY: Well, so HPV vaccine, Cervarix has been now proved in --
VAITHEESWARAN: This is the human papilloma --
WITTY: Yeah -- that has now been approved in 100 countries. In fact, Japan and the U.S. were countries 99 and 100. So, very widespread approval around the world. We have seen extremely good pick-up and performance of the vaccine so far in Europe, where we have the most extensive experience.
Clinical trials, as you may know, continue to roll out. We've got good, now, long-term experience, in terms of longevity response. And we're engaged with how --this, as you know, is a priority for the developing world as well, and so we're engaged in how we can go forward on that front.
So that program has been, in our view, a very successful development program. We believe we have a highly effective vaccine. And it's one where, again, we're focused on trying to deploy the right approaches to make sure that in the developing world, as much as the developed world, people have access, if that's regarded as a health priority by the government. Sometimes it is, sometimes it isn't. But that's pretty much where we're at with that.
WITTY: And it's -- right now it's being rolled out in the U.S.
VAITHEESWARAN: Now, if I'm not mistaken, Merck has a rival product that they rolled out first in the U.S., and they did encounter a backlash of some sort from concerned parents and different states of the union.
Have you encountered -- since we are talking about developing countries, any cultural or other kinds of backlashes that we've seen in some of the public health areas? Nigeria comes to mind -- (inaudible) -- for religious objections. Any kind of cultural barriers to a roll-out?
WITTY: Not really. I mean, in some ways I think it's slightly different for us. Our vaccine only targets the viruses -- virus subtypes which cause cervical cancer, so it doesn't touch other viruses which cause non-cancerous conditions.
Some people would argue that that's something good. Some people would argue that's not good. But it certainly diminishes the potential for some of the debates which took place on the previous experience that you just referred to, and so far we have not seen that kind of activity.
Having said that, I think it's incredibly important that when you're dealing with something like cervical cancer prevention you have to be extraordinarily thoughtful, and delicate in the way in which you deal with societies. Societies are all different; there are different norms; and you can't apply or assert a particular cultural perspective. And equally, it's critically important that people don't see the vaccine as somehow competitive or displacing of other approaches to reduce risk.
And actually I'll maybe just close off with a link back to where I started. You know, I absolutely believe screening is a requirement to maximize -- or to minimize the risk of cervical cancer whether the vaccine exists or not, just as I believe bed nets will be absolutely critical whether we have a malaria vaccine or not. And so I think sometimes, whether people do it deliberately or not, there is -- people make a mistake by trying to assert that the new technology somehow makes everything else everybody else has spent years working on redundant. And oftentimes that creates a lot of the friction in the system.
I think that kind of thoughtfulness and more delicate approach is something which companies like ours needs to be -- need to be able to do.
VAITHEESWARAN: Well, great. I see that we're right at the time of closure, so let me draw this meeting to a close. Please give a round -- (applause) --
WITTY: Thank you.
VAITHEESWARAN: -- of applause for Andrew Witty. (Applause.)
WITTY: Thanks a lot. Appreciate it.
VAITHEESWARAN: You bet.
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