July 25, 2018 / 10:06 AM / 5 months ago

GSK's new R&D head bets on genetics with $300 mln 23andMe deal

* Drugmaker takes stake in Silicon Valley gene testing firm

* GSK says genetically validated targets can half costs

* Pharma R&D turnaround top priority for British group

By Ben Hirschler

LONDON, July 25 (Reuters) - GlaxoSmithKline's new research boss aims to turbo-charge the British group's drug discovery engine with a $300 million bet on genetics by buying a stake in the Silicon Valley gene testing company 23andMe.

The move, announced by Hal Barron alongside financial results on Wednesday, secures GSK exclusive access to the Google-backed firm's vast DNA database, which it hopes will help unlock new treatments for a range of diseases.

It won't yield new products overnight but Barron believes it will accelerate GSK's drug development work, which has lagged behind rivals in producing multibillion-dollar blockbuster drugs.

GSK's pharmaceuticals business - its biggest unit - has seen sluggish growth in recent years and the group reported flat overall revenue in the second quarter.

While 23andMe is best known for saliva-based test kits that offer users a glimpse into their genetic ancestry, it also has a three-year-old drug R&D unit, whose efforts will now dovetail with those of researchers at GSK.

And with more than 5 million customers, 80 percent of whom have opted in to participate in research, it has a trove of information about the links between genes and disease.

"Human genetics is going to represent a core component of our drug discovery strategy, so 23andMe is a terrific partner for us to jump-start our efforts," said Barron, who joined GSK in January.

"By studying genetically validated targets we think we can cut the cost of development in half or, putting it a different way, develop twice as many medicines for the same price."

The first project will focus on an experimental GSK pill for Parkinson's disease. It is linked to a specific gene mutation and 23andMe has already identified hundreds of its users with the right genetic profile.

The 23andMe transaction marks Barron's first deal to bolster pharma R&D, and it is unlikely to be his last. "We'll be looking for opportunities moving forward, but we're going to keep a pretty high bar," he told Reuters.

PHARMA TURNAROUND

Chief Executive Emma Walmsley has made her top priority turning around the pharmaceuticals division, which analysts see as a prerequisite for any future spin-off of the consumer health business - a move advocated by some investors.

That puts Barron - a veteran of Roche's successful Genentech unit - at the centre of the next chapter in GSK's story.

The British drugmaker is not alone in tapping modern genetic data. Competitors including Roche and AstraZeneca have already made similar moves.

But by working with 23andMe it can now scan the world's largest human genetic database with associated health records, according to the privately owned firm's therapeutics head Richard Scheller, who used to work with Barron at Genentech.

Barron will set out more details of his R&D strategy on Wednesday in a presentation that is likely to overshadow the latest quarterly results.

Currencies and pricing pressure in respiratory medicine are both creating headwinds for GSK this year, although its new shingles vaccine is enjoying strong demand.

GSK's overall sales in the quarter were 7.31 billion pounds, producing adjusted earnings per share (EPS) of 28.1 pence. Analysts, on average, had forecast 7.21 billion pounds and 26.1 pence, according to Thomson Reuters data. (Editing by Keith Weir)

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