GSK bets $300m on tie-up with gene-tester 23andMe

GlaxoSmithKline has invested $300m (£228m) in 23andMe, a Silicon Valley gene-testing company, as the UK drugs giant looks to genetics to improve growth in its pharmaceuticals division.

Announcing second-quarter results, GSK said the deal would give it exclusive access to 23andMe’s DNA database as a resource for finding new treatments.

GSK said the deal was an important part of its new approach to research focused on the biology of the immune system and genetic evidence.

The four-year agreement will combine 23andMe’s genetic database with GSK’s medical experience and commercial heft.

23andMe has more than 5m customers, more than 80% of which have agreed to allow their data to be used for research.

The Google-backed US company is known for test kits that let users find out about their genetic roots with a sample of saliva. But it also has a research and development division that has come up with early stage therapies.

The companies will combine existing projects and form a joint drug discovery team to identify target diseases based on the strength of biological evidence.

Hal Barron, who joined GSK as chief scientist in January, said: "Drug targets with genetic validation have a significantly higher chance of ultimately demonstrating benefit for patients and becoming medicines. Partnering with 23andMe...will help to shift our research and development organisation to be 'driven by genetics', and increase the impact GSK can have on patients."

Project costs will be split equally with room for both sides to reduce its share for a particular programme. GSK has taken a $300m equity stake in 23andMe.

As far as the results are concerned, GSK said group sales in the second quarter rose 4% excluding currency swings to £7.3bn. Pharmaceutical sales were the weakest of GSK’s three divisions, rising 1% to £4.2bn compared with 16% from vaccines and 3% from healthcare at constant currency. GSK announced a plan to spend £1.7bn over thee years to save £400m a year in supply chain and administration costs

Emma Walmsley, GSK's chief executive, said: "GSK has delivered encouraging results across the company this quarter with CER (constant exchange rate) sales growth in each of our three global businesses. We have announced the start of a new approach to R&D which aims to capitalise on the assets we have in our promising early-stage pipeline and build the next wave of growth for GSK."

The company increased its target for adjusted earnings growth to 7-10% if no generic competitor for its Advair product hits the US market in 2018.