Glaxo scientists work to rebuild cancer line-up, funding uncertain

By Ransdell Pierson PHILADELPHIA (Reuters) - When GlaxoSmithKline agreed to sell its cancer drugs to Novartis in April, investors saw it as the death knell for an oncology business that languished well behind those of rivals. But the British drugmaker has not thrown in the towel completely and a tiny group of researchers experimenting with new treatments still believe they can find winners. "If we continue to do deals ... and keep growing our in-house pipeline, then we will have a pipeline in three years that is very competitive with the rest of the industry," said Axel Hoos, vice president of oncology research at GSK, in an interview at the company’s research center near Philadelphia. Hoos led development of Bristol-Myers Squibb’s melanoma treatment, Yervoy, which helps the immune system recognize and destroy cancer cells. With $1.4 billion in annual sales, Yervoy has heightened the rivalry between industry leaders Bristol-Myers, Merck & Co and Roche Holding AG in developing immuno-oncology drugs. Hoos moved to GSK in early 2012 and is trying to steer the company in a similar direction. GSK has since made nine immuno-oncology deals with other drugmakers, including a June agreement worth up to $350 million to develop drugs with Adaptimmune. GSK is focusing on two newer technologies: antibodies that latch onto two molecular targets at the same time and genetically modified immune system cells that are better able to grasp and destroy tumor cells. Its new crop of experimental drugs is not far enough along to suggest which have the strongest potential, Hoos said. But GSK's willingness to fund future deals and research after several years of financial disappointments is far from certain to investors and even its own scientists. Hoos said the extent of future investments will become clear only after the Novartis deal closes in the first half of next year. "It's hard to envision GSK spending a lot of money in an area in which they no longer have a commercial presence," said Marshall Gordon, healthcare analyst for ClearBridge Investments, which owns almost 2.5 million GSK shares. GSK spokeswoman Melinda Stubbee said the company does not disclose its funding plans for any specific therapeutic area but is counting on development of game-changing cancer medicines. STARTING OVER AGAIN GSK has been hit by slumping sales of its Advair drug for asthma and by bribery investigations in China and elsewhere. New drug launches have disappointed, including Benlysta for lupus and its Breo and Anoro respiratory treatments. Setbacks for its cancer pipeline cut short hopes for its MAGE-A3 therapy for lung cancer and melanoma, and Votrient for ovarian cancer. Those failures "drove the spirit out of the company in oncology," said Ori Hershkovitz, an analyst with the Tel Aviv based Sphera Fund. "It will be very challenging for them to get back in the game, but it's not impossible," Herskovitz said. One route would be to buy innovative biotechnology companies such as Seattle Genetics Inc, Incyte Corp and Denmark's Genmab, he said. Under the Novartis deal, GSK will sell all of its approved cancer drugs for up to $16 billion, including Votrient for kidney cancer and Tafinlar and Mekinist for melanoma. The medicines are more conventional treatments that block specific proteins involved in tumor growth. GSK will acquire Novartis' vaccine business and merge the companies’ healthcare units. Analysts favored the exit, as GSK lagged at 14th place in the global cancer market. Novartis has the right of first refusal to partner on any new GSK cancer products. But Rafael Amado, head of oncology at GSK, said his company is unlikely to partner with anyone for a cancer drug "that is truly a transformational product." In that event, he said GSK would likely need to build a "state-of-the-art marketing machine." Richard Purkiss, London-based analyst for Atlantic Equities, said it could take GSK five to 10 years, and a lot of good luck, to make a mark in cancer research. "They may have missed some of the early exciting areas, but there's still plenty to go for in the realm of immunotherapies," Purkiss said. (Reporting by Ransdell Pierson; Editing by Michele Gershberg and Steve Orlofsky)