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By Ransdell Pierson
PHILADELPHIA, Nov 5 (Reuters) - When GlaxoSmithKline agreed to sell its cancer drugs to Novartis in April, investorssaw it as the death knell for an oncology business thatlanguished well behind those of rivals.
But the British drugmaker has not thrown in the towelcompletely and a tiny group of researchers experimenting withnew treatments still believe they can find winners.
"If we continue to do deals ... and keep growing ourin-house pipeline, then we will have a pipeline in three yearsthat is very competitive with the rest of the industry," saidAxel Hoos, vice president of oncology research at GSK, in aninterview at the company's research center near Philadelphia.
Hoos led development of Bristol-Myers Squibb's melanoma treatment, Yervoy, which helps the immune systemrecognize and destroy cancer cells. With $1.4 billion in annualsales, Yervoy has heightened the rivalry between industryleaders 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 thecompany in a similar direction. GSK has since made nineimmuno-oncology deals with other drugmakers, including a Juneagreement worth up to $350 million to develop drugs withAdaptimmune.
GSK is focusing on two newer technologies: antibodies thatlatch onto two molecular targets at the same time andgenetically modified immune system cells that are better able tograsp and destroy tumor cells.
Its new crop of experimental drugs is not far enough alongto suggest which have the strongest potential, Hoos said.
But GSK's willingness to fund future deals and researchafter several years of financial disappointments is far fromcertain to investors and even its own scientists. Hoos said theextent of future investments will become clear only after theNovartis deal closes in the first half of next year.
"It's hard to envision GSK spending a lot of money in anarea in which they no longer have a commercial presence," saidMarshall Gordon, healthcare analyst for ClearBridge Investments,which owns almost 2.5 million GSK shares.
GSK spokeswoman Melinda Stubbee said the company does notdisclose its funding plans for any specific therapeutic area but is counting on development of game-changing cancermedicines.
STARTING OVER AGAIN
GSK has been hit by slumping sales of its Advair drug forasthma and by bribery investigations in China and elsewhere. Newdrug launches have disappointed, including Benlysta for lupusand its Breo and Anoro respiratory treatments.
Setbacks for its cancer pipeline cut short hopes for itsMAGE-A3 therapy for lung cancer and melanoma, and Votrient forovarian cancer. Those failures "drove the spirit out of thecompany in oncology," said Ori Hershkovitz, an analyst with theTel Aviv based Sphera Fund.
"It will be very challenging for them to get back in thegame, but it's not impossible," Herskovitz said. One route wouldbe to buy innovative biotechnology companies such as SeattleGenetics Inc, Incyte Corp and Denmark's Genmab, he said.
Under the Novartis deal, GSK will sell all of its approvedcancer drugs for up to $16 billion, including Votrient forkidney cancer and Tafinlar and Mekinist for melanoma. Themedicines are more conventional treatments that block specificproteins 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 inthe global cancer market.
Novartis has the right of first refusal to partneron any new GSK cancer products. But Rafael Amado, head ofoncology at GSK, said his company is unlikely to partner withanyone for a cancer drug "that is truly a transformationalproduct." In that event, he said GSK would likely need to builda "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, butthere's still plenty to go for in the realm of immunotherapies,"Purkiss said. (Reporting by Ransdell Pierson; Editing by Michele Gershbergand Steve Orlofsky)
