Will GSK Move Away from Respiratory Treatments for a Focus on Oncology R&D?

GlaxoSmithKline logo on outside of building

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Could GlaxoSmithKline, the maker of asthma drugs Advair and Breo Elipta, exit the respiratory business? Alex Hoos, head of oncology at GSK, indicated that could be a real possibility due to increased competition and loss of patent exclusivity.

In an interview with S&P Global Market Intelligence, Hoos said the company could narrow its drug development focus to aim at products that will generate growth. Hoos made the surprising comment during a meeting with reporters at the European Society for Medical Oncology Congress in Munich. Speaking with the reporters, Hoos indicated that there has been a change in focus at GSK under the leadership of Chief Executive Officer Emma Walmsley and Hal Barron, the head of research and development. Barron, Hoos indicated, could be looking to eliminate a number of assets, much like Novartis did this week with a 20 percent cut in research programs, and redirect the resources at big growth areas such as oncology.

Earlier this summer, Barron unveiled a long-term plan for R&D that is focused on the immune system and genetics. The company said it will focus on the development of medicines that target mechanisms of action with strong human genetic validations. Those targets have a higher probability of success, which means a shift to a genetics-driven portfolio, the company said.

For GlaxoSmithKline, respiratory medications have been a developmental cornerstone. However, as Hoos noted, respiratory sales were a bit underwhelming for the first half of the year. However, the company reported a significant increase in total respiratory sales. For the quarter respiratory drugs brought in £645 million, about $823 million. Will those numbers though stave off a potential divestiture of respiratory drugs?

In his conversation with reporters, Hoos noted the successful past GSK has had with its respiratory franchise. He said it’s been a driver at the company for a long time, but noted sales have been flat of late.

"There is not much growth to be expected. … This was a very successful business and continues to be — it's just much harder to innovate in respiratory than it is to innovate in oncology,” Hoos said, according to &P Global Market Intelligence.

Hoos further explained that oncology has not been as significant a focus at GSK in the past, but the growth opportunities are immense. As a result, he said the company will be redirecting some resources toward continued development.

A move toward further oncology development will reverse the course the company took three years ago when it divested itself of a significant number of oncology products in a $20 billion deal with Novartis. GSK swapped out some oncology assets for Novartis’ vaccine business and a joint share of an over-the-counter consumer healthcare business – a business that Walmsley acquired in total earlier this year for $13 billion.

As GSK moves forward with the focus on oncology, Hoos noted that the company will need to “clean-up” some of its portfolios. He said there are a few projects not likely to succeed that will need to be stopped. He also said the company will likely divest some assets that are not part of the company’s focus to “liberate resources” that can be used to accelerate development of drug candidates likely to generate significant revenue returns.

"These choices to be made are big choices and they're not easy — and we're in that process right now,” Hoos said.

While the company does have some oncology drugs in development, Hoos said GSK could flex its M&A muscle to pick up some late-stage immuno-oncology or cell therapy assets as potential drivers.

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