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GlaxoSmithKline (GSK - Analyst Report) recently announced disappointing data from the phase III DERMA study on its MAGE-A3 cancer immunotherapeutic. The randomized, blinded, placebo-controlled study evaluated the efficacy and safety of the MAGE-A3 cancer immunotherapeutic in patients suffering from stage IIIB/C melanoma with macroscopic nodal disease, whose tumors expressed the MAGE-A3 gene. Moreover their tumors were removed surgically.

An independent analysis of the DERMA study revealed that MAGE-A3 cancer immunotherapeutic did not significantly extend disease free survival (DFS). The study failed to meet its first co-primary endpoint. Investors have reacted negatively to the news.

The Independent Data Monitoring Committee (IDMC) recommended continuation of the DERMA study until its second co-primary endpoint is evaluated. Data related to the second co-primary endpoint is expected in 2015.

We note that MAGE-A3 cancer immunotherapeutic is also being evaluated for non small cell lung cancer following surgical removal of the primary tumor. The first data from the study is expected in the first half of 2014.

We are disappointed with the pipeline setback at Glaxo. The biggest near-term challenge for Glaxo will be to replace the revenues that will be lost to generic competition.

We believe that positive data from the DERMA study would have supported regulatory filings and increased Glaxo’s chances of gaining approval for the MAGE-A3 cancer immunotherapeutic and provided much needed boost to Glaxo's revenues.

Glaxo carries a Zacks Rank #3 (Hold). Companies that currently look well-positioned include Actelion Ltd. (ALIOF) and Biogen Idec Inc. (BIIB - Analyst Report) with a Zacks Rank #1 (Strong Buy) and Jazz Pharmaceuticals (JAZZ - Analyst Report) with a Zacks Rank #2 (Buy).

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