Above Tire Fix-It Shop Glycart Makes Roche Leukemia Drug

Roche Holding AG (ROG) is cooking up a next generation of cancer-killing drugs above a suburban Swiss tire-repair store.

The labs in an industrial corner of Zurich are the birthplace of GA101, a blood-cancer medicine from Roche’s Glycart biotechnology unit that was approved in the U.S. last month under the brand name Gazyva. The drug is heir apparent to leukemia treatment Rituxan, Roche’s top seller last year.

Glycart, an academic start-up from ETH Zurich university snapped up by Roche in 2005, just five years after its founding, is both an example of the kind of self-directed units Roche has fostered following acquisitions and an incubator for the kind of drugs the world’s biggest cancer company wants to make in the future. Roche says it allowed Glycart to maintain its independence so the scientists above the tire shop could do their best work.

“Our neighbors on the ground floor fix tires; we fix antibodies,” said Pablo Umana, who helped found Glycart and still runs the unit for Roche.

The site’s 106 scientists are trying to harness the body’s own immune system to attack cancer cells. Their projects include therapies that may be eventually be given in combination, a bit like the drug cocktails developed for HIV, Umana said in an interview.

Though Umana and Glycart are just a small piece of Roche’s 2,200-person Pharma Research and Early Development arm -- known internally as pRED -- the company let Glycart keep its offices nearly 50 miles from Roche’s Basel headquarters. Glycart has also been given latitude to chart its own research course since it was acquired, Umana said. He submits budgets each year; worthy projects are usually funded, he said.

Roche Portfolio

Glycart can demand that level of independence because Roche recognizes how valuable its drugs are within the Roche portfolio and was has also been relatively confident the GA101 project would prove successful, said Andrew Weiss, an analyst for Bank Vontobel AG in Zurich.

Roche’s approach to Glycart is a rarity in the industry. Big drugmakers usually either buy and absorb small biotechnology companies or license the right to develop their medicines. Others have announced an intention to keep newly acquired biotechnology companies independent then reversed course later, as Japan’s Takeda Pharmaceutical Co. did this year with U.S.- based Millennium Pharmaceuticals Inc.

Role Model

“It’s a role model, but it’s going to be a rare one,” Weiss said in a telephone interview. “Rarely do you have this constellation of knowledge, future potential and market value lining up.”

That doesn’t always mean success. Roche abandoned development of the Glycart molecule GA201 this year after disappointing trial results.

Still, the approach mirrors what Roche did on a larger scale when it bought out California biotechnology company Genentech in 2009. The U.S. company kept its name, exists as a free-standing early research unit within Roche and has sent 32 experimental drugs into human trials since its acquisition.

Glycart is unusual because big pharmaceutical companies increasingly seek to control their small biotechnology partners with research collaboration contracts instead of total buyouts, said Olav Zilian, a Geneva-based analyst for Helvea SA.

“You keep such a partner on a short leash and under its own cash constraints,” Zilian said. “They have to stay focused.”

Tumor Attack

The success of Gazyva is one of the reasons Roche’s stock has returned 37 percent this year including reinvested dividends, beating the 24 percent return on the Bloomberg Europe Pharmaceuticals Index. The stock fell 1.3 percent yesterday to close at 243 Swiss francs, giving the company a market value of 209.3 billion francs ($234.8 billion).

Backed by Roche’s research budget, Glycart’s next drug to go into human tests will be a cytokine immunomodulator, a molecule engineered to boost the attacking arm of the immune system, Umana said. The idea is to increase the number and activity of immune cells inside a tumor, he said. Doctors could either use it alone, to give the body’s immune system a boost if it’s already attacking the tumor on its own, or add it to another Roche medicine to turbo-charge the first drug’s effect.

Though the experimental drug isn’t yet listed on Roche’s published research pipeline, Umana said it should begin the first phase of patient tests by January. Using it in combination with other anti-cancer medicines may make it possible to harness a type of immune system technology previously used in blood cancers in solid cancers as well, where patients may have fewer immune cells to be enlisted in an attack on the tumor, he said.

Combination Trials

Combining medicines in order to create a more effective tool to fight cancer is a strategy Roche is pursuing widely, including in projects led by another researcher under Glycart’s roof, former Johns Hopkins University professor Hy Levitsky, now Roche’s head of cancer immunology experimental medicine. He moved his research group to Glycart’s offices in suburban Schlieren when Roche closed its research center in Nutley, New Jersey. Roche is running about 30 combination trials in patients, according to a Genentech blog post in June.

“What people have realized is that just one intervention in a particular immune pathway will not be enough, and that you need to address multiple points,” Umana said. “Similar to what happened with the antivirals many years ago, with HIV, you needed to combine several things.”

Combination therapies will help drive a market for cancer immunotherapies that could reach more than $35 billion in annual sales in a decade’s time, Citigroup Inc. analysts wrote in a report this year.

Big Payoff

For now, Roche’s big payoff from Glycart may be Gazyva. The new drug builds on a franchise begun with Rituxan, which had 6.71 billion francs in revenue last year. Gazyva patients with chronic lymphocytic leukemia, a type of blood cancer, had a year longer before their cancer progressed than people who took Rituxan in results disclosed last month and presented Dec. 8 at the American Society of Hematology meeting in New Orleans.

Gazyva won U.S. approval on Nov. 1 partly on the strength of that data.

Analysts estimate the drug will bring in 1.4 billion francs, on average, in 2018. If it replaces Rituxan across the board, higher prices could drive annual sales for the new medicine beyond those of the old, Weiss said.

To contact the reporter on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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