There have been several noteworthy developments in the drug space recently, which will likely have a material impact on the companies in this sector and the markets they serve. Companies mentioned in this review include GlaxoSmithKline plc (GSK), Eli Lilly & Co. (LLY), Pfizer Inc. (PFE - Free Pfizer Stock Report), and Merck & Co. (MRK - Free Merck Stock Report).

GlaxoSmithKline Inks Agreement with Adaptimmune.

Earlier this month, GSK announced that it would be working with British biotech company Adaptimmune to develop early-stage cancer drugs. Under the terms of the deal, Adaptimmune could receive more than $350 million from Glaxo over the next seven years if certain milestones are achieved, in addition to royalties on eventual sales. Ironically, the partnership was created a little over a month after Glaxo agreed to sell its cancer business to Novartis as part of a swap of roughly $23 billion in assets. Novartis agreed to buy Glaxo’s cancer unit for $16 billion, while Glaxo agreed to pay $7.1 billion for Novartis’ Vaccine business. Judging by the Adaptimmune deal, it doesn’t appear that Glaxo is fully ready to exit the oncology sector.

Eli Lilly’s Cancer Drug Disappoints in Late-Stage Trial

On June 11th, Lilly announced that its new liver cancer drug Cyramza failed to meet its primary endpoint in a phase III clinical study. The 565-patient trial showed that the drug didn’t result in statistically significant survival rates when compared to a placebo, though management indicated it was encouraged by certain findings and plans to discuss the results with regulatory authorities. At present, liver cancer is one of the most difficult-to-treat cancers and no phase III study of a drug has shown improved survival rates for patients undergoing secondary treatment (when surgery is no longer an option). Should a company be successful in bringing an approved candidate to market, the reward would be quite lucrative.

Pfizer Bolsters Cancer Portfolio with Cellectis Deal

On June 18th, only a few weeks after its failed $118 billion bid for AstraZeneca, Pfizer announced that it would be linking up with French biotech company Cellectis to develop immunotherapy cancer drugs. Immunotherapy, which is an approach that boosts the body’s immune system to fight tumors, is currently a red-hot area of drug research and many of the world’s top pharmaceutical makers have been investing heavily to get a piece of the pie. Under the terms of this deal, Pfizer will pay $80 million in cash upfront in addition to funding for research costs. Cellectis will also be eligible to receive development, regulatory, and commercial milestone payments of up to $185 million per product, plus royalties on any eventual sales.

Merck Drops Development of Cancer Drug

Earlier this week, Merck announced that it would be discontinuing the development of Vintafolide, an experimental cancer drug that it was producing with biotech drugmaker Endocyte. The decision was made following a disappointing trial that showed patients with ovarian cancer were not benefitting from a combination of Vintafolide and chemotherapy. Under an April, 2012 agreement, Endocyte received a $120 million upfront payment from Merck and was also eligible for up to $800 million in milestone payments along with a share of eventual sales of the drug. With Vintafolide’s future now very much in jeopardy, shares of Endocyte’s stock have plummeted nearly 20% since the news broke.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.