Axel Hoos, GlaxoSmithKline PLC's head of oncology, said the U.K.'s largest drugmaker may exit the respiratory business, where prospects have been hampered by increased competition and the loss of patent exclusivity on the former blockbuster asthma medicine Advair, as the company narrows its focus in a bid to generate growth.

Speaking to a small group of reporters on the sidelines of the European Society for Medical Oncology Congress in Munich, Hoos said that since the arrival of Hal Barron as head of research and development, there are no more "pet projects" at GSK anymore. Establishing a research facility on the U.S. West Coast and jettisoning some pipeline assets are among the moves being considered, as GSK seeks to redirect resources into areas like oncology, which Barron sees as having the most potential for growth in the entire company, according to Hoos.

"I don't want to be inappropriate and step on some toes, but we have areas that have a higher probability of growth and areas with a lower probability of growth. Our respiratory franchise, for example, has been a driver for GSK R&D for a long time and we've been very successful with it … but it's also pretty flat," Hoos said. "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."

Research and development at the Brentford, London-based pharmaceutical company has been re-invigorated by Hal Barron, who was responsible for the development of blockbuster cancer drugs including Avastin while leading Genentech Inc.'s R&D efforts. Having joined GSK on Jan. 1, he has injected cash back into the company's cancer division, which had been stunted by the Novartis asset swap of 2015 that split the oncology business and saw it drain talent. Hoos said he is moving fast to rebuild his team — in some cases hiring back former GSK researchers, but also poaching from industry rivals like AstraZeneca PLC, Bristol-Myers Squibb Co. and Genentech — in order to put oncology back in the ascendance.

"Oncology has been a small piece of this very large portfolio until very recently. So we are redirecting resources," Hoos said.

GSK's lead oncology candidate, BCMA, has shown a 60% response rate in fourth line trials to treat a type of skin cancer and is expected to launch in 2020. Hoos projects that this treatment alone can become a $5 billion product, once it has gained approval for use at earlier stages of the disease.

To date, GSK has been focused on building up the vaccines business and the ViiV HIV franchise, notably with a two-drug regimen rather than the previous three-drug regimen, as it seeks to make up from the loss of its former multi-billion dollar respiratory medicine, Advair. But Hoos suggests that even these former crown jewels may be up for grabs in Barron's hunt for growth.

"I actually think we have to do some clean-up. Our portfolio is still too big and we need to just stop a few projects that are less likely to succeed," Hoos said. "Or where we don't have a focus, divest some stuff that liberates resources that we can use to accelerate the big ticket programs that we believe will carry the success for GSK."

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

GSK has traditionally had a strong presence in the respiratory market. It was first to market with Advair, the first asthma inhaler to be introduced back in 2000 and its biggest selling asthma drug until the advent of generic competition, expected any day now. But growth rates in the highly competitive space are under pressure, with analysts at Jefferies forecasting a 32% drop in third-quarter Advair sales when GSK reports results Oct. 30.

Still, a strong performance in the vaccines business — with gains of 12% penciled in due to strong demand for the new Shingrix shingles vaccine — will underpin the pharmaceutical division, alongside an expected 8% gain from the ViiV franchise. Jefferies expects total pharmaceutical sales in the third quarter to be flat at £4.14 billion.

"Respiratory and HIV, your two major franchises, are probably two of the three least attractive categories going forwards, so they're in a tough space," said another analyst who spoke to S&P Global Market Intelligence on condition of anonymity.

Hoos signaled that the franchise may face some tough times ahead: "The challenge that [Hal] always points out is, companies often have too much in their pipeline, and they fail for indigestion reasons, not because they're not focused enough."

Oncology has huge potential

Still, he didn't rule out bulking up the later stage pipeline with acquisitions in oncology, and pledged to move fast. "The momentum in the industry for oncology is huge," Hoos said.

However, he said GSK would be disciplined in its approach and would stick to potential deals in immuno-oncology, epigenetics or cell therapy areas.

"With Glaxo we've had 15 years of R&D producing absolutely nothing," said the analyst, who rates the stock a "sell." "I don't doubt that Hal Barron's a very very clever bloke, but you don't turn these supertankers around in five minutes."