* MAGE-A3 fails to hit goal in Phase III lung cancer trial
* Setback follows disappointing 2013 results in melanoma
* GSK hopes to find patient sub-set in which vaccine works
* Shares fall 2 percent (Adds analyst comments, latest shares, further details)
An experimental cancer vaccine from GlaxoSmithKline has failed in a second test - this time against lung cancer - but the British company said it still hoped to identify a sub-group of patients in which it would work.
Thursday's news that the MAGE-A3 therapeutic vaccine did not help patients with non-small cell lung cancer in a late-stage study is a further blow to the high-risk, high-reward project after a similar setback in melanoma in September.
Unlike traditional preventative vaccines, the MAGE-A3 treatment is designed for people with established disease, helping their immune systems to prevent the return of disease after surgery.
The large Phase III study, involving more than 2,000 lung cancer patients, found that the experimental therapy did not help patients live longer without their disease recurring.
Nonetheless, GSK plans to continue the clinical trial in the hope of finding a sub-population that will benefit. It is also doing the same with patients suffering from melanoma and results of analyses looking at these sub-sets of patients with particular genetic profiles are expected in 2015.
Vincent Brichard, head of immunotherapeutics at GSK Vaccines, said the company was disappointed by the outcome but remained committed to the project.
Shares in GSK fell by 2 percent by 0945 GMT, underperforming a 0.7 percent decline in the European drugs sector.
Many investors had been expecting a disappointing read-out from the lung cancer study, following the earlier setback in melanoma, and there are doubts as to whether GSK will be able to prove the vaccine works for a smaller group of genetically selected patients.
But despite the problems GSK Chief Executive Andrew Witty painted a surprisingly upbeat picture of prospects for MAGE-A3 at full-year results last month. Witty described the cancer vaccine and another drug for heart disease called darapladib that has also disappointed in tests as among the most promising in the company's pipeline.
10 PERCENT CHANCE
Citi analyst Andrew Baum said he estimated there was a 10 percent probability that MAGE-A3 could result in a significant benefit in a gene-signature defined population group, which would still be a substantial market.
As a result, Citi has a risk-adjusted sales forecast for the product of 216 million pounds ($360 million) in 2022.
Other companies, including Bristol-Myers Squibb, Roche and Merck & Co, have had some recent notable successes in clinical trials of innovative drugs to boost the immune system, but GSK is still pushing the scientific boundaries with its vaccine-based approach.
So-called immunotherapy, in which the body's own immune system is enlisted to fight tumour cells, is a hot area of pharmaceutical research and development at the moment, although cancer vaccines have proved difficult to develop over the years.
U.S.-based Agenus has contributed technology to the GSK vaccine and its shares are sensitive to news on the project. The vaccine contains Agenus' QS-21 Stimulon adjuvant, or booster.
Although news on MAGE-A3 and darapladib has been disappointing for GSK, the company's overall drug research has been improving recently, with notable new drug approvals in 2013 for HIV, cancer and respiratory disease.
GSK, which is the only major drugmaker to report its internal rate of return on R&D investment, said last month that returns had now reached 13 percent, up from 12 percent two years earlier and 11 percent in 2010. It has set a target of reaching 14 percent. ($1 = 0.6014 British Pounds)