UPDATE 2-GSK drug fails in Type 1 diabetes study
* Otelixizumab misses primary endpoint in Phase III study
* Follows failure of similar drug from Eli Lilly last year
* Drug developed by GSK and Tolerx, licensed from BTG
* GSK and BTG shares little changed
(Adds further detail on drug, analyst comment, shares)
LONDON, March 11 (Reuters) - An experimental GlaxoSmithKline (GSK.L) drug has failed to help Type 1 diabetics in a late-stage clinical trial, marking a setback for the group's fight against autoimmune disease just two days after a notable win in lupus.
GSK has been developing the anti-CD3 antibody otelixizumab as a treatment for people with newly diagnosed Type 1 diabetes, although expectations for the medicine were modest following the failure of a similar Eli Lilly (LLY.N) product in October.
Type 1 diabetes, previously known as juvenile diabetes, is a disease in which the immune system attacks and destroys the insulin-producing beta cells in the pancreas, leaving sufferers reliant on regular insulin injections.
Only 5 percent of people with diabetes have the Type 1 form, with most suffering from Type 2, which is associated with lifestyle and obesity.
GSK secured rights to otelixizumab in 2007 through a deal with unlisted U.S. biotech firm Tolerx, which in turn licensed in the medicine from BTG BGC.L.
The drug's failure to preserve beta cell function in the Phase III trial now leaves its future uncertain.
GSK said on Friday it would explore additional dosing regimens in the light of the setback. New recruitment and dosing in a second similar clinical study has been suspended pending review of the results.
Earlier Phase II trials had used a higher dose of otelixizumab, which is given intravenously, although this had been associated with adverse side effects.
GSK is also looking at using the medicine in other autoimmune conditions, including Graves eye disease and rheumatoid arthritis, where it is in early-stage Phase I testing.
Industry analysts had forecast a potential sales opportunity for otelixizumab of around $500 million a year but uncertainty about its effectiveness meant consensus forecasts for 2015 sales were only $140 million, according to Thomson Reuters Pharma.
That makes it a relatively small product compared with GSK's big new hope in autoimmune disorders, the lupus drug Benlysta, which won U.S. regulatory approval on Wednesday. Benlysta, discovered by GSK's partner Human Genome Sciences HGSI.O, is expected to have global sales of around $3 billion in 2015.
GSK shares were 0.4 percent higher at 1,193 pence by 1530 GMT, outperforming a 0.7 percent decline in the European drugs sector .SXDP, while BTG was up 1 percent at 218p.
Vadim Alexandre, an analyst at Daniel Stewart, said the failure of otelixizumab was a "minor letdown" for BTG, resulting in a 20p reduction to his target price to 263p. (Additional reporting by Paul Sandle; Editing by Greg Mahlich)