Written by Danny Cohen and Scott Matusow
We accept articular Five Prime Therapeutics (FPRX) as a abeyant turn-around adventure with accessible cardinal data, an activist biotech armamentarium with about 22% ownership, and important business decisions this year than can achieve this aggregation a actual ample multi-bag gainer, or can breach them if handled improperly. Several of the company’s analytic assets. forth with Bristol-Myers Squibb (BMY) with presenting ‘actionable’ abstracts this year from the advancing appearance 2 abstraction of Cabiralizumab (Cabira) and Nivolumab (Opdivo), with and afterwards mFOLFOX (chemotherapy) in pancreatic cancer, are adverse what the acting administration aggregation calls a “go or no-go” decisions.
One of the basic tasks for FPRX administration actuality is to attenuated bottomward breadth to best arrange assets and breadth basic bake can be pared aback while creating actor value. Based on our compassionate of the company’s aftermost earning’s alarm in Nov. 2019, FPRX’s administration now is to booty a added abstinent and rational admission to basic administration as against to the over-aggressive action of the antecedent administration team.
At this amount point and with assorted shots on goal, we feel that FPRX offers an accomplished risk-reward hypothesis as a bet on a turnaround adventure that can net abundant acknowledgment from the accepted valuation.
For starters, the Cabira accommodation to go or no go will be in abundant allotment absitively by BMY, as BMY has the advance actuality in this asset.
In 2015, BMY fabricated a accord with FPRX for Cabira battery out $350 actor upfront to the company, and back-ended $1.74B in abeyant development and authoritative anniversary payments; added double-digit royalties on approaching sales, and the advantage to co-promote in the U.S.
There will be added added able-bodied abstracts from this asset to read-out this year, with abstracts accepted ancient in the 1st bisected of this year.
We see this asset as a abeyant amount add-on for FPRX. It’s not accepted to aftermath able results, so best of its downside is able already broiled into the banal price, as axiomatic from the antecedent abstracts read-out in Pancreatic blight which was disappointing, but not absolutely useless.
At the time of the antecedent ‘disappointing’ read-out on Cabira, FPRX banal was trading in the mid $40 range. With the banal now trading about $5 a share, the expectations actuality for Cabira are low, as it’s not accepted to aftermath the blazon of abstracts bare to be a aggravate mover. However, if bigger abstracts emerges with Cabira it should admonition with banal amount appreciation.
What is of primary absorption to us and best investors is the company’s Bemarituzumab (Bema, anti-FGFR2b antibody) affairs actuality developed in FGFR2 over-expressing belly cancer. The primary endpoint for the accepted appearance 3 abstraction is analytical chemotherapy with Bema, with the bar set for the company’s planned futility assay as Overall Survival (OS).
Informing this appearance 3 was the auspicious distinct abettor action in heavily pre-treated belly and gastroesophageal alliance (GEJ) blight patients (the distinct abettor abstracts presented at ASCO in 2017 is apparent below). In short, this distinct abettor deliver abstracts showed an ORR of 19% (impressive aural the ambience of a wide-open unmet charge here) in patients who accept aerial announcement of FGFR2b as bent by biopsy. With a low Severe Adverse Events (SAE) rate, the aggregation aggressively avant-garde this abettor into a appearance 1 / 3 balloon in aggregate with mFOLFOX.
Upon afterward up on the mono-therapy study, the aggregation begin that accomplishing a canal claret absorption of 60 μg/mL was all-important for responses. As such, dosing has been adapted to achieve this absorption of Bemarituzumab.
In the appearance 1 allocation of the appearance 1 / 3 study, the aggregate was evaluated primarily for safety, which was accounted able accustomed the abridgement of dosage attached toxicities and a 3/9 SAE amount for the aggregate at the aerial dose. This was a broader acceptance citizenry than the appearance 3 which is absolutely attractive at belly cancers. Actuality also, colorectal and pancreatic patients were additionally circuitous in the study. The assurance contour is abbreviated below. Though the abstraction was not geared to attending at efficacy, 2 PRs were empiric in the enrolled patients;
According to the aboriginal appearance 3 abstraction design, the antecedent ambition of 548 patients was estimated to accept 80% ability to ascertain an OS HR of 0.75 in favor of the Bema chemotherapy arm. One accessible absolute aftereffect actuality is that back assay is done at the acting cutoff, it is bent that beneath patients will be bare to achieve a statistically cogent signal.
Another accessible absolute aftereffect actuality although absurd is that the FPRX will stop the balloon aboriginal for efficacy, that is if the aggregation can attenuated bottomward an able cutoff. If a able ability arresting is accomplished at acting or final analysis, we would apprehend Five Prime to accompany an Accelerated Approval (AA) alleyway for Bema accustomed the unmet charge and poor cast of the ambition population.
High FGFR2 announcement has been about associated with poor cast by assorted studies. In a meta-analysis of 4,294 patients beyond ten studies, showed an OS Hazard Ratio (HR) of 1.40 (or 40% college amount of afterlife in FGFR2 over-expression). In addition, these tumors showed an 87% college allowance of lymph bulge metastasis. All of these studies took abode in Asian arena breadth FGFR2 over-expression and belly blight itself is added common.
However, there has yet to be accord on how FGFR2 accession should be bent or what a blow should attending like. As a result, some studies put the prevalence of this alteration as aerial as 61.4%, and as low as 2.5%. So far, Five Prime has appear a prevalence of FGFR2b over-expression at 30% based on pre-screening abstracts for the study.
On clinicaltrials.gov, the aggregation lists its admittance belief as “FGFR2b over announcement as bent by a centrally performed IHC tissue assay and/or FGFR2 gene accession as bent by a centrally performed ctDNA claret based assay”. To authorize on the base of immunohistochemistry (IHC), patients charge annual a 2 or a 3 from biopsy.
This leaves the aggregation a lot of allowance in its mid-2020 futility assay of the 140 patients enrolled to not alone actuate the actual cardinal of patients to ensure able powering but additionally attenuated bottomward the best cutoffs for FGFR2 – ctDNA levels for these patients. Emphasizing a biomarker-based on a claret assay will decidedly accession compliance, as able-bodied as annual for the airheadedness from amalgamate expression.
Interestingly, the aggregation appear closing its centers for acceptance to abstraction these 140 patients. However, analytic trials.gov shows that centers in Japan are still accessible for acceptance with the accession of a new centermost added as of December 9, 2019 update. Accustomed the aerial prevalence of belly blight in Japan, we anticipate it is accessible for the aggregation to accompany accession accord for this nation agnate to the Zai Lab (ZLAB) accord administering Bema development in greater China.
FPRX additionally has assets targeting B7-H4 (FPA150) and CD80 (FPT155), two potentially acute shots on ambition in the immuno-oncology space. Both of these programs are additionally accountable to a “go or no go” accommodation afterward abstracts read-outs in 2020.
FPA150 is actuality brash in ovarian blight in aggregate with Pembrolizumab (Pembro, Keytruda), Merck’s (MRK) anti-PD1 antibody. Ovarian blight is a ambience with a accepted aerial accident for B7-H4 over expression. The aggregate was begin to be able-bodied tolerated, with no SAEs begin to be analysis related. The company, therefore, has absitively on amplification at a recommended dosage of 20mg/kg in aggregate with abounding dosage Pembro.
It’s account acquainted that as a distinct agent, FPA150 showed 2 fractional responses in ovarian cancer. This is a ambience that IO about struggles in, with address analysis Pembro abstracts assuming responses in the distinct digits. Accustomed that B7-H4 is accepted as a agency to affected escape from PD-1 inhibition, a low bar, and the predisposition for B7-H4 over-expression in ovarian patients, we feel FPA150 offers accession acute attempt on goal.
FPT155 is still exploring dosing and is the atomic developed analytic affairs for Five Prime, but potentially the best differentiated. As of the amend at The Society for Immunotherapy of Blight (SITC) in November of 2019, the biologic was in the 8th accretion dosing accomplice with Maximum Acceptable Dosage (MTD) not yet been reached, in accession to the PK contour actuality constant with increases in dosing.
FPRX, forth with the FDA autonomous for a safer and slower dosage accretion architecture due to the abeyant for cytokine absolution affection (CRS). This is because the biologic works through the CD28 pathway, which has a aerial abeyant for CRS. However, the archetypal does announce that co-stimulation by the T-cell Receptor (TCR) circuitous is all-important for T-cell acknowledgment to the tumor.
If a dosage can be begin that is alive afterwards assurance issues, the aggregation could accept a absolute champ on its hands. As we can see in the CT26 (Colorectal cancer) archetypal below, cogent numbers of Complete Responses (CR) were apparent in mice in a dosage abased manner. Abstracts from the abstraction is accepted ancient abreast the end of 2020, able at SITC again.
What has additionally bent our absorption actuality is the contempo advancing affairs by BioValue Armamentarium (BVF). Not alone has the armamentarium brought its absolute affairs of FPRX to abreast 22% as of December 2019, but BVF additionally has afresh afflicted its filing cachet from a 13G to a 13D, which indicates the armamentarium intends to be an activist here. Abounding would accept that acceptable an activist in a accessible aggregation agency that said activist will accept a adverse accord with the aggregation it becomes circuitous in, but this is not absolutely the ambition in abounding cases – oftentimes an activist has a absolute accord with administration and its lath of directors.
In our acquaintance with activism, it’s alone back a aggregation refuses to accede the opinions of a ample actor that provokes said ample actor to booty a added adversarial position.
In 2017, BVF became an activist broker in Xoma Corp. (XOMA) back the banal was about $7 a share. Back that time, the banal accomplished a aerial of about $37 a share, with the accepted trading amount of XOMA about $25. Xoma, at the time of the BVF’s activist involvement, was afire way too abundant banknote and was operating aural a distinct archetypal premise. BVF helped to change the business archetypal at Xoma and is currently still actively circuitous with the aggregation who aloof afresh affianced a rights offering, in which BVF has an alive allotment in.
BioValue Armamentarium is run by a man called Mark Lampert, who has had a able accord of success advance in dev. Biotech over the years;
Mr. Lampert is the architect and General Accomplice of BVF Partners L.P. (“BVF”), a San Francisco-based, clandestine biotechnology advance close accustomed in 1993 that manages the Biotechnology Amount Fund, L.P. and accompanying entities. Mr. Lampert has been alive in the biotechnology industry back 1984, accepting served on the boards of admiral of abundant accessible and clandestine companies. Above-mentioned to basic BVF, Mr. Lampert was a Vice President at the advance cyberbanking close Oppenheimer & Co and the architect of Biotechnology Royalty Corp., aimed at pooling university biotechnology apparent royalties. Mr. Lampert was ahead alive by Cambridge NeuroScience, G.D. Searle & Co., and the Boston Consulting Group. He is a founding donor to the Lampert-Byrd Foundation and GiveDirectly.org. Born and aloft in Ann Arbor, Michigan, Mr. Lampert holds an A.B. with ceremoniousness in Chemistry from Harvard College and an M.B.A. from Harvard Business School.
Interestingly, the day that BVF afflicted from a 13G to a 13D activist filer on FPRX, the aloft CEO of the aggregation who was still the administrator of the lath of admiral stepped down. We do not anticipate this was a coincidence, and we anticipate BVF is actively affianced actuality to abetment in several accessible outcomes. One such aftereffect actuality is an beforehand than accepted affiliation with the company’s Bema asset.
As per the Nov. 2019 antithesis call, FPRX administration acutely declared that it has chock-full acceptance with the Appearance 3 Bema balloon at 140 patients, but the analytic identifier for this balloon acutely shows that in Japan, not alone has the aggregation not chock-full acceptance (which we acknowledgment beforehand in this article), but has added a new centermost as of Dec.9th, 2019 (scroll bottomward to the basal of the affiliated folio to see new centermost accession and alive Japanese centers still recruiting).
We acquisition this development to be absolutely analytical and brainstorm there’s a affiliation with BVF’s new activist position, and the aloft CEO/recently stepped bottomward chairman. What absolutely the affiliation is actuality we acutely do not know, but it could be accompanying to a abeyant beforehand than accepted partner.
The aggregation has declared that it’s absorbed in award a accomplice for Bema, but did in actuality adviser this would not action until afterwards it has had its ‘futility look’ at the abstracts this summer. However as above-mentioned mentioned, BVF’s activist position and the administrator of lath dispatch bottomward could announce a change of affairs here.
FGFR2 over announcement in Belly blight is austere unmet need, abnormally throughout Asian countries. This is appropriate up Takeda Pharmaceutical’s (TAK) alleyway with its declared Admission to Medicines (AtM) strategy.
This action is aimed at accretion admission to its avant-garde and potentially life-saving medicines for patients with some of the accomplished unmet medical needs. For decades, the aggregation has provided product, allotment and admission in abounding genitalia of the world, based on bounded needs. The new AtM action builds on that by absorption on geographies and analysis areas with the accomplished unmet need.
Takeda targets aerial unmet needs with a focus on bounded alcove markets. Could this be why the Japanese centers were larboard accessible for application in the Bema trial, and why a new centermost was added afterwards the aboriginal Nov. 2019 antithesis call? Tak’s basic breadth of operations are in Japan, so a accessible accessory and logistic affiliation actuality makes a lot of sense
On The Nov. call, FPRX did accompaniment that best of the patients enrolled in the Bema balloon did so in the summer of 2019. However, we appraisal at atomic 30 patients enrolled from October to December 2018 who would potentially be evaluable now.
With the balloon architecture listed as bifold appearance and not quadruple appearance (certain aggregation administration may not be addled to such abstracts as they alluded to in its Nov. 2019 antithesis call), the aggregation may accept taken a attending at the abstracts accessible as of December 2019, and may accept estimated that the abstracts was able-bodied abundant to access into affiliation talks now. Obviously, this is authentic belief on our allotment but we anticipate the belief is acceptable based on the contempo changes we accept apparent back FPRX’s Nov. antithesis call.
Let’s booty a attending at FPRX’s antithesis area to see why the aggregation may accept absitively to do this;
Total Banknote (mrq)
Total Banknote Per Allotment (mrq)
Total Debt (mrq)
Total Debt/Equity (mrq)
Current Ratio (mrq)
Book Amount Per Allotment (mrq)
Operating Banknote Flow (TTM)
-$136.82M (too abundant burn)
Levered Free Banknote Flow (TTM)
We can see from the above, that FPRX burns way too abundant cash, and is the able primary acumen that the aloft administration was ‘kicked to the curve.’ The Bema Appearance 3 balloon in agreement of the over ample N cardinal ambition was acutely a aberration (a abate N30 cardinal would accept sufficed for abeyant AA allotment in our assessment and goes to our point about that cardinal actuality evaluable now).
We feel BVF may additionally see what we are seeing actuality and may accept brash the aggregation to cut the spending on this balloon at this time and attending for a accomplice now, and not after on.
Not alone would this cut costs, but if Takeda or accession big pharma was to accomplice Bema now, the aggregation would apprehend both a amount extenuative by afire beneath money, and a net revenue/value accession while tethering the butt of their pipeline.
FPRX absolutely has a lot of accident here, but we additionally feel the aggregation has been grossly oversold so it’s a amount of access akin pricing, and we anticipate the accepted akin about $5 a allotment is a fair access point.
The FPRX activity has massive abeyant but administration does charge to achieve a burst this year in agreement of carrying data, acid costs, and amount abacus a accomplice as declared above. If administration can achieve this, again FPRX would see a banal amount abundant college than the accepted pps. But, if administration cannot achieve these, the banal amount could see a able abrasion from its accepted levels.
With FPRX’S abysmal activity that addresses aerial unmet-needs, if one of these assets abstracts hits this year again FPRX could be a multi-bag gainer, and that is our alert balderdash case here.
Our upside amount ambition which assumes acknowledged outcomes this year, which additionally assumes accustomed ‘risk on’ bazaar action is about $15 – $30 a share. If administration ‘drops the ball’ and assorted abstracts fails, again we anticipate $1.50 – $2 a allotment is the downside risk.
Disclosure: I am/we are continued FPRX. I wrote this commodity myself, and it expresses my own opinions. I am not accepting advantage for it. I accept no business accord with any aggregation whose banal is mentioned in this article.
Additional disclosure: Disclaimer: This commodity is advised for advisory and ball use only, and should not be construed as able advance advice. They are our opinions only. Trading stocks is chancy – consistently be abiding to apperceive and accept your accident tolerance. You can acquire abundant banking losses in any barter or investment. Consistently do your own due activity afore affairs and affairs any stock, and/or argue with a accountant banking adviser.
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